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Income Tax Appellate Tribunal, HYDERABAD BENCH “B”, HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI A. MOHAN ALANKAMONY
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “B”, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA No.945/Hyd/2013 Assessment Year: 2008-09 Sri Siva Ramakrishna Vs. Asst. Commissioner of Mulpuri, Income Tax, 8-2-120/117/10, Park Circle-6(1), View Enclave, Road No.2, Hyderabad. Banjara Hills, Hyderabad. PAN: AFAPM 7610 M (Appellant) (Respondent) Assessee by: Sri P. Murali Krishna Revenue by: Sri Y.V.S.T. Sai, CIT-DR Date of hearing: 24/06/2019 Date of pronouncement: 10/07/2019 ORDER PER A. MOHAN ALANKAMONY, AM.:
This appeal is filed by the assessee against the order of the Ld. CIT-III, Hyderabad dated 14/03/2013 in appeal No. 263/CIT-III/2012- 13 passed U/s. 143(3) and U/s. 263 of the Act for the assessment year 2008-09.
The assessee has raised several grounds in his appeal however the crux of the issue is that the Ld. CIT has erred in invoking his powers U/s. 263 of the Act by treating the assessment order passed u/s 143(3)
of the Act dated 16/12/2010 as erroneous and prejudicial to the interests of the Revenue and thereby set aside the order of the Ld.AO with directions to (i) treat the interest earned in respect of delayed receipt of sale consideration of the property located at Begumpet, Hyderabad amounting to Rs. 5,97,945/- as “income from other sources” and (ii) disallow the assessee’s claim for exemption U/s. 54F of the Act.
The brief facts of the case are that the assessee is an individual earning income from Long Term Capital Gains and Income from Other Sources filed his Return of Income on 31/07/2008 declaring total income at Rs. 56,53,991/-. The case was taken up for scrutiny wherein the Ld. AO treated the interest received by the assessee towards delayed payment of sale consideration with respect to the sale of property located at Begumpet, Hyderabad as part of sale consideration while computing the Long Term Capital Gains and further allowed the claim of deduction u/s 54F of the Act to the assessee and completed the assessment U/s. 143(3) of the Act on 16/12/2010.
Thereafter the Ld. CIT invoked the provisions of section 263 of the Act and set aside the order of the Ld. AO and remitted the matter back to the file of the Ld. AO with directions to (i) treat the interest earned in respect of delayed receipt of sale consideration of the property located at Begumpet, Hyderabad amounting to Rs. 5,97,945/- as “income from
other sources” as he was of the view that such interest cannot be treated as part of the sale consideration (ii) and further disallowed the assessee’s claim for exemption U/s. 54F of the Act because the assessee has not constructed the house within the stipulated period provided under the Act in order to claim the benefit of deduction U/s. 54F of the Act though he has paid the entire amount of capital gains earned of Rs. 1,97,00,000/- to the developer within the stipulated period as per the provisions of the Act.
At the outset, the Ld. AR submitted before us that the enhanced sale consideration received by the assessee due to delay in the sale transaction on account of the lapse on the part of the purchaser of the property cannot be treated as interest earned by the assessee. The Ld. AR further submitted that the entire amount received by the assessee was towards the sale of the property and any portion of the same cannot be attributed as interest. It was therefore argued by the Ld. AR that the order passed by the Ld. AO was not prejudicial to the interests of the Revenue in order to invoke the provisions of section 263 of the Act by the Ld. CIT. The Ld. AR further submitted that the entire capital gains earned by the assessee was paid to the developer towards purchase and construction of a residential house for the assessee and therefore, the assessee was entitled to the benefit of section 54F of the Act. It was further argued that the fault on the part of the developer for the delay
in the construction cannot be attributed to the assessee and it was beyond the control of the assessee to ensure that the developer fulfils his contractual obligation within the stipulated period. The Ld. AR further relied on the decision of the decision of the Hon’ble Madras High Court in the case CIT vs. Sardarmal Kothari reported in 302 ITR 286 and various other decisions cited in the order of the Ld. CIT in order to justify his stand. The Ld. AR therefore argued that the deduction granted by the Ld. AO U/s. 54F of the Act is valid and is not prejudicial to the interest of the Revenue as claimed by the Ld. CIT. It was therefore submitted that the order of the Ld. CIT invoking his powers U/s. 263 of the Act is erroneous. The Ld. DR on the other hand argued in support of the orders of the Ld. Revenue Authorities and further stated that the builder / promoter had registered the land from VUDA only in the month of August 2010 and therefore, at the time of agreement between the assessee and the builder/promoter the land was not purchased by the builder / promoter, hence the agreement between the assessee and the builder/promoter was invalid. However, it was subsequently pointed out by the Ld. AR before us that the land was allotted to the builder / promoter by VUDA earlier and therefore, the agreement entered between the assessee and the builder / promoter was a valid agreement. The submission of the Ld.AR could not be controverted by the Ld. DR.
We have heard the rival submissions and carefully perused the materials on record. On perusing the facts of the case, we find merits in the submissions of the Ld. AR. As pointed out by the Ld.AR the enhanced sale consideration received by the assessee due to the delay in the sale transaction on account of the fault of the buyer of the property cannot be termed as ‘interest’. Further it is pertinent to mention that there is no finding by the Ld. CIT as to what was the rate of interest charged by the assessee for the delayed payment. Considering these facts and circumstances of the case it can be only construed that the entire payment received by the assessee was only on account of ‘sale consideration’. Therefore, there is no mistake committed by the Ld. AO while passing his order, being prejudicial to the interest of the Revenue. Hence the finding of the Ld. CIT on this count is erroneous.
Similarly, with respect to the issue for granting deduction U/s. 54F of the Act by the Ld. AO is also appropriate and has merits. Various higher judiciaries cited by the assessee before the Ld.CIT has held that if the assessee invests the entire capital gains for construction of the residential house within the stipulated period and if there is a delay in the construction due to the fault of the builder / promoter wherein the assessee has no control over the builder/promoter for such delay then the assessee cannot be held to be in fault and shall be entitled for the
benefit of deduction u/s 54F of the Act. Considering these decisions which are also cited in the Order of the Ld.CIT the order of the Ld. AO for granting deduction U/s. 54F of the Act has merits and not erroneous. Therefore, the finding of the Ld. CIT that the order of the Ld. AO is prejudicial to the interest of the Revenue is devoid of merits. Considering these facts and circumstances of the case, we are to the considered view that the Ld. CIT is not right in his rem to invoke his powers U/s. 263 of the Act on these two counts in the case of the assessee. Therefore, we hereby quash the order of the Ld. CIT passed U/s. 263 of the Act. It is pertinent to mention that the decisions relied on by the Ld. CIT are not appropriate considering the facts and circumstances of the case of the assessee.
In the result, appeal of the assessee is allowed.
Pronounced in the open Court on 10th July, 2019.
Sd/- Sd/- (P. MADHAVI DEVI) (A. MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated:10th July, 2019 OKK Copy to:- 1) Sri Siva Ramakrishna Mulpuri C/o. P. Murali Krishna, Advocate 5-9-22/1, Adarshnagar, Hyderabad. 2) ACIT, Circle-6(1), Hyderabad.
3) The CIT-3, Hyderabad 4) The Pr. CIT-3, Hyderabad 5) The DR, ITAT, Hyderabad 6) Guard File