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TMI Blog2017 (11) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... gistered valuer. Hence, this issue is set aside to the record of the Assessing Officer for adjudication of the same in light of the above observations. Denying the claim deduction u/s 54 - investment made by the assessee in the new residential houses in the name of his wife and claim of exemption under section 54 against the acquisition of these two houses - Claim of deduction u/s 54 available to more than one houses - Held that:- Mere fact of the assessee purchased of new house in the name of his wife would not disentitle the assessee for claiming the benefit u/s 54 when the other conditions as provided u/s 54 are satisfied. Following the decision of Hon’ble Punjab and Haryana High Court in case of Pawan Arya Vs. CIT (2010 (12) TMI 44 - PUNJAB AND HARYANA HIGH COURT) hold that the assessee is entitled for the claim of section 54 of the Act only in respect of one house at the choice of the assessee. Disallowances claim of interest u/s 48 of the Act as well as under 24(b) - Held that:- This issue is directly connected with the claim of the assessee regarding the loan availed by the assessee and his family members are used for the purpose of construction of the house. As ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,89,600/- 2,10,400/- Second Floor 2007-08 10,55,000/- 2007-08 5,95,270/- 4,59,730/- Total 26,80,000/- 7,84,870/- 18,95,130/- The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by accepting the construction cost of ₹ 26,80,000/- as declared by the assessee. ( c) In the facts and circumstances of the case and in law the CIT(A) has erred in confirming the action of the ld. AO in denying the exemption u/s 54 of ₹ 39,19,596/-. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief my please be granted by allowing the exemption of ₹ 39,19,596/- u/s 54. 2.(a) In the facts and circumstances of the case and in law the CIT(A) has erred in not admitting the additional ground raised during the course of appellate proceedings. The Action of the ld. CIT(A) is illegal, unjustified, arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO took the cost of construction as per valuation report with the ICICI Bank for obtaining the house loan and therefore, the Assessing Officer held that the construction of first floor was completed in the year 1991-92 as against the claim of the assessee in the years 2005-06 and 2006-07. Further, the cost of construction was also recomputed by the Assessing Officer by applying PWD rates against the claim of the assessee. Thus the AO has substantially reduce the cost of construction of ₹ 26.80 lacs to ₹ 7,84,870/- so far as the construction of first floor and second floor house is concerned. The ground floor house was part of the original allotment in the year 1981-82 and hence was not in dispute. Therefore, the claim of the assessee cost of construction was reduced by the Assessing Officer by a sum of ₹ 18,95,130/-. Aggrieved by the action of the AO the assessee filed an appeal before the CIT(A) and contended that the valuation report with the ICICI Bank for obtaining the house loan cannot be taken as the value of cost of construction of the house when the assessee has furnished all the relevant details, cash flow statement as well as the source of fund being loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary to the fact recorded in the conveyance deed. Thus valuation report cannot be placed reliance upon for deciding the period of construction of different floor of the house. The authorities below have ignored the bank loan statement and solely relied upon the valuation report both these are indirect evidence available to contradicting to each other therefore, accepting one indirect evidence and rejecting the other is not justified. The ld. AR as thus stressed that the AO as well as ld CIT(A) both have erred in placing blind reliance on the valuation report of ICICI Bank for the purpose of determining the period of construction when the valuation report is unsubstantiated. The period of construction as claimed by the assessee is financial year 2005-06 to 2007-08 has been supported by the corroborative evidence of cash withdrawal from the Bank, payment made by the assessee and his son to Bansal Traders which has been ignored by the authorities below. It was further submitted that valuation done by the banker was for an entirely different purpose and intent, which is conflict with the purpose and intent of Income Tax Law. The Banker are adopting the most conservative approach a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or has been furnished by the assessee in support of the claim. Thus the assessee failed to discharge primary onus to prove with supporting evidence that the construction of the house was carried out in the F.Y. 2005-06 onwards. The ld. DR has referred to the valuation report which was prepared for the purpose of obtaining the loan from the ICICI Bank and submitted that the report has clearly mentioned the property consist ground + first floor and therefore, at the time of the said valuation report the first floor was very much inexistence. Hence, the claim of assessee regarding the cost of construction is unacceptable. The Assessing Officer has applied PWD rates which are proper and justified therefore, no fault cannot be found in the valuation adopted by the AO. The payment was claimed to M/s Bansal Traders and Agarwal Traders but it has not been explained the purpose for which these payments to Bansal Trader and Agarwal Trader were made whether it was for supply of construction material or for other purposes. He has relied upon the order of the authorities below. 6. I have considered the rival submission as well as relevant material on record. The dispute is confined on the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bank for their own purpose of securing the loan given to the assessee and not as actual cost of construction incurred by the assessee for the construction of the house. The valuation report gives the estimated value of property at that relevant point of time cannot substitute the real cost of construction incurred by the assessee at a different point of time. Though, the valuation as estimated in the valuation report got prepared by the bank for the purpose of granting loan is not conclusive proof however, the fact recoded in the valuation report of existence of the first floor cannot be doubted as this is not on the basis of any estimate but this fact is based on the existence of the structure on the plot of land. Therefore, to the extent the existence of the first floor as on the date of valuation report prepared for the purpose of loan the same cannot be denied. Still question of actual cost of construction remains to be examined on the basis of the proper enquiry and verification of the record. In case the complete record is not available to ascertain the actual cost of construction when the construction of house itself is not in dispute and therefore, the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... house the entire consideration for purchase of two house has flow from the assessee and not a single penny rent was contributed by any other person. He has further submitted that the assessee has purchased new houses in the name of his wife and once the entire investments was made from the sale proceeds and there was no contribution from the wife then the claim of section 54 cannot be denied in support of his contention. He has relied upon the decision of Hon ble Madras High in case of CIT vs. V. Natarajan 287 ITR 271 as well as decision of Hon ble Delhi High Court in case of CIT vs. Wahal 351 ITR 4 and submitted that the Hon ble High Court has held that the new residential house need not be purchased by the assessee in his own name nor it is necessary that it should be purchased exclusively in his name. Therefore, the house purchase in the name of his wife was held to be eligible for the benefit u/s 54/54F. The ld AR has also relied upon the Hon ble Delhi High Court in case of CIT vs. Ravinder Kumar Arora 342 ITR 38 and submitted that the Hon ble High Court held that as per section 54 house should be purchased by the assessee and it does not stipulate that house should be purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... natka High Court has held that the exemption against the purchase of two flats situated at different location is not available. He has also relied upon the decision of Mumbai Bench of the Tribunal in case of Smt. Myrtle D. Souza Vs. ITO 53 SOT 236. In the rejoinder the ld AR of the assessee has submitted that the decision of Hon ble jurisdictional High Court in case of Kalya vs. CIT (supra) is not applicable in the facts of the assessee s case as the said decision in respect of the exemption u/s 54B and not in respect of the claim u/s 54 whereas the decision relied upon by the assessee are directly on section 54 of the Act. 11. I have considered the rival submissions as well as relevant material on record. The first aspect of this issue is regarding the investment made by the assessee in the new residential houses in the name of his wife and claim of exemption under section 54 against the acquisition of these two houses. As regards the houses purchased in the mane of wife there is no embargo or legal impediment as held by the Hon ble High Court in case of CIT vs. V. Natarajan (supra), CIT vs. Kamal Wahal (supra) as well as CIT vs. Ravinder Kumar Arora (supra). The Hon ble High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the inspector inspected the premises, the flats were occupied by two different tenants is not the ground to hold that the apartment is not a one residential unit. The fact that the assessee could have purchased both the flats in one single sale deed or could have narrated the purchase of two premises as one unit in the sale deed is not the ground to hold that the assessee had no intention to purchase the two flats as one unit. Thus, it is clear that the claim of the assessee was for purchase of apartments situated side by side to make it one unit by opening door in between two apartments. Therefore when more than one apartments are so situated and contiguous that it can be used as one residential unit as per the requirement of the assessee s family and particularly the members of HUF. Similarly in case of CIT vs. K.G. Rukminiamma (supra) the Hon ble High Court has again was dealing with a case when the assessee has entered into development agreement for construction of the property and under the said joint development agreement total 8 flats were to be constructed out of which 4 flats was the share of the assesse and remaining 4 flats was the share of the builder. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Finance Act, 2OOO, can be read to mean that for the asst. 5rr. 1996-97 the assessee would be entitled to relief in respect, of more than one dwelling unit for the purpose of claiming exemption under the head ' Capital Gains' ? 4. In the provision of s. 54(1) of the Income-tax Act, the relevant portion is extracted herein for convenient reference : Subject to the provisions of sub-s. (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head ' Income from house property' (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased or has within a period of three years after that date constructed a residential house, then, instead of the capital gain being charged to Income-tax as income of the previous year in which the transfer took place, it shall be deal with in accordance with the following provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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