ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, JAIPUR vs. SMT. KULWANT KAUR, ALWAR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh Hkkxpan] ys[kk lnL; ,oa Jh dqy Hkkjr] U;kf;d lnL; ds le{k BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM vk;dj vihy la-@ITA No. 678/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2014-15 cuke Assistant Commissioner Smt. Kulwant Kaur, Vs. of Income Tax, EG-28, Ashiana Garden, Circle-2, Alwar. Bhiwadi, distt.-Alwar (Raj). PAN No.: BIAPK 0556 N vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl.CIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA) lquokbZ dh rkjh[k@ Date of Hearing : 05/10/2017 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 10/10/2017 vkns'k@ ORDER

PER: BHAGCHAND, A.M. This is the appeal filed by the revenue emanates from the order of

the ld. CIT(A), Alwar dated 05/06/2017 for the A.Y. 2014-15.

3,00,41,869/- on sale of property located at Khasra No. 534, village- Khanpur, Tehsil-Tijara. This property was sold to M/s Pinkcity Heights Pvt.

Ltd. for a sale consideration of Rs. 4.50 crores vide sale deed dated 03/06/2013. The part of the sale consideration was invested in purchase of

ITA 678/JP/2017 2 ACIT Vs. Smt. Kulwant Kaur

a flat at EG-28, Ashiana Garden, Bhiwadi for Rs. 87.50 lacs and the

purchase was effected on 03/7/2013 on which the assessee claimed

deduction U/s 54 of the Income Tax Act, 1961 (in short the Act).

additions.

grounds:

“1. On the facts and in the circumstances of the case and in law Id. CIT(A) erred in allowing the claim of deduction of Rs. 87,75,000/- u/s 54 of the IT Act disallowed by the AO for taking into account to compute capital gain as the assessee was not entitled to such claim as per provisions of section 54 of the IT Act 1961.

addition of Rs. 87.75 lacs on account of deduction claimed by the assessee

U/s 54 of the Act, which was disallowed by the Assessing Officer.

ITA 678/JP/2017 3 ACIT Vs. Smt. Kulwant Kaur

under:-

“5.3 I have perused the assessment order as well as submissions made by the appellant. Following facts have emerged;

(i) Electricity Bill:- Since February, 2004 onwards till the sale of the property in February, 2014;

(ii) LPG connection Bill;

(iii) Valuation Report by approved valuer dated 01-06-2013 containing photographs of the property showing residential structure on the land.

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(iv) PAN card letter dated April 30, 2009 on said address;

(v) Election card date of issue 19-02-2011;

(vi) Ration Card of family of assessee that includes assessee and her two son.

(vii) Aadhar Card dated 24-02-2013 of assessee at same address;

(viii) Welcome notice of Axis Bank to confirm the address in name of her son.

(ix) Certificate/declaration from Chairman of Municipal Committee, Bhiwadi and Parshad of Ward-4, Municipal Committee, Bhiwadi indicating that the family were living at Khasara No. 534/41, Khanpur, Bhiwadi between 2004 to 2014.

(x) Copy of land agreement dated 25-07-2008 declaring that the said property was given on rent and that the property included a house appurtenant to the land.

5.3.2 I have considered the above mention facts. The moot point in this case is whether the land under consideration was having a residential property or not? It is true that at the time of sale of the property, the appellant has declared it as- agricultural land only. It is submitted by the appellant that such declaration was made to save on stamp duty. However, while filing the return of income before the income tax authorities the appellant has claimed residential property on the land transferred in this case. Therefore, there are -two sets of declaration (i) before the Stamp Duty Authorities where the land has been shown as agricultural property where no residential property has been shown on the land and (ii) before the Income Tax Authorities where a residential property has been shown on the land. In this regard, I have taken into consideration Hon’ble Supreme Court decision on the SLP (2008) 307 ITR (ST) 3, filed in the case of CIT v/s M/s Veerdip Rollers Pvt. Ltd. 323 ITR 341 (Gujarat High Court).

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The Hon’ble Gujarat High Court and Hon’ble Supreme Court has held as under: - “where it was decided that The value of stock shown in the books of accounts is genuine or not in reference to stock statement submitted to bank has been considered by the Tribunal and considering the fact discussed by Tribunal that Stock shown in books is genuine as supported by books of accounts, we see no reason to hold that the findings of tribunal is perverse . Consequently, the appeal stand dismissed at the admission stage. ”

Further Hon’ble Supreme Court -SLP (2008) 307 ITR (ST) 3 has dismissed SLP by revenue against said order In this case appeal by Revenue was dismissed by the Gujarat High Court where tribunal has deleted the addition under section 69 B on account of the difference between the closing stock furnished to bank for avail ins of credit facility and that disclosed in the books of accounts furnished before the Income tax authorities.”

As per the above judgment, it is imperative to see which of the declaration made by the appellant is correct? Accordingly, the evidences produced by the appellant during the appellate proceedings and during the assessment proceedings have been considered. It would be prudent to first consider the provision of section 54 of the Act, which the appellant is claimed. The provisions of the section 54 of the IT Act are as under:-

ITA 678/JP/2017 6 ACIT Vs. Smt. Kulwant Kaur

(i) if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be' charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the-cost shall be nil, or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.

The amount of the capital gain which is not appropriated by the (2) assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub- section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset:

Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,—

ITA 678/JP/2017 7 ACIT Vs. Smt. Kulwant Kaur

(i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and

(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.

Explanation.—[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]

The relevant part of the section talks about the transfer of a long term asset being building or land appurtenant thereto, and being a residential house, the income of which is chargeable under the head income from house property. Therefore, in this case, the important question to be considered is whether there is a residential property or not on the land sold during the year?

The appellant has produced a number of evidences (as mentioned in para 5.3.1 above) in support of its claim that there was indeed a residential property on the land in question between year 2004 to 2014 (the year in which the property was sold). I have also taken into consideration the fact that the said land alongwith the built-up area was given on rent vide rent agreement dated 25-07-2008 on a-rent of Rs. 35,000/- per month. The said rent was received by cheque. Apart from this, plethora of documents produced before the AO and during the appellate proceedings has given credence to the claim of the appellant that a house property was there on the land when it was sold. If the appellant has given a wrong information to the stamp duty authorities for the purpose of sale deed, he is liable to be penalized under the Stamp Duty Act. So far as Income Tax Act is concern, it is my considered view that based on factual matrix of the case the appellant is liable to get benefit u/s 54 of the Act. Furthermore, A.O’s contention that the appellant has not taken permission to construct residential property on the agricultural land is

ITA 678/JP/2017 8 ACIT Vs. Smt. Kulwant Kaur

also not tenable as is decided in the case of Mahavir Prasad Gupta vs. CIT [20061 5 SOT 355 (Delhi) that even a farmhouse can be a residential house and investment is eligible for benefit of section 54F of the IT Act. Thus there is no prohibition regarding construction of a residential house on agriculture land. CBDT Cir. No. 667 dt. 18.10.1993 (204 ITR (St) 103) has clarified that for the purpose of computing exemption u/s. 54 or 54F, the cost of the plot together with cost of the building will be considered as cost of new asset, provided the acquisition of the plot and also the construction thereon are completed within the period specified in these sections.

Even otherwise, for argument sake, if section 54 is not available then alternately, deduction u/s 54F would be available. The AO cannot deny deduction u/s 54 and section 54F both. If a residential property is proved to be there then section 54 of the Act is applicable and if there is no residential property then deduction u/s 54F of the Act would be available. As, there is no dispute about investment of the sale proceed by the assessee in a residential property.

Therefore, it is my considered view that on the basis of plethora of evidences produced both during assessment proceeding as well as during appellate proceeding, the appellant is eligible for deduction u/s 54 of the Act. Accordingly, the AO is directed to compute the taxable capital gain taking into account that the appellant is eligible for deduction u/s 54 of the Act. Accordingly, the ground of the appeal on this issue is partly allowed.”

order of the Assessing Officer and pleaded that the order of the ld. CIT(A)

deserves to be set aside.

ld. CIT(A) has granted relief to the assessee after considering all the

relevant facts and circumstances of the case. The Assessing Officer denied

ITA 678/JP/2017 9 ACIT Vs. Smt. Kulwant Kaur

the benefit to the assessee. He pleaded that the assessee has purchased

agricultural land on 09/4/2003. A house was constructed during the period

2002-03 to 2005-06. The assessee was residing with her family in this

house from 2004 to February 2014. These facts are established by the

documents submitted by the assessee. The assessee has got valuation

done of the house as on 10/6/2013. The valuer clearly mentions that there

was a one storied house alongwith the boundary wall on this land. The

photographs of the house were also taken by the valuer. The assessee had

taken electricity connection from February, 2004 to till February, 2014

during the period when the assessee was residing. Necessary evidences in

this regard were submitted. LPG connection was also there in the name of

son of assessee Manpreet Singh. Necessary evidence in this regard was

also submitted before the authorities below. The address in the ration

card, Aadhar card of the assessee as well as of her husband were of this

property. Income tax notices were also issued on the address of this

property. The PAN was also allotted on this address. The assessee was

having bank account with the Axix Bank and a certificate was also

obtained from ICICI bank with regard to the address. This property was

given on rent for Rs. 35,000/- per month. The necessary agreement on

this regard was submitted. A certificate of the Chairman of the Municipal

Committee was also submitted and finally, the assessee submitted an

ITA 678/JP/2017 10 ACIT Vs. Smt. Kulwant Kaur

affidavit in this regard. After considering all these documents and

evidences, the ld. CIT(A) overruled the observation of the Assessing

Officer in this regard and he granted relief to the assessee.

disallowed the claim of the assessee U/s 54 of the Act on the basis of

report of the Tehsildar and Inspector obtained by the Assessing Officer

during the assessment proceedings stating that it was an agricultural land

and at the time of inspection, it was an open land. The Assessing Officer

observed that the electricity connection and LPG connection cannot be

taken as a conclusive evidence and he also observed that no evidence with

regard to construction or improvement was furnished. It was also

observed that no evidence of contract of demolition of the house was

produced and the land was not got converted from agricultural land to

non-agricultural. The assessee submitted a valuation report wherein one

storied house having boundary wall was mentioned. The valuer has also

taken photographs which were also produced during hearing, which are

placed at page No. 32 of the paper book. The electric connection and the

LPG connection in assessee’s name and her sons name respectively also

establish that there was a construction on this land and which was being

utilized as residence. Necessary evidence placed at page Nos. 33 to 40 of

ITA 678/JP/2017 11 ACIT Vs. Smt. Kulwant Kaur

the paper book. The ration cards were also on this address. The Aaadhar

card of the assessee as well as her husband was also of this address. PAN

was also allotted on this address. Even the income tax notices issued by

the Assessing Officer were served on this address, which are placed at

pages No.41 to 49 of the paper book. The property was on rent for Rs.

35,000/- per month for certain period for which necessary evidence is

placed at page No. 51 to 52 of the paper book, which is a rent agreement.

A certificate from the Chairman of the Municipal Committee, Parshad of

the Municipal Committee and neighbours of the assessee were also filed,

which is placed at page No. 52 to 62 of the paper book. The ld. CIT(A) has

granted relief to the assessee after considering all these evidences and he

has also observed that even if the property sold is taken as an agricultural

land then also the assessee is entitled for benefit U/s 54F of the Act. In

the light of these findings and observations of the ld. CIT(A), we hold that

the ld. CIT(A) has rightly deleted the addition. We uphold the same.

Accordingly this ground of the revenue’s appeal is dismissed.

expenses incurred on sale of property of Rs. 8.00 lacs, which was

disallowed by the Assessing Officer. The ld. CIT(A) has granted relief to

the assessee by holding as under:

ITA 678/JP/2017 12 ACIT Vs. Smt. Kulwant Kaur

“6.3 I have perused the assessment order as well as submissions made by the appellant. Following facts have emerged;

6.3.2 I have considered the above mentioned facts. In this regard, I have also taken into consideration the fact that the brokerage payment was made through cheque and details of the recipient was filed during the assessment proceedings also. In this regard, I have also taken into account prevalent brokerage rate in the sale/purchase' of Real Estate. As per Confederation of Real Estate Brokers of India (CREBI), the standard rate of brokerage on sale of real estate is 2%. In this case the appellant has claimed brokerage of Rs. 8 lakhs on the total sale proceed of Rs. 4.5 crores, which is within the range of prevalent brokerage/commission rate in Real Estate. Therefore, it is my considered view that the brokerage paid in this case is reasonable, hence appellant is given the benefit of brokerage paid of Rs. 8,00,000/- while calculating the taxable income under the head

ITA 678/JP/2017 13 ACIT Vs. Smt. Kulwant Kaur

capital gain. Accordingly, the appellant ground of appeal on this issue is allowed.

on the order of the Assessing Officer. On the contrary, the ld AR of the

assessee has vehemently supported the order of the ld. CIT(A).

has paid brokerage expenses of Rs. 8.00 lacs, which approximately 2% of

the sale consideration, which appears to be reasonable. This brokerage

was paid to three persons and the payments were made by cheques which

are verifiable from the bank statement of the assessee. Considering all

these facts, we find no fault in the order of the ld. CIT(A) and we sustain

the same on this ground. Accordingly, this ground of revenue’s appeal

stands dismissed.

claim of Rs. 39,43,196/- disallowed by the A.O. while computing capital

gain indexed cost of construction of house and its improvement. The ld.

CIT(A) has granted relief to the assessee by holding as under:

“7.3 I have perused the assessment order as well as submissions made by the appellant. Following facts have emerged;

ITA 678/JP/2017 14 ACIT Vs. Smt. Kulwant Kaur

7.3.2 Since, it is already held while adjudicating on the ground of appeal no. 2 and 4 above that there was a house property on the said land therefore the appellant is eligible for getting benefit of indexed cost of construction as well as the improvement. Accordingly, the AO is directed to give benefit of indexed cost of construction and improvement while calculating the taxable capital gain. Appellant’s ground of appeal on this issue is allowed.”

on the order of the Assessing Officer. On the contrary, the ld AR of the

assessee has vehemently supported the order of the ld. CIT(A).

ITA 678/JP/2017 15 ACIT Vs. Smt. Kulwant Kaur 15. We have heard both the sides on this issue. The assessee has

claimed deduction of construction and improvement of property at Rs

39,53,196/-. The assessee has submitted a valuation report. The ld.

CIT(A) has granted relief to the assessee after considering all the relevant

facts and circumstances of the case, therefore, we find no fault in the

order of the ld. CIT(A) and we sustain the same.

Order pronounced in the open court on 10/10/2017.

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