KIRTHISIMHAN WIJEYANAYAKE,COIMBATORE vs. ACIT NON CORPORATE CIRCLE 2, COIMBATORE

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeals by assessee for Assessment Years (AYs) 2009- 10 & 2012-13 arise out of separate orders of first appellate authority. The appeal for AY 2009-10 arises out of the order of learned Commissioner

of Income Tax (Appeals)-2, Coimbatore [CIT(A)] dated 11.04.2018 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s. 147 of the Act on 30.12.2016. The assessee is aggrieved by computation under the head ‘capital gains’. The Ld. AR filed additional grounds of appeal and pressed for original ground no.1 and additional ground no. 6 which read as under: -

The order of the CIT(A)-2, Coimbatore, dismissing the various grounds of 1) appeal raised by the appellant, before him, is opposed to law and unsustainable in the facts and the circumstances of the case. …… 6) The Ld. CIT(A) ought to have appreciated the fact that the appellant is eligible for claiming capital gains on the entire 7 flats and not merely on one flat.

2.1 The Ld. AR submitted that the property was acquired under will and the sale consideration was invested in 7 flats. The Ld. AR submitted that the assessee would be eligible to claim deduction for all the flats as held by Hon’ble High Court of Madras in CIT vs. Gumanmal Jain (80 Taxmann.com 21). The copy of the order has been placed on record. The Ld. AR also submitted that the objections raised by the assessee opposing reopening was not disposed-off by Ld. AO by way of speaking order and therefore, the reassessment proceedings would not be valid in the eyes of law. 2.2 The Ld. Sr. DR controverted the argument of Ld. AR and submitted that the reasons were sought by the assessee at fag-end of the year and no time was left with Ld. AO to pass a speaking order. The Ld. Sr. DR also submitted that the 7 flats could not be considered as single unit and each unit is separate unit.

- 3 - 2.3 Having heard rival submissions and after due consideration of material facts, out adjudication would be as under. Assessment Proceedings 3.1 The assessee filed return of income on 23.04.2010 declaring income of Rs.3.46 Lacs, Based on assessment proceedings of AY 2012- 13, the case was reopened and notice u/s 148 was issued on 14.03.2016. It transpired that the assessee along with Mr. Sunil Wijeyanayake entered into Joint Development Agreement (JDA) with M/s Foundation One Infrastructure (P) Ltd. (FIPL) on 11.06.2008 for construction of residential apartments on property owned by them. The owners were to get 50% of super built-up area in exchange. The assessee received 7 flats for transfer of 50% undivided share in the land. The assessee computed Long Term Capital Gains u/s 50D and claimed exemption u/s 54 on 2 flats out of 7 flats. The Ld. AO disputed the valuation of the assessee and also opined that exemption u/s 54 would not be available since the flats were handed over to the assessee only on 30.03.2012 which is more than 3 years. The assessee soght reasons for reopening on 22.12.2016 and the same were provided to the assessee. 3.2 The assessee had adopted sale consideration as per Sec.50D which was rejected by Ld. AO. Finally, the sale consideration was adopted at Rs.526.31 Lacs and Long-Term Capital Gains were computed at Rs.470.67 Lacs which were added to the returned income. The value of one flat was taken to be Rs.75.18 Lacs and deduction u/s 54 was denied since the flats were handed over to the assessee beyond 3 years.

- 4 - Appellate Proceedings 4.1 The Ld. CIT (A) rejected the legal grounds of the assessee by observing that no capital gains were declared by the assessee in the original return of income and therefore, Ld. AO had fulfilled the requirements u/s 147 to reopen the case and rightly assumed jurisdiction u/s 147. 4.2 The Ld. CIT(A) further noted that the provisions of Sec.50D was inserted by Finance Act 2012 w.e.f. 01.04.2013 and therefore, Ld. AO was right in rejecting the same and adopting cost of construction as the full value of consideration. 4.3 Regarding assessee’s eligibility to claim deduction u/s 54, the denial of the same was confirmed since the flats were acquired by the assessee beyond 3 years. Finally, the appeal was dismissed. Aggrieved as aforesaid, the assessee is in further appeal before us. Our findings and Adjudication 5. The issue before us is in narrow compass i.e., validity of reassessment proceedings and deduction u/s 54. The correct provision under which the deduction would be available to the assessee is Sec.54F and not Sec.54 since the assessee has parted with land and invested the same in residential properties. Therefore, the claim of the assessee would be ascertained at the threshold of provisions of Sec.54F. 6. We find that the original return of income was never scrutinized. In fact, no capital gain was declared in the original return of income. Based on assessment proceedings of subsequent year, it transpired that certain capital gain would accrue to the assessee in this year. Accordingly, the case was reopened. The assessee sought reasons for reopening at fag-

- 5 - end. The reasons were also supplied to the assessee. Therefore, in our considered opinion, Ld. AO had rightly assumed jurisdiction u/s 147 and no infirmity could be found in the same from this angle. The adjudication in the impugned order, to that extent, does not require any interference on our part. The corresponding grounds urged by the assessee stand dismissed. 7. On the issue of deduction u/s 54F, it could be seen that the assessee was eligible to acquire 7 flats against transfer of 50% undivided share in the land. The assessee has not received any consideration in cash rather the consideration is in the shape of flats only. Therefore, on the date of entering into JDA with the developer, it could be concluded that the assessee made deemed investment to acquire the flats. The mere delay on the part of the developer to hand over the possession of the flat would not vitiate the claim of the assessee since it would be beyond the control of the assessee to ensure timely acquisition of the flat. The provisions of Sec.54F are beneficial provisions and the same should be given effect to in full and could not be denied to the assessee on such technicalities. Therefore, we would hold that the assessee would be eligible for deduction u/s 54F. 8. So far as the quantum of deduction is concerned, we find that the issue stood squarely covered in assessee’s favor by the decision of jurisdictional High Court in the case of CIT vs. Gumanmal Jain (80 Taxmann.com 21) wherein Hon’ble Court, after considering catena of judicial decisions as well as amendment made by Finance Act, 2014, held as under: - 9. It is relevant to note herein that an amendment was made to the above-said provision with regard to the word 'a' by the Finance (No. 2) Act, 2014, which will come into effect from 01.04.2015. The said amendment reads as follows:

"32a. Words "constructed, one residential house in India" shall be substituted for "constructed, a residential house" by the Finance (No. 2) Act, 2014, with effect from 01.04.2015." 10. The above-said amendment to Section 54F of the Income Tax Act, which will come into effect only from 01.04.2015, makes it very clear that the benefit of Section 54F of the Income Tax Act will be applicable to constructed, one residential house in India and that clarifies the situation in the present case, i.e, post amendment, viz., from 01.04.2015, the benefit of Section 54F will be applicable to one residential house in India. Prior to the said amendment, it is clear that a residential house would include multiple flats/residential units as in the present case where the assessee has got five residential flats. We may also mention here that all the Authorities below have clearly understood that the agreement signed by the assessee with M/s. Mount Housing Infrastructure Ltd., is that the assessee will receive 43.75% of the built-up area after development, which is construed as one block, which may be one or more flats. In that view of the matter what was before the Assessing Officer is only equivalent of 56.25% of land transferred, equivalent to 43.75% of built up area received by the assessee. This built up area got translated into five flats. Hence, we are of the opinion that the transaction in this case was not with regard to the number of flats but with regard to the percentage of the built up area, vis-a-vis, the Undivided Share of Land. 11. In similar circumstances, this Court, by order dated 04.01.2012 in T.C. (A) No. 656 of 2005 held as follows: "The above provision refers to a residential house meaning thereby that even if there are four different flats and if it is considered for the property assessed as one unit and one door number is given, it should be construed as a residential unit, namely, one unit. In that sense, the said provision is available to the assessee." 12. In the decision reported in (2012) 75 DTR 56 (Dr. (Smt.) P.K. Vasanthi Rangarajan, this Court, while dealing with the benefit of exemption under Section 54F, followed the abovesaid decision of this Court in T.C. (A) No. 656 of 2005 and granted the benefit to the assessee under Section 54F of the Income Tax Act on the investment made in the four flats. 13. Hence, the above-said decisions of this Court make it clear that the property should be assessed as one unit, even though different flats are available. Here also, as per the assessment order, all the flats have one door number, namely, Door No. 29F, Race Course, Coimbatore.' (vi) In G. Chinnadurai's case (supra) [Honourable Single Judge of Madras High Court] the relevant paragraphs are paragraphs 14 and 15 and they read as follows: "Thus, by applying the legal principles enunciated in the case of Smt. V.R. Karpagam (supra), Dr. Smt. P.K. Vasanthi Rangarajan (supra), and G. Saroja (supra), it is to be pointed out that the expression 'a residential house' used in Section 54, should not be taken to convey the meaning that it refers to a 'single residential house and if that was the intention of the legislature, the framers of the statute would have used the-word "one" instead of "a". In fact, the facts of the case in Smt. V.R. Karpagam (supra), is more or less identical to that of the case on hand, which also pertained to a development of a property, originally owned by the assessee and the consideration was that the owner/assessee was to receive 43.75 % of build up area after development, which translated into five flats.

apply to the case before it particularly on the ground that the assessee is claiming exemption in respect of two residential houses in two completely different locations one in Dilshed Colony, Delhi and the other in Faridabad. On this basis in Pawan Arya's case (supra), Court refused to grant any relief to the assessee and held in favour of the Revenue. (x) Therefore, we have no hesitation in concluding that Pawan Arya's case (supra) does not apply to the facts of the instant case and thus would does not help the Revenue in any manner in the instant case. (xi) In G. Chinnadurai's case (supra), the matter arises under Section 54-F of IT Act. In this case also, the assessee had entered into a joint development agreement with the builder and had got more than one flat towards his share in the same location/address. Learned Single Judge of this Court had applied the principles in V.R.Karpagam's case and held in favour of the assessee. (xii) As mentioned supra, it was submitted before us that V.R. Karpagam's case was not carried to the Supreme Court by the Revenue. It is now not in dispute that Smt. K.G. Rukminiamma's case (supra) was also not carried to the Supreme Court by the Revenue. We notice that Pawan Arya's case (supra) also has not been carried to the Supreme Court by the assessee. (xiii) Therefore, we find ourselves persuaded to follow V.R.Karpagam's case for two reasons and they are as follows: (a) Smt. V.R. Karpagam's case (supra) has been rendered by a coordinate Division Bench of this Court. (b) Smt. V.R. Karpagam's case (supra) has not been carried by Revenue to the Supreme Court and therefore is holding the field as on today. (xiv) We are informed that there is no intra court appeal in G.Chinnadurai's case also. In other words Revenue has accepted G.Chinnadurai's case is what we are given to understand. (xv) To make our discussion on case law as complete and as comprehensive as possible, we deem it relevant to also mention that the all too important phrase 'a residential house' occurring in Section 54-F was amended with effect from 01.04.2015. Such amendment was brought in by the Finance (No. 2) Act, 2014 and post amendment, 'a residential house' now reads as 'one residential house'. We have noticed that this amendment is only with effect from 01.04.2015 and the case on hand pertains to assessment year 2012-2013. Therefore, this amendment does not in any manner impact the instant case. However, we make it clear that we have noticed this amendment. It is also to be borne in mind that the other coordinate Division Bench of this Court has also noticed this amendment in Smt. V.R. Karpagam's case (supra) and thereafter laid down the principles/ratio. 7. CONCLUSION: (i) We therefore have no hesitation in holding that in the instant case the assessee having got 15 flats along with his two sons will not disentitle him from getting the benefit under Section 54-F of the IT Act only on the ground that all the 15 flats are not in the same Block, particularly in the light of the admitted factual position that all the 15 flats are located at the same address namely, 'Rain Forest' No. 57, New No. 36, Taylor's Road, Rem Street, Kilpauk, Chennai 600 010. (ii) As a sequitur, we are unable to persuade ourselves that the 15 flats, even if they are located in different blocks would not disentitle the assessee from getting the benefit of Section 54-F of IT Act. (iii) We have no hesitation in holding that the order of ITAT which has been called in question before us is correct, there is no infirmity in the said order, does not call for

any interference and we are of the view that the said order deserves to be confirmed. (iv) We also noticed that in all the judgements, irrespective of whether it is under Section 54 or 54-F of IT Act, which we have discussed supra, the judgements have proceeded only on the basis that the flats [being more than one flat] are in the same location/address. Therefore, once it is in the same location/address, the question of whether it is in the same block or in different blocks does not arise for consideration. To our mind, as long as all the flats are in the same address/location even if they are located in separate blocks or towers it does not alter the position. In the instant case, after all, all the flats are a product of one development agreement of the same piece of land being said land. Therefore, we make it abundantly clear that even if flats/apartments are in different blocks and different towers as long as they are in same address/location it does not disentitle the assessee from getting the benefit of Section 54-F of IT Act. (v) Therefore, the sole and sheet anchor submission of counsel for Revenue that the 15 flats in the instant case are located in the different blocks does not impress us. We are unable to persuade ourselves that this will disentitle the assessee from getting the benefit of Section 54-F as all the flats are in the same location/address and all flats are by products of one development agreement with the same builder. (vi) The logic behind our view is that the assessee, irrespective of whether it is one flat or many flats, gets proportionate undivided share in land only for the same piece of land. Therefore, assessee does not buy more than one property in that sense of the matter. Flats, apartments are completely based on co-ownership. (vii) Owing to all that have been stated supra, we conclude that the assessee is entitled to the benefit of Section 54- F of IT Act.

Since facts are identical in the case before us, respectfully following the same, we direct Ld. AO to allow deduction u/s 54F on 7 flats acquired by the assessee under Joint Development Agreement. The corresponding ground raised by the assessee stand allowed. No other ground has been urged before us. 9. The appeal stands partly allowed in terms of our above order 10. Assessee’s Appeal for AY 2012-13 10.1 In this year, the only ground urged is addition of unexplained cash credit for Rs.40.65 Lacs which was made in assessment order passed u/s 143(3) on 31.03.2015. It transpired that the assessee deposited cash of Rs.40.65 as in Yes Bank and ING Vysya Bank which were stated to be sourced out of past savings. However, in the absence of any documentary evidences to substantiate the same, the deposits were

added to the income of the assessee. The Ld. CIT(A) confirmed the stand of Ld. AO against which the assessee is in further appeal before us. 10.2 The Ld. AR pleaded for another opportunity to the assessee to substantiate source of cash deposit. The Ld. AR submitted that the deposits were out of past savings, cash withdrawals and out of sale proceeds of old jewellery as well as flat. The requisite details have been placed on record. Considering the same, this issue stands restored back to the file of Ld. AO for fresh consideration with a direction to the assessee to substantiate its case. The appeal stands partly allowed for statistical purposes. Conclusion 11. The appeal for AY 2009-10 stands partly allowed whereas the appeal for AY 2012-13 stands partly allowed for statistical purposes.

Order pronounced on 06th December, 2022.

Sd/- Sd/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा12 /VICE PRESIDENT लेखासद: /ACCOUNTANT MEMBER

चे,ई/ Chennai; िदनांक/ Dated : 06-12-2022 JPV JPV JPV JPV आदेशकीWितिलिपअ7ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकरआयु� (अपील)/CIT(A) 5. िवभागीय�ितिनिध/DR 6. गाड�फाईल/GF 4. आयकरआयु�/CIT