9911796707
TMI Blog2018 (11) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... and prior to the sale of property d completed the construction within the time limit allowed u/s 54 of the Act. The intention of the legislature for giving the benefit is to encourage housing in the country. Since the assessee has acquired the property d completed the construction within the period of limitation prescribed by the Act, we hold that the assessee’s case is squarely covered by the decision of this tribunal in the case of Dy. CIT,Circle-2(1) Vs. Dr CHALASANI MALLIKARJUNA [2016 (10) TMI 1032 - ITAT VISAKHAPATNAM]. Accordingly, we hold that the assessment passed by the AO u/s 147 r. w. s. 143(3) dated 27. 03. 2015 is neither erroneous nor prejudicial to the interest of the revenue - Decided in favour of assessee - I.T.A.No.512/Viz/2017 - - - Dated:- 6-11-2018 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER For The Assessee : Shri R.Venkata Raman, AR For The Revenue : Shri D.K.Sonowal, DR ORDER PER D. S. SUNDER SINGH, Accountant Member: This appeal is filed by the assessee against the order of the Pr. Commissioner of Income Tax (Pr. CIT)-1, Visakhapatnam vide F. No. Pr. CIT-1/VSP/263/2016-17 dated 31. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the assessee situated at Vidyuth Nagar, Visakhapatnam for the sale consideration of ₹ 99,45,000/- and offered other property in exchange, located at Akkayyapalem belonging to Shri K. S. N. Murthy. Further, the buyers offered to pay the cost of acquisition of the new property on behalf of the assessee, from out of loan funds proposed to be raised from banks and also help in construction. Subsequently, the assessee acquired the vacant site admeasuring 350 sq. yards situated at Akkayyapalem, Visakhapatnam from Sri K. S. N. Murthy for a sum of ₹ 65,45,000/- and completed construction within the period of three years provided in the Act. The assessee argued before the Ld. Pr. CIT that the new residential house was constructed within the stipulated time provided u/s 54 of the Act, hence, the capital gains arising on sale of the residential house would be entitled for deduction u/s 54 of the Act for acquiring the new property and requested drop the proceedings u/s 263. 3. The Ld. Pr. CIT observed that the Memorandum of Understanding (MoU) entered by the vendor with the vendees was dated 29. 06. 2008 which is unregistered and there was no mention of the said MoU in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, details of the sale transaction, the taxability of capital gains, computation of capital gains, legal position of agreement to sale, the MOU and the allowability of deduction u/s 54 of the Ac. When the jurisdiction was changed the assessee reiterated the submissions vide letter dated 02. 12. 2014, which is placed on page No. 20 of the paper book. After going through the entire information, explanation furnished by the assessee, the AO completed the assessment u/s 143(3) r. w. s. 147 accepting the income returned. The AO after verifying the complete details, has taken a conscious decision to allow the capital gains deduction u/s 54 of the Act, therefore, argued that there is no error committed by the AO, thus invoking jurisdiction u/s 263 is bad in law and required to be quashed. 5. 1. On merits, the Ld. AR argued that the assessee had entered into MoU on 29. 06. 2008 for sale of property as explained before the AO as well as the Pr. CIT. Because of the compulsions and pressures, the assessee had no option except to sell the impugned property to the vendees by MoU dated 29. 06. 2008. Vendees have agreed to pay the consideration of ₹ 99,45,000/- for acquiring the new as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT as well as provisions of section 54 of the Act and argued that there is no error in the order passed by the Pr. CIT and requested to upheld the order of the Pr. CIT. 7. We have heard both the parties and perused the material placed on record. Ground No. 1 and 4 of the Grounds of Appeal are related to the issue of invoking the jurisdiction by the Pr. CIT u/s 263 of the Act. In this connection, the Ld. AR argued that the AO has completed the assessment and allowed the deduction u/s 54 after making detailed enquiries with regard to the allowability of the deduction u/s 54 of the Act, thus there is no error in the order passed by the AO, hence there is no case for invoking the jurisdiction u/s 263 of the Act. Perusal of the assessment order shows that the case was reopened u/s 147 of the Act for the purpose of verification of long term capital gains in respect of the sale of property located at Vidyuth Nagar, for a sum of ₹ 99,45,000/- on 15. 01. 2010. The AO has called for the details, verified the details and after verification of the various submissions, allowed the deduction u/s 54 claimed by the assessee and completed the assessment accepting the return of income. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO which reads as under : With reference to the above-mentioned reassessment proceedings, the undersigned [ Assessee ] wishes to reiterate as under: 1. BACKGROUND OF CASE a. The Assessee [who is the VENDOR] had purchased a plot during FY 1983-84 admeasuring 300 sq. yds (or 250. 84 sq. mtrs) situated at Plot No. 5 (part) covered by S. No. 542/2A 2C in TP No. 26/27, Akkayyapalem and thereupon constructed a residential house during FY 2004-05 [ PROPERTY ] being D. No. 49-55-1A, Vidyuth Nagar, Akkayyapalem, Visakhapatnam 530 016. She has been residing there since then. b. In June 2008, four brothers namely M/s V. A. Siddiqi, H. A. Jafri, I. H. Farooqui J. A. Qureshi ['BUYERS ] who are known to the Assessee, approached her and expressed their desire to acquire the aforesaid Property owned by the Assessee and offered another site which had a slightly larger extent [hereinafter referred to as NEW PROPERTY in exchange located in the vicinity and identified by the buyers The reason why the Buyers were persistent was on account of Vaastu reasons and also the fact that they owned the adjacent plots and sought to make a composite block to enhance the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing loan on the part of buyers, the actual registration could materialize only on 15 Jan 2010. Consequent to the sale deed, the Assessee received additional funds from the Buyers (on account of sanction of housing loan) and soon refunded back the amount to the buyers - since she had already received the funds earlier. g. It is emphasized here that the entire sale consideration was received by the Assessee on 25. 09. 2008 on date of registration of the new site along with cash of ₹ 31 lacs to fund the cost of construction along with from the Buyers and hence, the sale deed for all practical purposes was complete on 25. 09. 2008 itself. In the instant case, the buyer and de-facto sellers are the same. As soon as the MOU was entered into and the Assessee purchased the new property, the Assessee had handed over her property to the Buyers thereby fulfilling specific performance. In other words, both sale of assessee s residential house as well as purchase of new house were carried out simultaneously and legal conveyancing by way of execution of sale deed in favour of Buyers was only a matter of mere legal formality. 2. FILING RETURN / MISTAKE APPARENT ON RECORD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 dote 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 dealt within accordance with the following provisions of this section, that is to say,- (i) if the amount of the capital gain is greater than the cost of [the residential house] so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) if the amount of the capital gain is equal to or-less than the cost of the new asset the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indexed Cost Rs. 1983-84 Land cost 26,5400 1,44,380 1985-86 Cost of construction of 1 st Floor 2,35,200 11,17,642 1994-95 Cost of construction of 2 nd Floor 3,02,400 7,37,903 5,64,100 19,99,925 (19,99,925) Long term capital gains (eligible for reinvestment u/s 54) 79,45,075 Reinvestment in new residential house 1,01,49,000 *Break-up is as under : *FY 2008-09 Land cost . . ₹ 71. 67 lacs *FY 2008-09 Construction cost incurred . . ₹ 19. 25 lacs *FY 2009-10 Construction cost incurred . . ₹ 10. 57 lacs The Assessee seeks rectification of mistake by the Learned AO in light of the above. It is settled law that the Assessee cannot be penalized for mistakes committ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held that The expression purchase' occurring in section 54 is not synonymous with 'ownership' or 'transfer of legal title' whereas in sections 22 and 45, which are the charging sections creating tax liability the words used are 'owner' and 'transferor' and they connote legal title f. Reg. eligibility of claim u/s 54 With respect to self-occupied residential house, CBDT Circular No. 538 dated 13. 07. 1989 reads as under: 476, Whether capital gain arising from transfer of a self occupied residential house would be entitled to exemption L Section 54 of the Income-tax Act provides for exemption in respect of capital gain arising from the transfer of a long-term capital asset, being a residential house, the income of which is chargeable under the head 'income from house property' if the conditions laid down in the said provision are fulfilled. 2. Under section 23(2) of the Income-tax Act, as amended by the Finance Act, 1986, the annual value of one house in the occupation of the owner for purposes of his own residence is token as nil. A question has been raised whether capital gain arising from the transfer of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction u/s 263. In the instant case, the AO has collected the relevant information, verified the details, considered the legal position and held that the assessee is entitled for deduction u/s 54 of the Act. In the submissions made before the AO, the assessee has convinced the AO that the date for reckoning the deduction u/s 54 for transferring the property was 29. 06. 2008. Since the AO has taken a conscious decision after verification of the complete information the and the same is one of the possible views as per law, the assessment order passed u/s 143(3) r. w. s. 147 cannot be held to be erroneous. Though prima facie, there appears to be some confusion with regard to the reckoning the date of transfer of the property, whether it is to be reckoned from the date of agreement or from the date of sale deed, on the set of facts both the views are possible thus it amounts to difference of opinion between the AO and the Pr. CIT, but cannot render the order erroneous. Since there is no error in the order passed by the AO, we hold that the Pr. CIT has incorrectly taken up the case for revision u/s 263 and the same is unsustainable. 7. 3. On merits also, this Tribunal has taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the residential house, which resulted in the capital gain or alternatively, a new residential house has been constructed in India, within three years from the date of the transfer, which resulted in the capital gain. The said section does not exclude the cost of land from the cost of residential house. 22. It is axiomatic that Section 54(1) of the said Act does not contemplate that the same money received from the sale of a residential house should be used in the acquisition of new residential house. Had it been the intention of the Legislature that the very same money that had been received as consideration for transfer of a residential house should be used for acquisition of the new asset Section 54(1) would not have allowed adjustment and/or exemption in respect of property purchased one year prior to the transfer, which gave rise to the capital gain or may be inthe alternative have expressly made the exemption in case of prior purchase, subject to purchase from any advance that might have been received for the transfer of the residential house which resulted in the capital gain. 23. At the cost of repetition, it it reiterated that exemption of capital gain f ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
