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TMI Blog2018 (2) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... on under section 54F by treating entire amount of ₹ 78,00,000 as the “cost of the residential house” purchased within specified time limit under section 54. Here is an NRI who decided to sell a fairly spacious house in his hometown, and yet, to keep his India connection alive, invested a part of these sale proceeds in a smaller residential unit, but he has been declined the legitimate deduction under section 54 in respect of the same, only for the reason, as the circumstances suggest, that he is made an unwilling party to artificially splitting of sale consideration to minimise the capital gains burden of the seller. Leaving even this aspect of the matter aside, quite clearly the sale of furniture and fixtures was an integral part of the deal of buying the house property. Whichever we way look at it thus, the assessee was wronged in partial denial of deduction. Now that the facts on record demonstrate that the actual consideration for the new house property was ₹ 78,00,000, he is being sought to be declined resultant relief on the ground that this particular plea was not taken earlier. That is certainly not a fair treatment to an assessee. What matters really is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this backdrop that out of the long term capital gain of ₹ 1,89,77,426 that the assessee claimed a deduction, under section 54 of the Act, for an amount of ₹ 78,00,000. The assessee s claim was that he has invested, within permissible time limit and out of this capital gain earned by him, ₹ 78,00,000 in the new house. During the course of scrutiny assessment proceedings, however, this claim did not find favour with the Assessing Officer. The Assessing Officer noted that the assessee had entered into two separate contracts, though on the same date, for purchase of house property and the furniture and fixtures therein. The payment of ₹ 60,00,000 was under contract for the purchase of house property and the remaining payment of ₹ 18,00,000 was made under contract for the purchase of furniture and fixtures in the said property. A complete list of the items of furniture and fixtures was also set out. The Assessing Officer proceeded on the underlying assumption that these two separate contracts are independent of each other and are to be considered in isolation of each other. The Assessing Officer was of the opinion that clearly the assessee has executed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d bearing R S No-376/1, 376/2 and 379 City Survey No.2732, 2733, 2744, 2680 and T.P. Scheme No.18 and FP No.338 Anandvan Compalex (Annapurna Co. Op. Hsg Ltd) scheme of row houses has been constructed at IG Marg, Opp. Bhavan s School, Lal Baug Road, Vadodara. In the said Society, Block No.C/6, having total plot area 1952 in which 885 sq. ft. construction at ground floor and 1000 sq. ft. construction at final floor and 315 construction at second floor and the said Block is bounded as follows:- EAST - Society Road WEST - Common Road NORTH - Block No. C/5 SOUTH - Block No. C/4 The said Flat includes water connection, drainage and electricity etc. THE TERMS AND CONDITIONS OF THE SALE AGREEMENT ARE AS UNDER:- 1. The seller has agreed to sale and the purchaser has agreed to purchase the above referred property for the consideration of the sum of ₹ 78,00,000/- (Rs. Seventy Eight Lakhs only). 2. Whereas, the purchaser is agreed to give and the seller has agreed to accept an earnest money deposit of ₹ 30,00,000/- (Rs. Thirty Lakhs only) by cheque No.685409 of ING Bank Ltd, Chhani Br., Racecourse Circle, Vadodara. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NG Vaishya Bank Ltd cheque no. 354375 dated 4.2.2011, under this said agreement. On the same day, the assessee had entered into a separate agreement, under which he paid ₹ 18,00,000 by the very next cheque leaf of the same bank i.e. cheque no. 354376 dated 4.2.2011 on INNG Vaishya Bank Ltd. This sale agreement for sale of furniture and fixtures, inter alia, stated as follows: Today on date 04.02.2011 the Scheme organized in the name of Anandvan Complex (Annapurna Co-Operative Housing Society Ltd.) House No-C-6, in the property the sale agreement for fixed furniture and A.C. . That the property under sole ownership, possession and occupation which is situated at Registration District-Vadodara and Sub-District-Vadodara of Mouje-Kasba bearing R. S. No.-376/l, 376/2 and 379 its City Survey No.-2734/B, T. P. Scheme No.-18, Final Plot No.- 338 the construction of the Complex (Annapurna Co-Op. Hou. Soc. Ltd) in the row house the House No.-C-6, the property with complete construction. That the first party sold the said property on date 4-2-2011 by the Registered Sale Deed No.-918 to the second party. So the fixture and furniture and the following items ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s quite clear from these arrangements is that the actual consideration for purchase of the house property in question is ₹ 78,00,000 and the splitting of consideration, as rightly noted by the Assessing Officer, is an artificial arrangement; in substance and in effect the house is sold for ₹ 78,00,000 and it was not open to the assessee, as evident from the contents of the banakhat (i.e. agreement to sell), to buy the house for ₹ 60,00,000 and furniture separately for ₹ 18,00,000. Even if the assessee was to buy the house, without the furniture, it would have been ₹ 78,00,000 anyway- as is clearly specified in the agreement to sell. Whatever may have been the cause or trigger for the splitting of the consideration, ₹ 60,00,000 for the house and ₹ 18,00,000 for the furniture and fixtures, such a splitting of consideration had no bearing on de facto consideration for purchase of house property. That s what, as we have noted earlier as well, the agreement to sell makes clear in unambiguous terms. These two agreements, therefore, cannot be considered in isolation with each other on standalone basis. Let us in this light take a look at the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditioners, geysers, fans, electric fittings, furniture, modular kitchens and dishwashers. If these things are integral part of the house being purchased, the cost of house has to essentially include the cost of these things as well. In such circumstances, what is to be treated as cost of the residential house is the entire cost of house, and it cannot be open to the Assessing Officer to treat only the cost of only civil construction as cost of house and segregate the cost of other things as not eligible for deduction under section 54. Let us, in this light, address ourselves to the facts of this case. Quite clearly, for the detailed reasons set out earlier in this order, the two separate agreements for sale of house property and the furniture and fixtures cannot be considered in isolation of each other on standalone basis, and have to considered essentially as a composite contract- particularly in the light of the undisputed contents of the agreement to sell dated 19th January 2011. Given these facts, the cost of the new asset has to be treated as ₹ 78,00,000. The cost of the residential house is ₹ 78,00,000 as the assessee did not have any choice about buying or not bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of the residential house so purchased . In our considered view, therefore, the assessee is entitled to deduction under section 54F by treating entire amount of ₹ 78,00,000 as the cost of the residential house purchased within specified time limit under section 54. 9. When the above position was put to the learned Departmental Representative, he was fair enough in not really being very aggressive in disputing our perspectives on the artificial splitting of contracts. He, however, pointed out that it was never the case of the assessee that these two agreements were required to be viewed together- particularly in the light of the agreement to sell. The case of the assessee, according to learned Departmental Representative, was that the assessee incurred the expenses on furniture and fixtures to make the residential property habitable, and it was in this context that the reliance was placed on this Tribunal s decision in the case of Srinivas R Desai (supra). It was thus contended that an altogether different case cannot be made out at this stage and we must confine ourselves to adjudicating upon assessee s stand that the expenditure incurred on additional furniture an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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