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Income Tax Appellate Tribunal, HYDERABAD BENCH “A”, HYDERABAD
Before: SHRI D. MANMOHAN & SHRI S. RIFAUR RAHMAN
PER S. RIFAUR RAHMAN, A.M.:
Both these appeals of the assessee are directed against the order dated 23/03/2016 of ld. CIT(A) – 1, Hyderabad relating to AY 2007-08 .
ITA No. 984/Hyd/2016 2. Briefly the facts of the case are, the AO observed that assessee sold a house property admeasuring 629 sq.yards plot bearing No. 530-A, situated at Hakimpet Village, Huda at Jubilee Hills, Hyderabad vide registered sale deed No. 4627 of 2006 dated 21/08/2006 at a sale consideration of Rs. 75,00,000/- against the fair market value of Rs. 1,88,70,000/- as per SRO. The assessee did not file her return of income for the AY 2007-08. As there was escapement of income, the AO reopened the case u/s 147 of the Act and a notice u/s 148 was issued to the assessee on 16/01/2014. In response, the assessee
2 ITA No. 984 & 1249/Hyd/2016 V. Nishitha Reddy, Hyd. filed her return of income on 12/03/2015 by declaring long term capital gain of Rs. 10,67,130/-. Subsequently, the case was converted into scrutiny and a notice u/s 143(2) was issued to the assessee on 13/08/2014.
2.1 In response to the notice u/s 143(2), the AR of the assessee stated that the value of SRO cannot be acceptable for the reason that during the time of execution of purchase deed of the same property on 29/06/2006, the FMV was Rs. 75,45,000/- and the said FMV as on the date of sale of property on 21/08/2006 was Rs. 1,88,70,000/- and the state govt. has increased the value of the property abnormally to obtain revenue, but, land value cannot be doubled in two months time, hence requested for valuation of the property by the DVO u/s 50C(2) of the Act. Accordingly, the DVO determined the value of the property at Rs. 1,14,48,000/-.
2.2 During the year, assessee has invested the capital gains in purchase of a flat at Khajaguda from M/s Vasundhara Realtors (P) Ltd. Before the AO, the assessee submitted the receipts for Rs. 45 lakhs and bank statement. The assessee also submitted that the construction of the flat has got delayed by the builder and was registered on 28/05/2012 in semi-finished stage. However, a cheque was issued dt. 17/10/2006 for an amount of Rs. 30,92,000/-, the total amount paid by the assessee was Rs. 75,92,000/-.
2.3 After considering the submissions of the assessee, the AO completed the assessment by treating the property sold as long term capital assets and allowed the deduction u/s 54 after taking the value of the property determined by the Valuation Officer of the Department, as under:
Sale value of the property sold Rs. 1,14,48,000/-
Less: Cost of land after indexation Rs. 6,59,385/- Less: Cost of improvement(registration Charges) 7,17,060/- Long term capital gains Rs. 1,00,71,555/-
3 ITA No. 984 & 1249/Hyd/2016 V. Nishitha Reddy, Hyd. Less Deduction u/s 54F 50,92,375/- ------------------- Long term capital gains taxable Rs. 49,79,180/- Income from other sources (SB A/c int.) 35,952/- Total assessed income 50,15,132/- ========== 3. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A), who confirmed the order of AO on adoption of section 50C and exemption u/s 54F, at the same time gave relief by deleting the interest u/s 234B.
Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal:
The order of the learned Commissioner of Income-Tax (Appeals) is erroneous to the extent it is prejudicial to the appellant. 2. The Assessing Officer erred in initiating action u/s 147 of the I.T. Act. 3. The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the Assessing Officer in adopting the sale consideration of the property at Rs.1,14,48,000/- as against the sale price of Rs.75 lakhs. 4. The learned Commissioner of Income-Tax (Appeals) ought to have considered the explanation of the appellant that the sale consideration adopted by the Assessing Officer is excessive considering the actual market value (saleable value) of the property of Rs.75lakhs during the month of April, 2006 . 5. The learned Commissioner of Income-Tax (Appeals) ought to have seen that the value of the property cannot be more than Rs.75 lakhs and, therefore ought to have directed that the sale consideration be adopted at Rs.75 lakhs. 6. The learned Commissioner of Income-Tax (Appeals) erred in confirming the working made by the Assessing Officer u/s 54F of the I.T. Act at Rs.50,92,375/- without appreciating the fact that even when the sale consideration is adopted at Rs.1,14,48,000/- by applying the provisions of Sec.50C of the I.T. Act. 7. The learned Commissioner of Income-Tax (Appeals) ought to have seen that for the purpose of deduction u/s 54F, the
4 ITA No. 984 & 1249/Hyd/2016 V. Nishitha Reddy, Hyd. amount is to be reckoned as Rs.75 lakhs as against Rs.83,80,539/- worked out by the appellant. 8. The learned Commissioner of Income-Tax (Appeals) ought to have seen that the ground once decided in the appellate order cannot be modified by passing a Corrigendum. 9. The learned Commissioner of Income-Tax (Appeals) ought to have seen that the proportion to be adopted shall be the amount spent for acquisition of the property in relation to the actual sale consideration of Rs.75 lakhs and not the deemed consideration worked out based on the provisions of Sec.50C of the I.T. Act. 10. The learned Commissioner of Income-Tax (Appeals) erred in confirming the charging of interest u/s 234A and 234C of the I.T Act.” 5. Ground Nos. 1 & 11 are general in nature, hence, need no adjudication. Ground No. 2 was not argued by the assessee, therefore, this ground is dismissed as not pressed.
With regard to ground Nos. 3, 4 & 5, which relate to section 50C, ld. AR submitted that assesse is an NRI, sold a plot of land in Hyderabad on 21/08/2006 for the registered value of sale of Rs. 75 lakhs, whereas, the AO has invoked provisions of section 50C adopting SRO value as on the date of registration of Rs.1,88,70,000/-. He submitted that at the time of execution of purchase deed of the same property on 29/06/2006 , the SRO value was Rs. 75,45,000/-. He submitted that within a period of two months the value of stamp duty has increased substantially and the State Govt. has increased the value of property abnormally to get the revenue and the value of land cannot be doubled in a span of two months. Based on the assessee’s objection, it was referred to DVO u/s 50C. Before the DVO, assessee has submitted various issues with regard to land. After considering the issues submitted by the assessee, the DVO has determined the value of the property at Rs. 1,14,48,000/-. He, therefore, submitted that the value fixed by the stamp value authority on the date of sale, does not represent actual market value. He further submitted that even the value fixed by the valuation cell, the
5 ITA No. 984 & 1249/Hyd/2016 V. Nishitha Reddy, Hyd. value will not increase to such an extent. Therefore, he submitted that the actual sale value should be determined as sale consideration. By submitting that assessee is an NRI and she was not in a position to negotiate for a better price and the document registered in April’06 and the market value determined by the Sub-registrar on the date of registration was only Rs. 75 lakhs, she has no reason to believe that market value of the property will change within a period of 4 months.
On the other hand, ld. DR objected to the above submissions of the ld. AR and relied on the order of ld. CIT(A).
Considered the rival submissions and perused the material on record. We have noticed that assessee has sold property on 21/08/2006 for the value of Rs. 75 lakhs, whereas, the SRO value was at Rs. 1,88,70,000/-. Based on the objection from the assessee, AO referred the matter to DVO and the DVO has arrived at the value of Rs. 1,14,48,000/- after considering the objections and issues on the land. After considering the reasons given in valuation report, which is placed on record, in our considered view, the value submitted by the DVO is in order and AO has followed the value as per the deemed provisions of section 50C. The submissions of the assessee cannot be accepted on the fact that assessee is an NRI and was not in a position to negotiate or the market value cannot be fluctuated with a span of 4 months. The AO has to follow the provisions laid down in section 50C and he also has followed the due process of law by referring the matter to the valuation cell and, accordingly, he has adopted the value as determined by the DVO. Therefore, we do not see any reason to interfere with the findings of ld. CIT(A) and upholding the order of CIT(A), we dismiss the grounds raised by the assessee in this regard.
With regard to ground No. 6, 7 & 9, relating to exemption u/s 54F, ld. AR submitted that assessee invested the sale consideration in purchasing a plot at Khajaguda from M/s Vasundhara Realtors (P)
6 ITA No. 984 & 1249/Hyd/2016 V. Nishitha Reddy, Hyd. Ltd. before March’07. Accordingly, assessee claimed the exemption of Rs. 50,92,375/- considering the capital gains arrived at Rs. 75 lakhs. The assessee has arrived at the exemption u/s 54F as under:
Rs. 61,23,555 /75,00,000 x 62,37,033 = Rs. 50,92,375.
He submitted that in the above calculation, assessee arrived Rs. 61,23,555/- as capital gain and Rs. 62,37,033/- is the amount utilized for acquiring new asset and the total sale consideration received is Rs. 75 lakhs. He submitted that in this case the AO has invoked provisions of section 50C and accordingly, the capital gains has increased to Rs. 1,00,71,555, therefore, the capital gains has arrived at by the AO should be considered for determining the exemption u/s 54F. He relied on the decision in the case of Raj Babbar Vs. ITO, [2013] 29 Taxmann.com, 11 (Mum. Trib). In case, the above decision is considered, the assessee should get 54F deduction at Rs. 83,80,539/-. He, therefore, submitted that the exemption u/s 54F should be enhanced to the above extent.
Ld. DR objected to the above submissions and relied on the decision in the case of Shri Gouli Mahadevappa Vs. ITO, 9 ITR(T) 129 (Bang.) (2011). He submitted that section 54 is an exemption provision and it should be independently applied and deeming provision cannot be brought into claiming higher deduction u/s 54F. He supported the findings of ld. CIT(A).
Considered the rival submissions and perused the material on record. We find that ld. AR argued before us that section 54F exemption should be enhanced when deeming provision of section 50C is applied and accordingly, capital gain is increased in such application of section 50C. He argued that exemption should be increased in proportion to increase in capital gain by applying the provisions of section 50C. He relied on the decision in the case of Raj Babbar (supra). On careful reading of the above decision of the ITAT,
7 ITA No. 984 & 1249/Hyd/2016 V. Nishitha Reddy, Hyd. Mumbai, we find that in that case assessee sold a property for sale consideration of Rs. 8 lakhs and on the date of sale, SRO value was Rs. 16,87,000/-. At the same time, assessee has also invested Rs. 17,65,752/- for the construction of two additional floors over the residential houses within the stipulated time u/s 54F. Since the assessee has invested more than the net consideration arrived at by the AO, after applying the provisions of section 50C, the coordinate bench has allowed the exemption u/s 54F considering the fact that assessee has invested more than the capital gain determined by AO.
11.1 In the case before us, assessee has invested Rs. 62,37,033/- in creating new property, whereas, AO and CIT(A) had allowed Rs. 50,92,375/- by observing that assessee has actually paid during the relevant year. Assessee can claim to the extent of actual investment made by the assessee or to the extent of money deposited in capital gains scheme. Assessee has to submit before the AO proof of making actual investment and deposits in bank under the scheme. In the given case, assessee himself acknowledges that he has made investment to the extent of Rs. 62,37,033/-. Therefore, the above case of Raj Babbar (supra) cannot be applied.
11.2 With regard to case law, relied upon by the ld. DR in the case of Shri Gouli Mahadevappa (supra), the ITAT Bangalore Bench has observed as under: “8.21 The main ingredients of the statute to be dealt with to compute the exemption allowable under these sections are, (1) the "capital gain" arising from the transfer of any long-term capital asset, (2) net consideration in respect of the original asset, (3) extent of the net consideration invested in the new asset. The "capital gains" and the "net consideration" have to be worked out within the framework of s. 54F of the Act, without imposing any fiction created by any other section. Thus, the capital gains arising from the transfer of any long-term capital asset for the purpose of s. 54F has to be worked out applying s. 48 without imposing s. 50C into it. As regards to net consideration, the section itself has made it clear in the Explanation the method in which it has to be arrived at. Needless to mention that the words "such capital gain" and "capital gains" mentioned in s. 54F(1)(a) and (b) of the Act refer to "the capital gains" arising from the transfer of any long-term capital asset worked out as mentioned in s. 54F(1) of the Act r/w s. 48 and not worked out as mentioned in s. 45(1) r/w ss. 48 and 50C of the Act. When this interpretation is adopted, every provision of
8 ITA No. 984 & 1249/Hyd/2016 V. Nishitha Reddy, Hyd. the chapter will fall in line without producing any absurd result and thereby giving a fruitful purpose for the enactments. Alternatively, as canvassed by the learned Authorised Representative, if the term "capital gain" in s. 54F is arrived at by imposing s. 50C of the Act, then the intention for introducing s. 50C of the Act would be defeated, because whatever may be the capital gain arrived at by imposing s. 50C of the Act would be exempt, if the net consideration, however meagre it may be, is invested in the new asset.”
Considering the above observations of the coordinate bench of ITAT, Bangalore, assessee cannot claim deduction u/s 54F in proportion to increase in capital gains after attracting the provisions of section 50C. Therefore, the ground raised by the assessee are dismissed.
With regard to ground No. 8, ld. AR submitted that ld. CIT(A) has passed the corrigendum order without giving proper opportunity of being heard to the assesse, as ld. CIT(A) cannot pass corrigendum order once grounds of appeal have already decided.
Ld. DR has opposed the above submission and submitted that it is only a clerical error, which does not require opportunity to be extended to assessee, therefore, the ld. CIT(A) has passed Corrigendum as per the procedure.
Considered the rival submissions and material on record. We have noticed that ld. CIT(A) has passed corrigendum in para 6 while disposing off ground No. 4. She has discussed the merits and decision in the final para in favour of the revenue and while passing the order it is mentioned “has accepted the stand taken by the assessee”, whereas, it should have been “stand taken by the AO. Therefore, in our considered view, it is only a clerical error. The ld. CIT(A) has got power to rectify the mistake apparent on record by passing corrigendum. Therefore, it is not necessary to give opportunity to the assessee before passing such order. Accordingly, this ground is dismissed.
With regard to ground No. 10, ld. AR submitted that assessee is an NRI, whenever payment is made to NRI, payee should deduct tax at source in accordance with the provisions of section 195 of the Act. During this year, the assessee does not have any other income, therefore, the capital gain
9 ITA No. 984 & 1249/Hyd/2016 V. Nishitha Reddy, Hyd. determined is subject to deduction of tax at source by payee as per the provisions of section contained in section 209, tax is to be adjusted in accordance with the proviso in section 209. As per the proviso, tax deductible at source has to be reduced for the purpose of making advance tax payable. He, therefore, submitted that AO cannot invoke interest u/s 234C of the Act. He relied on the following cases: 1. M/s Prysmian Cavi e Systemi Telecom SPA, 46 Taxmann.com 216 (Hyd. Trib.) [2014]
Ld. DR relied on the order of ld. CIT(A).
Considered the rival submissions and perused the material on record. No doubt, assessee is NRI and remittance to the assessee comes under the provisions of section 195. Deduction of tax while remitting lies with the payee. By considering the above situation, ld. CIT(A) has deleted interest charged u/s 234B and retained interest charged u/s 234A & 234C as they are statutory provisions. Assessee has relied on the case of M/s Prysmian Cavi e Systemi Telecom SPA (supra). This decision is relating to section 234B, which was already considered by CIT(A) and accordingly deleted. Therefore, this case cannot be relied. When an income is chargeable to tax in India, irrespective of the residential status, assessee is bound to follow advance tax provisions as laid down u/s 234A and 234C. Therefore, these provisions are consequential in nature. Accordingly, this ground raised by the assessee is dismissed.
ITA No. 1249/Hyd/2016
On perusal of record, we find that this appeal was filed before the ITAT with a delay of 34 days. To this effect, the assessee filed a petition for condonation of the said delay. After going through the petition, we accept the submissions of the assessee in the petition and admit the appeal for hearing and adjudication.
10 ITA No. 984 & 1249/Hyd/2016 V. Nishitha Reddy, Hyd. 19. In this appeal, the assessee has raised the following grounds of appeal:
“1. The Corrigendum issued by the learned Commissioner of Income-Tax (Appeals) is erroneous both on facts and in law.
The learned Commissioner of Income-Tax (Appeals) ought to have seen that the ground once decided in the appellate order cannot be modified by passing a Corrigendum without providing proper opportunity to the appellant.
The learned Commissioner of Income-Tax (Appeals) ought not to have altered the order accepting the stand taken by the Assessing Officer.
Any other ground that may be urged at the time of hearing."
Considered the rival submissions and perused the material on record. Similar ground is raised in ITA No. 984/H/2016. Following the conclusions drawn therein, we dismiss the grounds raised by the assessee in this appeal.
In the result, both the appeals under consideration are dismissed.
Pronounced in the open Court on 11th May, 2018.
(D. MANMOHAN) (S. RIFAUR RAHMAN) VICE PRESIDENT ACCOUNTANT MEMBER
Hyderabad, Dated: 11th May, 2018 kv
11 ITA No. 984 & 1249/Hyd/2016 V. Nishitha Reddy, Hyd. Copy to:-
1) V. Nishitha Reddy, C/o Sri S. Rama Rao, Advocate, Flat No. 102, Shriya’s Elegance, 3-6-643, Street No. 9, Himayatnagar, Hyderabad – 500 029. 2) ITO, Ward – 4(2), Aayakar Bhavan, Basheerbagh, Hyderabad 3) CIT(A) – 1, Hyderabad 4) Pr.CIT - 1, Hyderabad 5) The Departmental Representative, I.T.A.T., Hyderabad. 6) Guard File