M S VEENA,TUMKUR vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1, TUMKUR

The facts relating to the above said issue are stated in brief. The assessee had purchased a site on 25-05-1994 at Ideal Home Layout, Bangalore for a sum of Rs.2,28,030/-. The said site was sold by the assessee on 26.11.2014 for a sum of Rs.1,68,00,000/-. Thus the assessee earned long term capital gains on sale of above said site. The assessee claimed deduction of Rs.1,43,84,307/- u/s 54F of the Act against the long term capital gain with the plea that she has constructed a residential house during the year ending 31.3.2015. The said residential house was claimed to have been constructed on a land admeasuring 1 acre and 5 guntas, which was obtained from D.Basavaraju (HUF) on lease for a period of 29 years. The said lease deed was unregistered one. Shri D. Basavaraju is the spouse of the assessee herein. In support of claim of construction of residential house, the assessee furnished a valuation report obtained from a registered valuer named Shri N.V. Ramamurthy.

The assessee had held a residential house property prior to the sale of above said site. She transferred the same to his son on 10-01-2014 by way of unregistered Gift deed.

The AO noticed that valuation certificate furnished by the assessee described property constructed by the assessee as “Guest house, a farm house, a meditation hall, a Coconut Godown and landscaped area with pavements, kerbs and stone monuments and Compound Hall”. Before the AO, the assessee could not furnish the bills and vouchers relating to construction except few bills for purchase of bathroom items to the tune of Rs.61,000/- and certain estimates. Hence the AO took the view that the claim of the assessee requires further investigation.

The AO downloaded satellite pictures of the building as on 12-04- 2014 from the internet and noticed that the building structure was available on the impugned land as on that date also. The AO noticed that assessee had also not obtained any plan approval from the local panchayat/municipality. When questioned, it was contended by the assessee that such kind of approval is not required in the village areas. The AO also noticed that the Electricity connection was available in the name of her husband only, who is the owner of the land and the connection was obtained in 2007 itself. The AO also made local enquiries through his Inspector and the said enquiries revealed that the property existed in that land for quite a long time. Accordingly, the AO took the view that the assessee has not constructed any new residential building as claimed by her and she might have done some renovation work in the already existing structures. The AO also took the view that the guest house and other structures are not residential buildings. Accordingly, he held that the assessee is not eligible for deduction u/s 54F of the Act and accordingly rejected the claim of Rs.1,43,84,307/- made under the above said section. The Ld CIT(A) also confirmed the same and hence the assessee has filed this appeal before us.

The Ld A.R submitted that there existed two building structures in the above said land, an old structure owned by Basavaraju and a new structure built by the assessee. He submitted that the AO has not carried out physical verification of the buildings in order to ascertain this fact. The Inspector also has made enquiries with some local people only and has given his report without conducting any physical verification. He submitted that the AO has rejected the valuation report without examining the same in proper perspective. Accordingly he submitted that the rejection of claim for deduction u/s 54F of the Act was not justified.

On the contrary, the Ld D.R submitted that the assessee has failed to prove that she has actually constructed a new residential house. He submitted that the structures were already existing, which were proved by satellite images and local enquiries. The valuation certificate is a self serving document and the valuer might have valued the existing structures also. The assessee could not furnish any bills and vouchers relating to construction of residential house. The Ld D.R submitted that, in any case, Guest house, meditation hall, Coconut Godown are a commercial buildings and hence the claim for deduction u/s 54F of the Act was rejected on several grounds.

We heard rival contentions and perused the record. We notice that the assessee has furnished following documents in order to claim that she has constructed a residential house and accordingly claimed deduction u/s 54F of the Act. (a) Unregistered lease deed for taking lease of land of 1 acre and 5 guntas. (b) Valuation certificate obtained from a registered valuer. The land was taken on lease by the assessee from her spouse for a period of 29 years and the same is also unregistered.

It is an undisputed fact that the assessee could not furnish copies of plan approval, electricity connection, bills and vouchers relating to construction of building. The case of the revenue is that the unregistered lease deed and the valuation certificate are self serving documents, which should have been corroborated by the assessee by producing other evidences. We find merit with the view taken by the revenue. Though the assessee has furnished copies of certain vouchers, yet they were related to plumbing items, which could have been used on the existing building structure also. We notice that the AO has made local enquiries, which revealed that the impugned buildings were existing for many years. The AO has also found that the assessee has not taken any new electricity connection and the existing electricity connection was given in 2007 itself in the name of spouse of the assessee. The AO has also relied on satellite images to buttress his views. We notice from the valuation report furnished by the assessee that the constructed area was about 9000 Sq.ft., and it has been claimed that the same was constructed within a period of 11 months, which is difficult in normal circumstances. We have earlier noticed that the assessee could not furnish any evidence to support her claim of construction of a new residential house except the unregistered lease deed for lease of land from her spouse and a valuation report. There should not be any dispute that the burden to prove the claim of construction of new residential house is placed upon the shoulders of the assessee, which the assessee has failed to prove. On the contrary, we notice that the AO has brought on record many evidences in order to prove that the assessee has not constructed any new residential building, as claimed.

We also agree with the view taken by the tax authorities that the Guest house, Meditation Hall and Coconut Godown etc., which is claimed to have been constructed, cannot be taken as residential building, even if the claim of the assessee that she has constructed a new building is accepted for a moment.

In view of the foregoing discussions, we are of the view that the Ld CIT(A) was justified in confirming the rejection of claim for deduction u/s 54F of the Act. Accordingly we confirm his order.

In the result, the appeal of the assessee is dismissed.