SHRI. N KRISHNAKUMAR,CHENNAI vs. ACIT NON CORP CIRCLE 13(1), CHENNAI

आदेश / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER This is an appeal filed by the Assessee directed against the order of the Commissioner of Income Tax (Appeals)-14, Chennai (‘CIT(A)’ for short) dated 28.02.2018 for the Assessment Year (AY) 2013-2014.

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The Assessee raised the following grounds of appeal: 2.

‘’ 1. The Order of The Commissioner of Income tax (Appeals) is contrary to Law, facts and circumstances of the case.

2 The Commissioner of Income tax (Appeals) erred in confirming the disallowance of the claim for deduction under Section 54/54F for the year under appeal.

2.1 The Commissioner of Income tax (Appeals) erred in holding that the sale was only of vacant land even though the agreement to sell specified land and building and the AO has verified the electricity payment details filed with him as evidence of existence of the residential house at the time of transfer of immovable property.

2.2 The Commissioner of Income tax (Appeals) should have appreciated that the building was demolished after the agreement of sale was executed and possession given to the buyer and the building was demolished on the instructions of the buyer before conveyance of property under a registered sale deed in the next year. As the capital gains on transfer of property is based on the agreement for sale under which both land and residential house was transferred, the Appellant was eligible for the deduction under Section 54.

2.3 The Commissioner of Income tax (Appeals) erred in denying the claim for deduction on the value invested on another residential property by erroneously invoking sec 54F, while the Appellant is entitled to deduction u/s 54. Hence owning of more than one residential property cannot be a reason for denying the deduction against capital gains claimed by the Appellant. 3 The Commissioner of Income tax (Appeals) erred in confirming to tax the annual Letting value of residential flat at Kodaikanal.

5 The Appellant craves leave to file additional grounds at the time of hearing’’.

The brief facts of the case are as under: 3.

The appellant is an individual, manufacturing PVC Pipes and

Fittings in the name of proprietorship concern M/s. Essorke

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Industries. The return of income for the AY 2013-14 was filed on

28.09.2013 disclosing total income of Rs.1,44,55,220/-. Against the

said return of income, the assessment was completed by the Assistant

Commissioner of Income Tax, Non Corporate Circle-13 (1), Chennai

(hereinafter referred as ‘’’Assessing Officer’’) vide order dated

30.03.2016 passed u/s. 143(3) of the Income Tax Act, 1961 (for short

‘the Act’) at total income of Rs.9,80,30,110/-. While doing so, the

Assessing Officer denied exemption of capital gains claimed u/s.54F of

the Act arising on sale of property situated at No.4A (No.165), Arcot

Road, Valsaravakkam, Chennai.

The factual background of the case are as under :- 4.

Assessee is a owner of Plot No.165, Arcot Road, Valsaravakkam,

Chennai and the same was sold to M/s.Shell India Markets Pvt Ltd for

a consideration of �8,40,00,000/-. Assessee claimed exemption of

capital gains derived on sale of said property u/s.54F of the Act as the

assessee invested the sale consideration in purchase of new house

property situated at No.5/55, Blue Beach Road, Neelangarai, Chennai

of �5,40,00,000/- apart from the cost of improvement of

�1,55,56,178/-. The Assessing Officer denied claim for exemption

u/s.54F of the Act on the ground that on the date of sale of asset,

assessee was owning more than two house properties i.e one at 70,

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4th Avenue, Ashok Nagar, Chennai and other at Kodaikanal. The

Assessing Officer rejected the contention of the assessee that property

at Kodaikanal was business asset after referring to the description of

property given in schedule of property in the sale deed at the time of

purchase of property which drescribes the property as residential

house. The Assessing Officer also denied exemption u/s.54 of the Act

rejecting the contention that the property sold was residential

property. Thus, Assessing Officer denied exemptions claimed u/s.54

and 54F of the Act.

Being aggrieved, an appeal was preferred before ld. CIT(A), 5.

who vide impugned order had dismissed the appeal concurring with

the view of the Assessing Officer that the property at Kodaikanal was

residential property.

Being aggrieved by the order of the ld. CIT(A), the appellant 6.

is in appeal before us in the present appeal. Ld. Authorised

Representative submitted that assessee is entitled for exemption

u/s.54F of the Act, in as much as, the property at Kodaikanal is not

residential property and is used as guest house and the same formed

part of fixed asset schedule of M/s. Essorke Industries. In support of

this, he also placed before us Balance Sheet and Profit and Loss

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Account of said proprietary concern demonstrating that depreciation

was claimed.

On the other hand, ld. Departmental Representative 7.

submitted that property at Kodaikanal is residential property as

shown in schedule of property in the sale deed at the time of

purchase of property and the asset is deemed to have converted into

personal asset.

In rejoinder, the ld. Authorised Representative submitted 8.

that assessee continued to carry on business and the property at

Kodaikanal continues to be part of fixed asset of M/s. Essorke

Industries in subsequent years.

record. The only issue in the present appeal revolves around the

allowability of claim for exemption u/s.54 of the Act. During the

previous year under consideration, assessee sold property at No.4A

(No.165), Arcot Road, Valsaravakkam, Chennai for a consideration of

�8,40,00,000/- to M/s. Shell India Markets Pvt Ltd. The sale proceeds

has been invested towards purchase of new residential house situated

at Neelangarai, Chennai. Assessee claimed exemption of capital

gains u/s.54F of the Act as the sale proceeds where invested in

purchase of residential property. The Assessing Officer denied the

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claim for exemption u/s.54 of the Act solely on the ground that

assessee was owning two residential house on the date of sale of

original asset i.e. one at Ashok Nagar and another at Kodaikanal. The

finding of the Assessing Officer is being disputed by the assessee on

the ground that the property at Kodaikanal is a business asset forming

part of fixed assets of M/s. Essorke Industries which is proprietorship

concern of the assessee. According to the assessee, the property

situated at Kodaikanal cannot said to be residential property. This

contention was rejected by the Assessing Officer placing reliance on

the description of the property given at the schedule of the property at

the time of purchase of the property by the assessee. The ld.

Departmental Representative further contented before us that once

the assessee ceased to carry on the business, the business asset shall

become personal asset and since the assessee had discontinued to

carry on the business, same is only personal asset. Therefore the

controversy in the present appeal revolves around whether property in

the name of M/s. Essorke Industries continue to exist and if it

continues in the schedules of fixtures owned by said proprietary

concern. The Assessing Officer never gone into the issue whether

proprietary concern still continues to exist even after sale of property

at Valsaravakkam, Chennai and whether the said property situated at

Kodaikanal continues to be part of fixed asset even in the year post to

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2013-2014. Therefore, we are of the considered opinion that the matter should be remitted back to the file of the Assessing Officer for limited purpose of examining whether or not M/s. Essorke Industries continues to be in existence even in the period of post assessment year 2013-2014 and the said asset continues to be held in the hands of M/s. Essorke Industries, if it is found that the said company continues to exist and the property at Kodaiknal is forming part of fixed asset of schedule, the exemption cannot be denied to the assessee. Accordingly, we remit the issue back to the file of the Assessing Officer for denovo adjudication in accordance with law.

In the result, the appeal filed by the assessee is partly 10.

allowed for statistical purpose.

Order pronounced on 21st day of November, 2019, at Chennai. Sd/- Sd/- (इंटूर� रामा राव) (धु�वु� आर.एल रे�डी) (DUVVURU RL REDDY) (INTURI RAMA RAO) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai �दनांक/Dated: 21st November, 2019. KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF