Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘’ A’’ BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आदेश/O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-6, Ahmedabad, dated 20/11/2018 arising in the matter of assessment order passed under s. 143(3) r.w.s. 263 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2011-12.
ITA no.64/AHD/2019 A.Y. 2011-12 2
Briefly stated facts are that the assessee in the present case is an individual and filed his return of income under section 139 of the Act declaring at ₹ 1,37,680.00 only. The case of the assessee was selected under scrutiny and accordingly the assessment was framed under section 143(3) of the Act dated 20th February 2014 after making certain additions at ₹ 1,83,180.00. Subsequently, the assessment was revised under section 263 of the Act by the learned Principal CIT vide order dated 12 January 2016.
2.1 The AO in consequence to the direction of the learned Principal CIT under section 263 of the Act further revised the assessment by making necessary changes in the cost of construction which was also accepted by the assessee.
2.2 The assessee has also claimed deduction under section 54 of the Act for Rs. 12,50,000.00 which was reduced by the AO to 2,40,084.00 in the assessment framed under section 143(3) read with section 263 of the Act vide order dated 29- 12-2016. The revised computation as made by the AO stand as under: Working of LTCG on sale of property 1/2 sale consideration as per form No.1 =Rs.61,03,800/- Less: Indexed Cost (1807347 x 711/406) Rs.31,65,135/- Less: Construction cost Rs.17,66,324/- Rs.49,31,459/- Rs.11,72,341/- Less: Proportion of profit Rs.6103800 x 12,50,000/- = Rs.2,40,084/- 1172341 Correct Long Term capital Rs.9,32,257/-
Aggrieved assessee preferred an appeal to the learned CIT-A, who confirmed the order of the AO.
Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us.
ITA no.64/AHD/2019 A.Y. 2011-12 3
The learned AR before us contended that the assessee is very much entitled for the full amount of investment made in another residential unit i.e. Rs. 12.50 lacs despite the fact that the assessee was in possession of another residential house and the time of making the investment in another residential.
On the other hand, the learned DR before us vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, there was nobody appeared before the learned CIT-A and therefore, the learned Principal CIT dismissed the appeal of the assessee. Undeniably, the present proceedings are arising in consequence to the direction of the learned Principal CIT under section 263 of the Act. Thus it is seen that the assessee has already suffered from different proceedings before the income tax authorities. The first time the proceedings under section 143(3) of the Act. The 2nd proceedings were initiated under section 263 of the Act. The next proceedings were in consequence to the direction of the learned Pr. CIT under section 263 in the assessment framed under section 143(3) read with section 263 of the Act. Finally the assessee, has carried the matter to the learned CIT-A and now the assessee is in appeal before us.
7.1 On perusal of the dispute, we note that the issue can be disposed of on merit based on the facts available on record. In other words, all the necessary facts for resolving the dispute are arising from the order of the authorities below. There is no need to make any reference to any other documents. Therefore, to avoid the multiple proceedings and considering the sufferings of the assessee that he has already undergone for different proceedings, we are inclined to adjudicate the issue on hand without remitting the matter to the file of the learned CIT-A.
ITA no.64/AHD/2019 A.Y. 2011-12 4
In the 1st ground of appeal the assessee has challenged the order of the AO 7.2 who denied the claim of excess construction cost of Rs. 250,000.00 only. In this connection, we note that the assessee himself before the AO has agreed that he has claimed excessive construction cost by Rs. 2,50,000.00 only. The relevant submission of the assessee reads as under: With reference to the above we submit as under:- 1. We have claimed Construction Cost of Rs.2,77,600/- for the year 2001-02 which was typing error on our part 2. However the original cost was Rs.27,600/- for the above Rs.2,77,600/-
7.3 In view of the above, we do not find any reason to interfere in the finding of the AO. Thus, the ground of appeal of the assessee for claiming the deduction on account of the expenditure of Rs. 2,50,000.00 is dismissed.
7.4 The assessee has also claimed the deduction of Rs. 12,50,000.00 under the provisions of section 54 of the Act. However, this deduction of Rs. 12,50,000.00 was denied by the AO on the reasoning that that the assessee was already having in his possession a residential house at the time of purchase of a new residential house at Shivam Apartment. Therefore, the same should not be allowed as deduction. The relevant finding of the AO reads as under: The assessee was already in possession of a residential house at the time of purchase of new residential house at Shivam Apartment. Hence, the exemption claimed u/s.54 of the IT Act is also not correct and required to be withdrawn.
7.5 However, on perusal of the computation of income tax working made by the AO in his assessment order, we note that the AO himself has allowed the proportionate deduction under section 54 of the Act which has been reproduced somewhere in the preceding paragraph of this order.
7.6 From the above, we note that the AO has taken contradictory statement. The AO on one hand denies the deduction under section 54 of the Act and on the other hand, the AO allows the deduction under section 54 of the Act on proportionate
ITA no.64/AHD/2019 A.Y. 2011-12 5
basis. Thus we are of view that, in such facts and circumstances, of the view that the assessing cannot be denied the deduction provided under section 54 of the Act.
7.7 Be that as it may be, we also note that the deduction was denied by the AO on the reasoning that the assessee was already in the possession of the residential house at the time of purchase of the new house. At this juncture, we are inclined to refer the provisions of section 54 of the Act as applicable to the year in dispute which is extracted below: Profit on sale of property used for residence. 60 54. 61 [(1)] 62 [ 63 [Subject to the provisions of sub-section (2), where, in the case of an assessee 64 being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset 65 [***], being buildings or 66 lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of 67 [one year before or two years after the date on which the transfer took place purchased 68 ], or has within a period of three years after that date constructed, a residential house, then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,— (i ) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (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.
7.8 On perusal of the above provision we note the word used in section 54(1) of the Act reads as investment in ‘a residential’ property which ought to be interpreted as property in which investment should be of residential in nature in nature. As the word ‘a residential property’ should not understood in singular number or one residential property. In holding so, we find support and guidance from the judgment of Hon’ble Karnatka High Court in case of CIT vs. D. Ananda Basappa reported in 180 taxman 4, the relevant observation of the Hon’ble bench reads as under: “The contention of the revenue that the phrase 'a residential house' would mean one residential house, does not appear to the correct understanding. The expression 'a residential house' should be understood in a sense that building should be residential in nature and 'a' should not be understood to indicate a singular number. [Para 6]”
ITA no.64/AHD/2019 A.Y. 2011-12 6
7.9 In view of the above, we hold that the assessee cannot be denied the benefit of the deduction provided under section 54 of the Act if he has a house at the time of transfer of the property and makes the investment in another residential property. Accordingly, the finding of the authorities below is devoid of any merit.
7.10 Likewise, the amount of capital gain is less than the amount of the investment made by the assessee in another residential house. Therefore, we are of the view that the assessee is eligible for deduction of ₹12,50,000 under the provisions of section 54 of the Act. Accordingly, we set aside the finding of the learned CIT-A and direct the AO to allow the benefit of deduction for making the investment in another residential unit of ₹12,50,000.00 only. Accordingly, there cannot be any addition to the total income of the assessee on account of capital gain as discussed above. Hence, the ground of appeal of the assessee is allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 02/03/2022 at Ahmedabad.
Sd/- Sd/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 02/03/2022 Manish