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TMI Blog2015 (11) TMI 1850X X X X Extracts X X X X X X X X Extracts X X X X ..... roundings. The land purchased by the assessee is surrounded by canals in which passenger boats ply which is common way of transport in this particular area, therefore approach should not be a problem to the assessee. Interpretation given by the Revenue that assessee purchased several pieces of land by way of separate sale deeds and therefore not eligible for deduction under section 54F of the Act on the entire land is hyper technical and contrary to the intention of the provision. No doubt provision is intended to benefit the assessee that invests in acquisition of residential house. However, in this case the intention of the assessee appears to be not to purchase residential house but to develop a resort. The developmental activities, if any on the property are at the instance of M/s. Arun Excello Construction and the assessee has no connection therewith. All these things go to clearly show that assessee s intention was to purchase land and develop a resort rather than a residential house for residing purpose. If the version of the assessee that all the land purchased is contiguous land forms part of one property with one residential house though purchased from several indiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the A.O. disallowed the exemption u/s 54 since the assessee has purchased plots of land from 6 different persons as land appurtenant to the residential building situated on the first plot of land (purchased from Shri Y.J.Alex) and the first plot of land itself possess a large area of land appurtenant to the residential house. 4. It is submitted that A.O. has allowed exemption u/s 54F to the extent of one plot of land with residential building. The subsequent purchase of plots by the assessee from six different persons has rightly not been considered for deduction u/s 54F. 5. The Id. CIT(A) ought to have appreciated the fact narrated by the A.O. in the assessment order that each transaction on purchase of land is independent and payments are also made separately. Hence, the reason that the family members sellers family) insistence for buying land is not a valid ground. 6. The Id. CIT(A) ought not to have considered assessee's submission that the different pieces of land are contiguous whereas the AO has clearly found the assessee has not purchased a single plot but a huge tract of land and the reason for non allowability of claim on this ground has been menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... water bodies and there is only one residential house in the property purchased from Mr. Y.J.Alex and other parts of the land has no residential building and there were only two sheds in some other properties which cannot be treated as residential buildings and therefore, assessee is entitled for exemption under section 54F of the Act as she has purchased all the properties belonging to one family though under separate deeds and there is only one residential house in such property and the land is contiguous though there are ponds in the lands purchased. However, the Assessing Officer restricted the deduction under section 54F of the Act only to the plot purchased by the assessee from Mr. Y.J.Alex and the building thereon and did not consider the sale consideration paid in respect of the property purchased from other six family members holding that residential house is situated at the land bearing survey numbers 98/9, 98/10, 98/11, 98/2-3 purchased from Mr. Y.J.Alex. As per the assessee, there is no property to be called as residential house in any other part of the land. Section is inserted in the Act to encourage construction of residential houses and meant for those who owns only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) allowed the claim of the assessee in toto observing that a perusal of the map shows that lands are part of two main survey numbers 98 and 99 though there are some sub-divisions. Therefore, according to the Commissioner of Income Tax (Appeals) it cannot be said that different pieces of land are not contiguous. The Commissioner of Income Tax (Appeals) observed that existence of water bodies on the plots of land cannot be a reason to conclude that assessee had acquired more than one residential house because such water bodies like swimming pool or well are required to be maintained for daily necessities of occupants in Kerala. The Commissioner of Income Tax (Appeals) held that cost of vacant land appurtenant to and forming part of residential unit has to be considered for claim under section 54F of the Act, even if no construction has been done for residential house on the appurtenant land. The new residential house is not debarred from having a land appurtenant to any size for claiming exemption under section 54F of the Act when especially land was purchased from one family though consisting of seven members. Thus he allowed the claim of the assessee without any restriction. Again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99/5-3 3,00,000 No Bldg 03.04.09 530/09 Baiju ___ 2.612 99/5-1 3,00,000 No Bldg 4,99,00,000 18,00,000 Referring to the details furnished, Departmental Representative submits that value of land in respect of the properties having buildings are higher in value. Departmental Representative submits that though the assessee is at liberty to purchase property irrespective of the cost of land component, the fact in this case is that the intention of the assessee to purchase land at property for commercial exploitation. Departmental Representative submits that entire land purchased by the assessee cannot be considered as being land appurtenant to the building for the purpose of claiming exemption under section 54F of the Act. Referring to copies of sale deeds submitted by the assessee, Departmental Representative submits that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the extent of land which can be considered as contiguous or appurtenant to a residential property came up for consideration before the Hon'ble High Court, Kerala in the case of Smt. Asha George reported in 351 ITR 123, and the Hon'ble Court held that held as under: Section 54F is intended to encourage construction of or acquisition of residential house with the aid of the proceeds from the transfer of any long term capital asset, which is not a residential house. The provision contemplates computing the cost of the residential building, but the value of the plot on which the farm house stands and the land appurtenant could also be considered. The tribunal has categorically found that the appellant has not produced material to show that the entire area of1.92 acres should be considered as land appurtenant to it. It is in such circumstances, the Tribunal made estimation and directed that the value of the plot on which the farm house is located and the land appurtenant be fixed as ₹ 2 lakhs. We are unable to accept the contention of the appellant that the value of the entire land must be considered in arriving at the value of the residential building. We find no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the impugned order, exemption against purchase of two flats was allowed having regard to the finding that both the flats could be treated to be one house as both had been combined to make one residential unit. The said judgment, thus, proceeds on a different fact situation. We are thus of the opinion that the CIT(Appeals) was justified in confirming the view taken by the A.D. that assessee could not claim exemption under Section 54 on two disparately placed properties. Therefore, in view of the above decision, the assessee cannot claim exemption u/s 54 in respect of the other two properties (purchased from Y.M.Alexander and Mariamma Alex), on which buildings stand since they are disparately placed properties. The CIT(Appeals) in para 12 on page 6 states that - The appellant claimed exemption u/s 54F of net consideration which the appellant has invested in the purchase of first plot on which residential house was available and in respect of his continuous purchase of plots which were nothing but land appurtenant to the building constructed on the first plot of land'. The reference to the 'first plot' obviously is to the property purchased by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the tribunal, the revenue contends that the existence of sheds in two of the survey numbers leads to the conclusion, that the two were independent properties that are not liable to be taken into consideration for the claim under Section 54F. Assesse's Reply: (I) With respect to the properties in Survey numbers of Mr. Alexander and Mrs. Mariyamma Alex, the building comprises old outhouses that were not habitable. One temporary construction was utilized by the family for storing grain, and the other comprise a shed that was utilized for running the business of a shell crushing unit. (ii) Reference has been made by the department to the Sale Deeds and the annexures thereto, indicating details of the constructions thereupon such references do not advance the case of the revenue in the light of the explanation above. (iii) We, now proceed to respond in Seriatim to the written submissions filed by the Departmental Representative. The averments in un-numbered para two that there are three residential properties in the entire in the property purchased is factually erroneous. There is only one property in survey number that was purchased from Mr. Y.J. Ale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts the aforesaid proposition. The Revenue relies upon the judgment of the Kerala High Court in the case of Smt. Asha George reported in 351 ITR 123. The observations of the Kerala High Court extracted in the submissions in fact support the assessee in so far as the Division Bench confirms as follows: 'Section 54F is intended to encourage construction of or acquisition of residential house with the aid of the proceeds from the transfer of any long term capital asset, which is not a residential house. The provision contemplates computing the cost of the residential building. but the value of the plot on which the farm house stands and the land appurtenant could also be considered.The Tribunal has categorically found that the appellant has not produced material to show that the entire area of 1.92 acres should be considered as land appurtenant to it. It is in such circumstances, the Tribunal made estimation and directed that the value of the plot on which the farm house is located and the land appurtenant be fixed as ₹ 2 lakhs. We are unable to accept the contention of the appellant that the value of the entire land must be considered in arriving at the value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prayed that the appeal of the Revenue be dismissed. 11. Further in the additional written submissions, the Departmental Representative raised the following contentions:- The learned counsel during the course of arguments on 03rd July 2015, stated that a fresh line of argument has been taken by the Departmental Representative for the first time that the said property in respect of which claim of 54F has been made consisted of three houses. In this connection, I wish to submit that it is not a fresh line of argument I had taken. I have just highlighted certain facts so that the case can be appreciated in the proper perspective. The facts are not my creation. The facts already existed in the very documents relied upon by the learned counsel. As pointed out in my written submissions earlier, the Department's stand is that since the land contiguous to the property purchased from Y. J.Alex as per Document No 523/09 consisted of an extent of 2 acres and 18.500 cents, the Assessing Officer is right in restricting the claim of 54F to that extent as against the claim made by the assessee that the entire land of 5.61 acres is contiguous. The undeniable fact of the matter is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee, the said residential buildings are sheds there would be no 'House numbers. Thirdly, the number of electrical installations as per Columns 8 on page 18 and page 25 are 10 each. Therefore the contention of the Counsel that there is only one residential building on the said property is factually erroneous. The Counsel claims that she is unaware of any oral direction given by the Vice President of the Income tax Appellate Tribunal. In this connection, I am enclosing a copy of the letter dated 03-06-2014, addressed by the CIT(DR-I) Admn to the .Chief Commissioner of Income Tax, Kochi the subject, which is self-explanatory, for Your Honours kind perusal. The Counsel in page 3, para 3 of the typed set dated 2nd July 2015, accepts that the properties purchased from Alex Mathew, T.G.Paul. T.G. Sebastial and Baiju do not qualify in so far as the said properties do not contain any building. However, it is claimed that these lands are contiguous with the property purchased from Y.J.Alex. in this connection, it is reiterated that the extent of land lying contiguous with the property purchased from Y.J.Alex is only an extent of 2 acres and 18.500 cents, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue of access to the property while working out the cost for which she could purchase the property. Further, the question of access to the property would arise only in the event that the assessee resided there for a considerable period of time. The assessee did not purchase the property with an intention to reside there permanently. Your Honours, it is on record that the assessee had sold the property to M/s Arun Excello Constructions on 29.08.2012. As pointed out in my earlier submissions, the assessee had also entered into an agreement with M/s Arun Excello to construct a resort on the same property. The above said would prove that the issue of access to the property never existed and this has been raised now only for the sake of argument and therefore does not merit consideration. In view of the above, it is prayed that the appeal of the Revenue be allowed. 12. Heard both the sides. Perused the orders of lower authorities, materials placed before us and the written submissions. The assessee an individual purchased several plots from seven members of a family to the extent of 5.61 acres of land and claimed that property is a contiguous property and property is purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iamma Alex -- 88 98/2/2 95,00,000 5,00,000 II/380 03.04.09 528/09 Alex Mathew __ 25 98/2/1A 27,00,000 No Bldg 03.04.09 531/09 T.G.Paul --- 20 99/5-3 3,00,000 No Bldg 03.04.09 529/09 T.G.Sebastian --- 20 99/5-3 3,00,000 No Bldg 03.04.09 530/09 Baiju ___ 2.612 99/5-1 3,00,000 No Bldg 4,99,00,000 18,00,000 13. As could be seen from the above details the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t huge land is adjacent to the Vambanadu lake which joins Arabian sea, in and around this lake there are several resorts and tourism is a major activity in the surroundings. The land purchased by the assessee is surrounded by canals in which passenger boats ply which is common way of transport in this particular area, therefore approach should not be a problem to the assessee. The contention of the Assessing Officer is that circumstantially the assessee s land is not totally cut off from the main stream possibility of approach cannot be denied. 14. The assessee relying on the memorandum explaining the provisions of section 54F as reported in 184 ITR (Statue) submits that provision is intended to benefit an assessee that invests in acquisition of residential house. According to the assessee, this parameter is satisfied in this case. Therefore, interpretation given by the Revenue that assessee purchased several pieces of land by way of separate sale deeds and therefore not eligible for deduction under section 54F of the Act on the entire land is hyper technical and contrary to the intention of the provision. No doubt provision is intended to benefit the assessee that invests in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause of emergence of ecobackwater tourism in Alappuzha. Muhamma is lying in western side of the Vembanad lake in Alappuzha Dist. Many resorts are functioning successfully for years in this area. It is evident that the purchaser spent huge amount for buying this land with an intention to make a huge return from either running a resort or from resale of the land. Earlier before the advent of tourism the cost was only ₹ 20,000/- for a cent of land. But as this area become a major tourist attraction in the world, the land price in this area has gone up substantially. My findings in brief in the light of questionnaire envisaged in the letter of Hon.ITAT Chennai are as under:- 1. The very intention behind deduction u/s.54F is fully defeated as the assessee neither constructed any building in the land nor existing buildings were useful for residential purpose. Moreover, the intension of the assessee in purchasing the property is to start a resort thereon which is a commercial / business activity. The assessee has been keeping the land idle from the date of purchase till last month. 2. With regard to the investment in property after purchase. a) three side of the propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelop a resort rather than a residential house for residing purpose. If the version of the assessee that all the land purchased is contiguous land forms part of one property with one residential house though purchased from several individuals of a family should be considered as eligible for deduction under section 54F of the Act, it defeats the very purpose of introducing the provisions of section 54F of the Act which is enacted to intend the benefit to the assessee who invests in acquisition of residential house especially in the present circumstances where the assessee purchased huge extent of 5.61 acres of land stating to be contiguous which was later developed into a resort for commercial purposes. The assessee places reliance on the decision of Delhi Bench of the Tribunal in the case of Addl. CIT Vs. Narendra Mohan Uniyal (34 SOT 152) in support of her contention that vacant land appurtenant to and forming part of a residential unit should be considered for deduction under section 54F of the Act. We find the said decision relied on by the assessee is distinguishable on facts and has no application to the facts of the present case. Other decisions relied on by the assessee als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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