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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”: HYDERABAD
Before: SHRI SATBEER SINGH GODARA & SHRI LAXMI PRASAD SAHU
Revenue by: Shri Rohit Mujumdar Assessee by: None Date of hearing: 26/10/2021 Date of pronouncement: 24/11/2021 O R D E R PER L.P. SAHU, A.M.: Both these appeals filed by the Revenue are directed against CIT(A) – 5, Hyderabad’s separate orders dated 30/10/2019 and 18/11/2019 respectively for AY 2011-12
:- 2 -: & 59/Hyd/2019 Bhupathi Ra V and another, Hyd. involving proceedings u/s 143(3) rws 147of the Income Tax Act, 1961 ; in short “the Act”. Since common issues are involved in both these appeals, we decided to dispose of the same in combined order for the sake of conveyance.
To dispose of these appeals, we refer to the facts from Bhupathi Rao Vaddepally. Therefore, the decision taken in this appeal shall mutatis-mutandis apply to the other appeal. The grounds raised
in which are common in other appeal, are as under: “1. Whether in the facts and circumstances, the order of the Id. CIT(A) in directing the Assessing Officer to allow the claim of the assessee u/s 54F of the Income Tax Act, is not perverse, illegal and likely to be set aside.
2. Whether in the facts and circumstances, the order of the Id. CIT(A) is justified in directing the Assessing Officer to consider all the residential flats received as consideration as part of reinvestment for the purpose of section 54F, when the assessee received multiple flats located on different floors separated by different blocks of gated community/apartment complex.
3. Whether in the facts and circumstances, the order of the Id. CIT(A) is justified in directing the Assessing Officer to consider all the residential flats received as consideration relying on the decision of Hon'ble AP High Court in the case of Sri Syed Ali Adil by not considering the facts of the case are distinguishable and not applicable to the flats of the present case.
4. Whether in the facts and circumstance, the Id. CIT(A) is justified in not considering the intention of the :- 3 -: & 59/Hyd/2019 Bhupathi Ra V and another, Hyd. legislature while amending Section 54F of the Income Tax Act vide Finance Act 2014 which clarifies that ' a residential house' means ' one residential house' even before the amendment to Section 54F. 5. Any other ground(s) that may be urged at the time of hearing.”
Briefly, the facts of the case are that the assessee is an individual. For the AY 2011-12, the AO initiated action u/s 147 of the Act on the ground that the assessee entered into a development agreement with 12 others with M/s Sumashaila Developers in respect of land of ac.10.20 guntas situated at Kukatpally, Hyderabad on 14/02/2011. In response, the assessee filed the return of income on 09/05/2018 declaring Nil income. The AO had taken up the case for scrutiny and computed the total income at Rs. 4,32,38,990/-.
The facts relating to the grounds raised by the revenue are that the assessee had claimed the exemption u/s 54F, on account of investment made in the constructed area comprising of multiple residential flats (more than one in number), which was received by the assessee, as an application of the consideration with regard to the transfer of his share of land. The AO, however has restricted the exemption u/s. 54F claimed by the assessee only to the extent of investment in one residential flat and denied on the other residential flats.
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Aggrieved, the assessee preferred an appeal before the CIT(A) and before the CIT(A) the assessee had cited several decisions including that of the jurisdictional High Court, that exemption u/ s 54F has to be allowed in respect of a residential house which consist of multiple units and of jurisdictional ITAT wherein it has been held that Sec. 54F exemption has to be allowed even if such independent units or on different floors. The relevant part of decisions with citations are reproduced as under: “1. Virtal Krishna Conjeevaramvs ITO (144 lTD 325) (Hyd): In this case the Hon'ble ITAT, Hyderabad Held as under:- "Exemption u/ s. 54F only requires that the property should be of residential nature and the fact that the residential house consists of several independent units cannot be an impediment to grant relief u/s. 54F even if such independent units are on different floors. " 2. CIT vs Syed Ali Adil ( Decision of AP High Court dated 20.12.2012): In this case though the decision was rendered in the context of Sec 54 of the IT Act the hon'ble high court held that the assessee was eligible for exemption in respect of a residential house which consists of multiple units."
The CIT(A) after considering the elaborate submissions as well as case law cited by the assessee, which were extracted in his order at pages 11 to 20 held that it is clear that even if the investment is made in multiple residential houses/units, the appellant will be :- 5 -: & 59/Hyd/2019 Bhupathi Ra V and another, Hyd.
entitled for exemption u/s 54F. Further, he held that it is also important to note that an amendment u/s. 54F took place vide Finance Act, 2014, wherein, "a residential house" was substituted with "one residential house in India w.e.f. 01.04.2015. The said amendment very clearly states that prior to 01.04.2015, the section did not restrict the investment to only one residential house. Therefore, from the above decisions and subsequent amendment, the reinvestment quantum for eligibility u/s. 54F cannot be limited to one residential house. Therefore, he directed the AO to consider all the residential flats received as consideration as part of re-investment for the purpose of section 54F.
Aggrieved by the order of CIT(A), the revenue is in appeal before the ITAT.
At the time of hearing of this appeal, none appeared on behalf of the assessee and, therefore, we proceed to dispose of the appeal after hearing the ld. DR and considering the material available on record.
We have heard the ld. DR and perused the material on record as well as gone through the orders of revenue authorities. Similar issue came up for consideration before the coordinate bench of this Tribunal in the group cases of the assessee in and others in the :- 6 -: & 59/Hyd/2019 Bhupathi Ra V and another, Hyd.
case of Kondala Rao Vaddepally and others vide order dated 18/06/2021 wherein the coordinate bench has held as under: “10. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The AO restricted the exemption u/s 54F claimed by the assessee only to the extent of investment in one residential flat and denied on the other residential flats. Whereas the CIT(A) held that “it is also important to note that an amendment u/s. 54F took place vide Finance Act, 2014, wherein, "a residential house" was substituted with "one residential house in India w.e.f. 01.04.2015. The said amendment very clearly states that prior to 01.04.2015, the section did not restrict the investment to only one residential house. Therefore, from the above decisions and subsequent amendment, the reinvestment quantum for eligibility u/s. 54F cannot be limited to one residential house. Therefore, he directed the AO to consider all the residential flats received as consideration as part of re- investment for the purpose of section 54F”. 10.1 It is clear from the supplementary agreement dated 20th March, 2013, which is executed against the assessee & developer and the details of total construction area is as under as per page No. 44 of paper book: a) Open plots – 4 Nos b) 2/3 Bedroom Blocks – 10 blocks (Block 1 to 10) c) EWS/LIG Blocks – 2 Blocks (Block 11/A and 11/B) d) Independent Villas – 40 Nos (Villa No. 1 to 40 e) Club house and Amenities f) Tot lots and Mandatory open areas g) Road and Driveways 10.2 The details of each block area as per page No. 46 of paper book, are as under: Apartment – Each block area statement
:- 7 -: & 59/Hyd/2019 Bhupathi Ra V and another, Hyd.
Block No. Construction Each Floor Area in 5 pattern Area Floors B1 C+S+5 Floor 7962 39810 B2 C+S+5 Floor 7962 39810 B3 C+S+5 Floor 7962 39810 B4 C+S+5 Floor 7962 39810 B5 S+5 Floor 6194 30970 B6 C+S+5 Floor 6194 30970 B7 C+S+5 Floor 12189 60945 B8 C+S+5 Floor 12170 60850 B9 C+S+5 Floor 15099 75494 B10 S+5 Floor 5589 27945 B11/A S+5 Floor 17012 86935 B11/B S+5 Floor 2954 14770 Total built up area in flats = 547120 SFT Villa Area Statement Villas Nos Built up area Total area East 20 3135 62700 West 20 3175 63500 Total Area in Villas (SFT) = 126200 Open Plot Area Statement Plot No Land Area Open 1 625 Sq.Yds Open 2 625 Sq.Yds Open 3 625 Sq.Yds Open 4 625 Sq.Yds 10.3 Allotment of the apartment units between first party and second party: Area Distribution between owners and developers Owners Area Development Area Block Description Area in Block Area in Description SFT SFT B2 Full Block 39810 B1 39810 Full Block B3 Full Block 39810 B4 31935 Partial Block
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B4 Flat 1 x 5 Flrs 7875 B7 60945 Full Block B5 Full Block 30970 B8 15050 2x3BHK x 5floor B6 Full Block 30970 B9 30197 Partial Block B8 Partial Block 45800 B10 12289 Partial Block B9 Partial Block 45298 B11/A 18943 EWS B10 Partial Block 15656 B11/A 30082 LIG B11/A EWS 15847 B11/B 7670 EWS B11/B EWS 7100 Total area in SFT = 300199 246921 SFT Collective area = 300199 + 246921 = 547120 10.4 Allotment of the apartments units between First Party and Second Party in the ratio of 42 : 58 at page No. 50 of paper book, is enclosed to the order as Annexure – 1. 10.5 Block-wise details are given at page 82 of paper book, which is enclosed to the order as Annexure – 2. 10.6 Further, in the agreement at page 63 & 64 of the paper book are mentioned as under: “12. That the "PARTIES" have further agreed that with regard to the division of the constructed area in Residential Township, the same shall be done as per the following: "Approximate Total Area of Construction of Apartments = 5,36,905 SFT Total Number ofIndependent Villas Approximately = 40 Nos (1,00,000 SFT) The FIRST PARTY (owners) shall be allotted an area of 3,00,000 SFT as their entire share and the balance area of construction of Flats and Independent Houses comes to the share of the "SECOND PARTY"( Developers! Builders) on the plan being sanctioned and such allocation to be :- 9 -: & 59/Hyd/2019 Bhupathi Ra V and another, Hyd. recorded in writing and the"PARTIES" will endeavour to make the distribution of their respective shares in Flats! Houses or block wise. • The maximum excess area over proposed initial area of Apartments in the land earmarked for Construction of Flats as per the attached tentative drawing shall not cross beyond 1 % of 5,36,905 SFT. If any excess area is constructed beyond 1% in excess of 5,36,905 sft, then, the excess area shall be shared among the First party and the Second Party as per 40 : 60 ratio-respectively. Any area arrived within the excess of 5,36,905 Sft. shall belong to the share of the Second Party after giving First Party" its total share of 3,00,000 Sft. • However, the Second party is at liberty to do any changes in the area earmarked for Construction of Villas, either to construct flats or Villas, increase or decrease the area, as per the will of the Second. party only, without disturbing the area earmarked for Apartments, and that the First Party shall not have any objection or right on it. TYPIC OF CONSTRUCTION FIRST PARTY SECOND PARTY (OWNERS) (,DEVELOPERS) Apartment/Flats 300000 SFT 236905 SFT 536905 SFT Independent houses NIL 100000 SFT 10000 0 SFT
APPROX. AREA OF CONSTRUCTION FOR FLATS IN TOTAL: 5,36,905 SFT APPROX. AREA OF CONSTRUCTION FOR INDEPENDENT HOUSES: 1,00,000 SFT (40 Villas) ALL THE" AREAS CONSJDEREDIMENTIONED herein are as per Saleable area in SFT only which includes total constructed area including
:- 10 -: & 59/Hyd/2019 Bhupathi Ra V and another, Hyd. balconies, sit out, staircases, lift rooms, Security rooms, games room, if any; electrical meter room, Economic Weaker Section, Low Income Group housing, pump room, generator rooms if any, common areas, circulation areas but excludes car parking area. The construction areas and the layout may be altered by the SECOND PARTY to meet the marketability demands, at any stage or as per stipulated rules of concerned authorities. That the First Party shall retain an area of 2500 Sq. yds out of Ac 10 - 20 Guntas for their exclusive use and enjoyment of the First Party with absolute right of Ownership. The Second party is not haying any claim in and over the 2500 Sq. yds which is clearly mentioned in the plan in red colour annex to this Agreement and the said area Is abutting the 60 Feet of main Road which is facing towards East and South after deleting the area for the Transformer Yard on the Comer of South East. The Second party shall provide supply lines for Electrical, Drainage, Water (Gound and Municipal) etc and to develop them to the stage of Open Plots. However, any further construction and its implied expenses and deposits shall be borne by the First party itself. Moreover, Entry from these earmarked open plots into the developed layout shall not be permitted. It is mutually agreed that, a closed compound wall shall be constructed towards the West side of the said plots to restrict the access. Lf made mandatory by the Competent Authority to construct either Economic Weaker Section or Low Income Group. housing, and as such, the construction expenses shall be borne by SECOND PARTY only, but the area will be shared among
:- 11 -: & 59/Hyd/2019 Bhupathi Ra V and another, Hyd. the FIRST and SECOND parties @ 40% and 60 % respectively between First and Second Parties. The Mortgage of property towards Layout Development for the Concerned Authorities shall be made as per the 40% share of the FIRST PARTY and·60 % share of the SECOND PARTY. For the Mortgage of property towards Building Permission for the Concerned Authorities, out of the total area to be Mortgaged, the First party shall mortgage 30,000 SFT from its share of apartment area and the balance total shortfall area to be Mortgaged shall be made by the Second Party only from its share of Apartments and Independent Villas. Any legal issues / Claims / Settlements pertaining to the Scheduled Land shall be cleared and made free of any such claims at the risk and cost of the FIRST PARTY only in reasonable time. Deviation in Construction shall not be entertained in any way by the SECOND PARTY. The SECOND PARTY shall be at liberty to check the legality in any manner as deemed fit to ensure the Title Rights. There shall not be any objection by the FIRST PARTY in the process adopted by the SECOND PARTY for the same. The SECOND PARTY is at liberty to Promote / advertise / market in any form of media as deemed fit and the FIRST PARTY shall not have any objection towards it as long as it is done on the name of the SECOND PARTY. “ 10.7 The ld. CIT(A) has relied on the judgement of Hon’ble Delhi High Court in the case of CIT Vs. Geeta Dugal (ITA No. 1237/2011 dated 21/02/2013) and :- 12 -: & 59/Hyd/2019 Bhupathi Ra V and another, Hyd.
Hon’ble AP, Karnataka High Courts judgements as well as the decision of ITAT, Hyderabad. In all these judgements, the exemption claimed was in respect of multiple units on different floor/floors in a Block/Tower. But, in these cases, it is not clear as to whether one assessee has been allotted house/houses in a Block/Tower. We have gone through the allotment of apartment, which has been enumerated in para 10.3 cited supra, it is clear that some of the Blocks have been allotted fully to the assessee/assessees and some of the Blocks are partially allotted amongst the assessees and developers. In this regard, the AR of the assessee has not submitted any documents or any allotment letter for ascertaining the number of flats allotted to the assessee/assessees by the developers which is root for determining the deduction u/s 54F of the IT Act. The CIT(A)’s decision is right if the assessee has been allotted a house or more than a house in a Block/Tower as per the decision cited supra. The said blocks consist of more than a floor i.e. 5 floors. We, therefore, remit this file back to the AO for verification for the allotment of flats, which have been allotted to the assessee in a Block/Tower or in different Blocks/Towers. If the AO is found that the assessee has been allotted residential units in more than Blocks/Towers, the AO will recompute the capital gain afresh in the hands of the assessee as per law after providing reasonable opportunity of hearing to the assessee. The assessee is also directed to substantiate its claim u/s 54F by producing necessary documents and avoid unnecessary adjournments. Accordingly, the grounds raised by the revenue are partly allowed for statistical purposes.”
9.1. The issue is squarely covered by the decision of the coordinate bench of this Tribunal in the group cases of the assessee in M.A. Nos. 48, 49 & 50/Hyd/2021 and in 889 & 890/Hyd/2019 in the case of Kondal Rao
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Vaddepally and others vide order dated 23/11/2011. The relevant findings of the coordinate bench in the order are reproduced below:
“4.1 The ld. AR submitted the note along with case law on 28/05/2021, which was not taken into consideration while passing the order dated 18/06/2021. To avoid physical contacts due to the global pandemic COVID-19, drop box system for filling any physical documents has been arranged in the office premises w.e.f. 14/08/2020. The ld. AR filed the documents in physical in the drop box, which could not be placed before the Bench at the time of hearing of this appeal as well as up to passing of the order and, therefore, there was no occasion to consider the said documents while passing the order. The said documents were also filed before the office of the DR, ITAT. We make it clear that the main cases had been heard on 27/05/2021 on virtual mode because of Covid-19 pandemic lockdown imposed and the same only forms the sole reason of these assessees’ as well as their learned counsel having not able to place on record various judicial precedents deciding the issue herein against the department; we find our order dated 18/06/2021 suffering a mistake(s) apparent on record. We now consider the case law: 1. CIT Vs. Vittal Krishna Conjeevaram, ITTA No. 588 of 2013, dated 06/12/2013 2. Vittal Kirshna Conjeevaram Vs. ITO, 144 ITD 325 (ITAT, Hyd.) 3. CIT Vs. Syed Ali Adil, 352 ITR 418 (AP – HC) 4. CIT Vs. D. Ananda Basappa, 309 ITR 329 5. CIT Vs. Gita Duggal, 357 ITR 153 6. Arun K. Thiagarajan Vs. CIT, 193 DTR 153) 7. CIT Vs. Gumanmal Jain, 394 ITR 666 8. Tilokchand and Sons Vs. ITO, 413 ITR 189 9. K. Jaipal & Others, and others, dated 19/11/2015.
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4.2 Considering the above judgements cited by the ld. AR of the assessee, there was a mistake apparent on record in the order passed in 889 & 890/Hyd/2019 dated 18/06/2021 and, therefore, the same are hereby recalled and disposed off. ITA Nos. 732, 889 & 890/Hyd/2019 5. The above appeals had been decided as per para No. 10.7 and 11 in the order dated 18/06/2021, wherein the matters have been remitted back to the file of the AO. In view of the MAs decided supra, the assessee is eligible to claim deduction u/s 54F of the Act in more than one house as per the judgments cited (supra). Therefore, we modify the order dated 18/06/2021 and allow the appeals of the assessee.
As the issue in both the appeals under consideration are materially identical to that of the above decision, following the conclusions drawn therein, we uphold the order of the CIT(A) and dismiss the grounds raised by the revenue in its both the appeals.