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Income Tax Appellate Tribunal, HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI A. MOHAN ALANKAMONY
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “A”, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA Nos. 1756/Hyd/2017 Assessment Year: 2008-09 Sri Potla Nageswara Rao, Vs. Income Tax Officer, 11-4-70/2, Nehrunagar, Ward-2, Aayakar Khammam. Bhavan, Rajeev Gunt, PAN: AGOPP 4882 H Near Kinnerasani Theatre, Khammam – 507001. (Appellant) (Respondent)
ITA Nos. 1757/Hyd/2017 Assessment Year: 2008-09 Sri Potla Nishanth, Vs. Income Tax Officer, Rep. by GPA Sri Potla Ward-2, Aayakar Nageswara Rao, Bhavan, Rajeev Gunt, 11-4-70/2, Nehrunagar, Near Kinnerasani Khammam. Theatre, Khammam – PAN: APEPP 2330 R 507001. (Appellant) (Respondent)
ITA Nos. 1758/Hyd/2017 Assessment Year: 2008-09 Ms. Potla Shanthi, Rep. by Vs. Income Tax Officer, her GPA Sri Potla Nageswara Ward-2, Aayakar Rao, 11-4-70/2, Nehrunagar, Bhavan, Rajeev Gunt, Khammam. Near Kinnerasani PAN: APEPP 2329 E Theatre, Khammam – 507001. (Appellant) (Respondent)
Assessee by: Sri A.V. Raghuram Revenue by: Smt. Amisha S. Gupt, DR Date of hearing: 25/09/2019 Date of pronouncement: 31/10/2019 ORDER PER A. MOHAN ALANKAMONY, AM.:
These three appeals are filed by the assessees against the orders of the Ld. CIT(A)-7, Hyderabad dated 27/03/2017 in appeals nos. 337, 354 & 355/CIT(A)-7/2014-15 passed U/s. 143(3) r.w.s 254 and U/s. 250(6) of the Income Tax Act, 1961 for the assessment year 2008-09. Since all the three assessees are related to each other viz., Sri Potla Nageswara Rao (Father), Sri Potla Nishanth (S/o. Sri Potla Nageswara Rao) and Ms. Kumari Potla Santhi (D/o. Sri Potla Nageswara Rao), and the issues are also identical, all the three appeals are taken up for hearing together and disposed off by this common order.
The identical grounds raised in all the three appeals are with respect to the erroneous computation of capital gains and denial of deduction U/s. 54 of the Act by the Ld. AO as well as by the ld. CIT (A).
Further, with respect to the appeal filed by Ms. Kumari Potla Santhi, the assessee is aggrieved by the order of the Ld. AO as well as
by the Ld. CIT (A) who had brought to tax the gain arising out of the sale of her agricultural land to M/s. Amsri Developers Pvt Ltd.
Brief facts of the case are that all the three assessees who are related to each other entered into a development agreement with the partnership firm M/s. Aditya Constructions wherein Sri Potla Nishanth(one of the assessee) is the Managing Partner. On the first round of litigation, when the matter reached the Tribunal, the Tribunal remitted the appeal back to the file of the ld. AO for re-computation of LTCG. Thereafter, the Ld. AO recomputed the capital gain in the hands of all the three assessees denying the claim of exemption U/s. 54F of the Act, which was further upheld by the Ld. CIT (A). Aggrieved by the order of the Ld. CIT (A) for the erroneous computation of LCTG and denial of exemption U/s. 54F of the Act, all the three assessees are in appeal before us.
At the outset, the Ld. AR submitted before us that the contention of the assessee before the Ld. AO was that as per the development agreement, the assessees was to retain 30% of the total extent of land given for development and in lieu of that receive 30% of the total constructed area in the developed project. Thus, the share of land transferred to the developer is only 70% of the total extent of land. Hence, it was argued before the ld. AO that the LTCG has to be worked
out for the relevant assessment year only towards the transfer of 70% of the land to the developer and accordingly, LTCG is to be computed in the hands of the assessees taking into consideration of the cost of acquisition of the 70% of the land and the cost of construction of the 30% of the constructed area in the project as the sale consideration. The further submission of the assessees before the Ld. AO was that, as and when the assessees sell their respective portion of the constructed area received from the developer which are independent houses, LTCG has to be computed in that particular assessment year. The Ld. AR further submitted before us that the ld. AO as well as the Ld. CIT (A) has not considered these arguments advanced before them. The Ld. AR also argued that the assessee is entitled for deduction U/s. 54F of the Act while computing the LTCG in the above-mentioned manner. The AR therefore pleaded to remit back the matter to the file of Ld.AO to consider these aspects in the case. The Ld DR on the other hand, relied on the orders of the Ld. Revenue Authorities and requested for confirming the Order of the Ld.CIT(A).
After hearing both sides on the issue, we find merits in the arguments advanced by the Ld. AR. If the assessees had exchanged 70% of their land in lieu of 30% of the constructed area of the entire project, then the cost of construction of the 30% of the constructed area would be attributable to the sale of 70% of the land and treated as the sale
consideration. Therefore, for the relevant assessment year the LTCG has to be computed taking into consideration of the indexed cost of acquisition of the 70% of the land and the cost of construction of the 30% of the constructed area receivable by the assessees as the sale consideration. The assessees would also be eligible for the benefit of deduction U/s. 54F of the Act towards the independent house received and retained by them subject to the fulfilment of the other conditions stipulated in the Act. Thereafter, when the assessees sells the independents houses allotted to them which are not retained by them, LTCG has to be computed once again in the year when those Independent houses are sold and they shall be eligible for deduction U/s.54F of the Act subject to the fulfilment of the conditions stipulated therein. On perusing the Orders of the Ld. Revenue Authorities, We find that these aspects are not considered. Therefore, in the interest of justice we remit back all the three appeal to the file of the Ld. AO for de novo consideration and to pass appropriate order in accordance with merit and law keeping in view the observations made hereinabove. The identical concise grounds raised in all the three appeals mentioned in para 2 hereinabove are accordingly disposed off.
Sale of agricultural land (In the case of Kumari Potla Shanti)
With respect to the land at Bowrampet Village sold by the assessee to M/s. Amsri Developers Private Limited and to Smt. M. Jhansi the
Tribunal vide order dated 22/3/2012 for the relevant assessment year 2008-09 remitted the matter back to the file of the Ld. AO to re-examine the issue afresh in the light of findings given in the case of Smt. Ghousia Begum in ITA No. 1024/Hyd/2011 dated 16/1/2012 and to duly verify the nature of land as to whether it can be classified as agricultural land falling beyond 8 kms of any Municipal Limit.
Thereafter the Ld. AO on examining the submission of the assessee arrived at the conclusion that the land transfered by the assessee situated at Bowrampet Village is near to Kukatpally Municipality and not near to Quthbullapur Municipality, and Kukatpally Municipality was merged with Greater Hyderabad Municipal Corporation (GHMC) vide G.O. No. 256, dated 16/04/2007. Since, the transfer of land in question took place as per development agreement dated 23/5/2007, the distance of the land has to be measured from the outer limits of GHMC and not from the outer limit of Quthbullapur Municipality. Further, from the Google Maps it was clear that the land transferred by the assessee falls within 8 kms from the outer limit of GHMC. Therefore, the Ld. AO held that the land transferred by the assessee falls within the ambit of ‘capital asset’ as per section 2(14) of the Act. Since the assessee could not produce any other cogent materials to justify her stand the Ld.CIT(A) upheld the view of the Ld.AO.
At the outset, the Ld. AR submitted before us that the distance of the asset transferred by the assessee from the outer limit of the Municipal Limit has to be measured as per the motorable road as on the date of the transfer of the land. The Ld. AR further submitted that on such measurement, the land falls beyond 8 kms from the outer limit of the GHMC limit. The Ld AR further argued by stating that the Google Maps does not take into consideration of the outer limit of the GHMC, therefore the information adduced by the Ld.AO is not reliable. The Ld. AR further pleaded that the matter may be remitted back to the file of the Ld. AO so that the assessee may be able to produce sufficient authorised documents in order to prove his claim. The Ld. DR on the other hand, relied on the order of the ld. CIT (A) and requested for confirming his order.
We have heard the rival submissions and carefully perused the materials on record, and we find merit in the submission of the ld. AR. The information gathered from the Google Map with respect to the distance of the asset transferred by the assessee from the outer limit of GHMC may not be reliable because the authenticity of the information as on the date of transfer of the asset is absent. Further, the outer limit of GHMC is not marked in the Google Map. In this situation, in the interest of justice, we are of the considered view that the assessee
should be provided with one more opportunity before the ld. AO in order to establish her claim by producing authentic relevant information from the appropriate Government Authorities. Accordingly, we hereby remit the matter back to the file of ld. AO for de novo consideration and grant liberty to the assessee to produce any evidence in order to justify her stand.
In the result, appeals of the assessees are allowed for statistical purposes as indicated hereinabove.
Pronounced in the open Court on 31st October, 2019.
Sd/- Sd/- (P. MADHAVI DEVI) (A. MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 31st October, 2019 OKK Copy to:- 1) (a) Potla Nageswara Rao ; (b) Potla Nishanth and (c) Ms. Potla Shanthi C/o. K.Vasantkumar, A.V. Raghu Ram, P.Vinod & M. Neelima Devi, Advocates, 610, Babukhan Estate, Basheerbagh, Hyderabad-1. 2) Income Tax Officer, Ward-2, Aayakar Bhavan, Rajeev Gunt, Near Kinnerasani Theatre, Khammam – 507001. 3) The CIT(A)-7, Hyderabad 4) The Pr. CIT-7, Hyderabad 5) The DR, ITAT, Hyderabad 6) Guard File