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TMI Blog2017 (3) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... e has given clear cut finding that the assessee did not furnish any details towards the construction expenditure of 3 lakhs such as the nature of construction, permission from the competent authority for construction, date of utilization of funds for construction, bills and vouchers for various items of expenses for construction and above all whether the new building was completed within the specified period of 3 years from the date of transfer, completion certificate from competent authority and the nexus between the consideration received and the investment in the construction of house property. The Ld. Counsel for the assessee could not adduce any evidence before us to counter the above factual findings given by the Ld.CIT(A). Since the assessee failed to substantiate with evidence regarding the investment of 3 lakhs in construction of the house property, therefore, we find no infirmity in the order of the CIT(A) rejecting the claim of the assessee that an amount of 3 lakhs was utilized towards construction of the house property. - Decided against assessee Estimating the cost of acquisition @ 100/- per sq.mtr as on 01-04-1981 for the purpose of indexation - Held that:- Since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 100/- per sq.ft. It was pointed out that the land as on 1-4-1981 was agricultural land and total area of the land was 45 guntas. In the year 1998, the assessee had applied for N.A. conversion of the land and the Town Planning Authorities granted permission for only 21 guntas out of 45 guntas as N.A. plot. After receiving the permission for conversion of the land as N.A. for 21 guntas (2194 sq.mtrs.) out of the 45 gunthas (4500 sq.mtrs.), the assessee sold 1580 sq. mtrs. of the converted N.A. plot in April, 2000 for a total consideration of ₹ 23,00,000/-. Since the value of the land had increased due to conversion into N.A. land, the cost of agricultural land as on 1-4-1981 was taken at ₹ 200/- per sq.mtr. Accordingly, the cost of acquisition of the agricultural land admeasuring 3240 sq.mtrs (equivalent to 1580 sq.mt. of NA land) as on 1-4-1981 in possession of the assessee was taken at ₹ 3,24,000/-. Out of the sale proceeds, an amount of ₹ 10 ,19,940/ - was deposited with capital gain account scheme in the State Bank of India, Baramati Branch under Account No.01190/015245 on 24-10-2000 besides spending a sum of ₹ 3,00,000/- in the construction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f land on which Construction has been put up Rs.9,30,000 4) Development expenses and commission paid Rs.56,730 Rs.23,06,220/- 5. During the assessment proceedings, the Assessing Officer asked the assessee to explain as to how the cost of plot was taken at ₹ 2,37,000/- in the individual return while the same was taken at ₹ 3,24,000/- in the HUF return filed in response to the notice under section 148 of the Act. It was explained by the assessee that the cost of the land was taken on estimate basis of land cost @ 150 per sq. ft., whereas in the HUF return the same was taken on the basis of valuation report as the cost of the land had doubled due to conversion of part of the land Into N.A. plot. The assessee stated that the land belonged to HUF and no such documents releasing the rights by the members were required as HUF was the owner of the land. 6. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He noted that the assessee had changed the cost of acquisition three times which was clearly to avoid payment of capital gain tax. He observed that the capital gains was worked out at ₹ 2,61,560/- in the return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to be attached with the return of income. In the opinion of the Assessing Officer, the assessee in the present case, did not apportion any sum of the net consideration towards purchase of new asset before the due date for filing of the return. The Assessing Officer accordingly worked out the capital gain as under: Net Sale Consideration Rs.22,43,270/- Less : Expenditure incurred for transfer i) Development expenses Rs.33,730 ii) Commission paid Rs.23,000 Rs.56,730/- Net Consideration Rs.22,43,270/- Less : Deduction u/s.54F(4) being amount deposited in capital gains a/c scheme Rs.10,19,490/- Long term capital gains Rs.12,23,780/- 7. Before CIT(A) the assessee strongly objected to the conclusion of the Assessing Officer that the capital gains was worked out without apportioning any sum out of the net consideration towards purchase of new asset before the due date of filing of the return. It was argued that the total construction cost was of ₹ 13,19,490/- and the construction was made on the land admeasuring 614 sq.mtrs., valuation of which was done at ₹ 8,93,797/-. It was submitted that as per section 54F(4), the unutilized net consideration amounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 3 lakhs in the construction of residential house property is concerned, the Ld.CIT(A) rejected the claim of the assessee in absence of any supporting evidence such as the nature of construction, permission from the competent authority for construction, date of utilization of funds for construction, bills and vouchers for various items of expenses, whether the new building is complete within the specified period of 3 years from the date of transfer, completion certificate, the nexus between the consideration received and the capacity in the construction of house, valuation report etc. 10. So far as the claim of the assessee that the land admeasuring 1614 sq.mtrs was made available to the assessee by release of the same in favour of HUF for utilization of construction of house property and such release amounts to purchase by the assessee and therefore deduction u/s.54F is available towards the cost of the land is concerned the Ld.CIT(A) also rejected the same. While doing so, he held that the property in the instant case stands in the name of the assessee HUF itself and therefore the claim that there was transfer of land by release in favour of the same HUF by co-parcener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of the appellant be accepted. 3. On the facts and circumstances of the case and in law the Ld. C.I.T. (A) was not justified in estimating the cost of acquisition as on 01-04-1981 for adopting the same for Indexation @ 100/- per Sq.Mtr. instead of ₹ 200/- per Sq. Mtrs. as claimed by the appellant. The order of the Ld. C.I.T. (A) is without any legal support. The appellant's claim be accepted. 4. On the facts and circumstances of the case and in law the interest levied u/s.234-A, 234-B and 234-C is not justified and it be deleted. 5. The appellant craves leave to add/amend or alter any of the above grounds of appeal. 13. The Ld. Counsel for the assessee strongly opposed the order of the CIT(A). He reiterated the same arguments as made before the Assessing Officer and the CIT(A). He also relied on the following decisions : 1. CIT Vs. Gurucharan Singh reported in 292 ITR 0387 2. CIT Vs. Bai Shirinbai K. Kooka reported in 46 ITR 86 (SC) 14. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 15. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d received by way of release is concerned we find the Ld.CIT(A) distinguishing the various decisions cited before him and relying on the CBDT Circular No.667 dated 18-10-1993 has held that when the property already stands in the name of the HUF and there is no evidence on record to show that the assessee received the land by way of release from the co-owners and the assessee has not paid any price to the coowners, there is no justification on the part of the assessee to claim deduction u/s.54F on the value of 614 square meters of land. The relevant observation of the CIT(A) from Para Nos. 5.4 to 5.4.7 reads as under : "5.4 The submissions of made by the Ld. Counsel for the appellant are carefully examined with reference to the facts of the case and the provisions of sec. 54F of the I T Act. During the year under, it is not in dispute that the total consideration received by the appellant on sale of land in question admeasuring 1580 sq. mtrs. was ₹ 23,00,000/-. The claim of the appellant is that an amount of ₹ 10,19,940/- was deposited with the capital gain account scheme of the State Bank of India, Baramati and another ₹ 3,00,000/- was utilized for construction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45 : Thus, the main ingredients of section 54F of the Act are asunder: (i) Capital gain arises to an appellant being an individual or a Hindu undivided family. (ii) The asset transferred must be a long term capital asset. (iii) The asset transferred can be any capital asset other than a residential house. (iv) The appellant purchases within a period of one year before or two years after the date on which the transfer took place, or constructs within a period of three years after the date of transfer, a residential house. (v) The appellant does not own more than one residential house on the date of transfer of the original asset exclusive of one purchased for claiming exemption under section 54F. The claim of the appellant that cost of the land received by way of 'release' is also to be taken into consideration for the purpose of for determining the quantum of deduction under section 54F. This claim of the appellant has no merit. Firstly, in the present case, the property stands in the name of the appellant HUF himself and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of price by payment In kind or adjustment towards an old debt or for other monetary consideration from its legal meaning in section 54(1). Undoubtedly each release in this case is a transfer of the releasor's share for consideration to the releasee. The transferee purchases the share of each brother at a price of ₹ 30,000 each. Thus, it would be evidently called a "purchase" by the assessee who would, accordingly, be entitled to relief under section 54(1). As already mentioned hereinabove, firstly, in the present case, the property stands in the name of the appellant HUF himself and therefore, the claim of the appellant that there was transfer of land by release in favour of the same HUF by the coparceners does not stand to reason. Even otherwise, no evidence whatsoever was produced by the appellant to show that the appellant received the land by way of release from other coparceners. Secondly, even presuming there was a release as claimed by the appellant; release was not for a consideration as the appellant has not paid any price to the other coparceners for release of their share in favour of the appellant. Therefore, the decision of the Supreme Court in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to the facts of the case. 5.4.5 In the case of Twenty First Century steels Ltd. (94 ITD 258), the special Bench of ITAT, Delhi in the context of provisions of sec. 32AB held that the terms 'utilization' or 'purchase' of 'new machinery' are not to be taken in strict literal sense and, therefore, the benefit of deduction is to be allowed also in those cases where the entire machinery has not been purchased from market, but the same has been fabricated or assembled by the assessee. The Special Bench observed that the object is to encourage investment in new machinery and plant. If an assessee purchases the parts or components of the machinery and fabricates the same at its own premises by incurring expenditure and labour, etc., and, thus, assemble the entire machinery himself or itself, then investment in the purchase of components of such machinery and expenditure in the cost of labour for fabricating such machinery, should be taken to be 'utilization of the amount for the purchase of the machinery'. In such circumstances it was held that the term 'purchase' cannot mean purchase for price from the market only. In the present case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he foregoing reasons, the claim of the appellant that there was transfer of land by release in favor of the same HUF by the coparceners is not tenable on the facts of the case. Even presuming there was a release as claimed by the appellant; release was not for a consideration as the appellant has not paid any price to the other coparceners for release of their share in favor of the appellant and therefore there was no appropriation of sale consideration towards cost of the land. Accordingly, the estimated and notional cost of the land without actual appropriation or utilization of sale proceeds towards the cost of the land cannot be allowed as deduction under sec. 54F from the capital gains on sale of the impugned property." 18. The Ld. Counsel for the assessee could not controvert the above observation of the Ld.CIT(A) nor could bring any material before us to take a different view than the view taken by the Ld.CIT(A). The two decisions relied on by the Ld. Counsel for the assessee are distinguishable and not applicable to the facts of the present case. We, therefore, uphold the order of the CIT(A) in rejecting the claim of the assessee that the release of land by the members of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken at ₹ 200/- per sq. mtr. on the ground that the cost of the land had doubled due to conversion of part of the agricultural land into N.A. plot. In fact, while taking the cost of acquisition of the land sold, the assessee has doubled the extent of the land sold from 1580 sq. mtrs. to 3240 sq. mtrs. on the ground that in the year 1998, the Town Planning Department has granted N.A. permission to the extent of 21 gunthas only out of the total agricultural land of 45 gunthas and then adopted FMV as on 01.04.1981 at ₹ 100/- per sq. mt.. By taking the extent of land sold at 3240 sq. mt. instead of 1580 sq. mt., the FMV as on 01/04/1981 of the land sold of 1580 sq. mt. got doubled to ₹ 200 per sq. mtr. as against of ₹ 100 per sq. mtr. estimated by the valuer. The Assessing Officer has not allowed any cost of acquisition while computing the capital gains in the assessment order on the ground that the assessee keeps on changing the cost of acquisition while computing the capital gains. But under the provisions of sec.55(2)(b), cost of acquisition in relation to any capital asset, where the capital asset became the property of the assessee before the 1st day of Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.22,43,270 Less : cost of acquisition as on 01-04-1981 is Rs.1,58,000/- @ ₹ 100 per sq.mt Indexed cost of acquisition = Rs.1,58,000 x 406/100 Rs.6,41,480/- Long term capital gains Rs.16,01,790/- Less : Deduction u/s.54F(4) on account of Amount deposited in capital gain a/c scheme 16,01,790 X 10,19,490 22,43,270 Rs.7,27,959/- Taxable long term capital gains Rs.8,73,831/- Accordingly, the Assessing Officer is directed to assess the long term capital gains at ₹ 8,73,831/- as against ₹ 12,23,780/- determined by him in the assessment order. The assessee gets consequential relief of ₹ 3,49,949/- (Rs.12,23,780 - 8,73,831). Ground of appeal No.3 is partly allowed." 21. The Ld. Counsel for the assessee could not controvert the findings given by the CIT(A) on this issue. Since the order of the CIT(A) is based on the report of assessee's own valuer who has determined the value at ₹ 100/- per sq.mtr as on 01-04-1981, therefore, in view of the reasoned order given by the CIT(A) on this issue we find no infirmity in the same. Accordingly, the same is upheld and the ground raised by the assessee is dismissed. All the 3 grounds raised by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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