Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, CHANDIGARH BENCH ‘A’, CHANDIGARH
Before: SMT.DIVA SINGH & SHRI VIKRAM SINGH YADAV
Per Vikram Singh Yadav, Accountant Member:
This is an appeal filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals)-2, Chandigarh[in short the ‘Ld.CIT(A)’] dated 10.04.2019 relating to assessment year 2015-16, passed u/s 250(6) of the Income Tax Act, 1961 (in short ‘the Act’), wherein the assessee has challenged the sustenance of disallowance of deduction claimed u/s 54 of the Act.
Briefly, the facts of the case are that the assessee filed his return of income declaring total income of Rs.9,51,770/- wherein he has declared Long Term Capital Gains on sale of immovable property at nil after claiming deduction u/s 54 of the Act. During the course of assessment proceedings, the assessee filed details of property sold and purchased by him as so called for by the AO. On perusal of the documents so filed by the assessee, the AO observed that the assessee had purchased industrial plot No.10C, Phase-I, Mohali on 25.10.1969 for a consideration of Rs.35,000/-through a Conveyance Deed executed on 13.06.1973. It was further observed by the AO that this industrial plot was sold by the assessee for a consideration of Rs.9.25 crores as per registration deed executed on 10.05.2015. The AO accordingly, observed that a perusal of the documents showed that the nature of the property sold is an industrial plot as is apparent from the contents of the sale deed.
Further, the AO also referred to the copy of the Valuation Report prepared by M/s Syal& Associates, Chartered Accountants as so submitted by the assessee and as per the AO, a perusal of the said report also shows that the valuer has certified the nature of the property as industrial property. The AO accordingly, informed the assessee that he was not eligible to claim deduction u/s 54 of the Act as he has sold an industrial plot and not a residential house. The assessee was also informed that he is eligible for deduction u/s 54F of the Act. Accordingly,, the AO disallowed the deduction u/s 54 of the Act, of Rs.3,50,55,939/- as so claimed by the assessee and has allowed deduction u/s 54F of the Act, amounting to Rs.1,33,87,863/- and recomputed the Long Term Capital Gains at Rs.2,16,68,076/-, as against nil offered by the assessee.
Being aggrieved, the assessee carried the matter in appeal before the Ld.CIT(A). During the course of hearing before the Ld.CIT(A), it was submitted that the assessee was residing in the said house which has been sold by him and in support, it was submitted that the assessee has obtained his Aadhar Card showing the same address. Similarly, in his bank account, the same address has been mentioned. In his return of income, he is showing the same address where he is residing. Further, an affidavit of the assessee showing that there was no other residential property in the name of the assessee and he used to reside in the said house, was also filed. Further, reliance was placed on certain Coordinate Benches’ decisions. The Ld.CIT(A) considered the submissions so filed by the assessee. However, the same were not found acceptable and relevant findings of the Ld.CIT(A) are contained at paras 6.3.2 to 6.3.5 of his order, which are reproduced hereunder:
“6.3.2 The fact of the transacted property being an industrial plot is borne very clearly from the contents of the purchase and subsequent sale documents of the impugned property duly recorded in the assessment order. "During the course of appellate proceedings, the assessee filed details of properties sold and purchased by him. A perusal of the documents shows that the assessee had purchased Plot No IOC, Phase -I, Mohali on 25.10.1969 for a consideration of Rs 35,000/-. A conveyance deed was issued by the Urban Estate, Punjab, Chandigarh on 13.06.-1973 in favour of assessee. This industrial plot was sold by the assessee for consideration of Rs 9,25,00,OOO/- on 10.02.2015 as per registration deed no 3568 executed in the office of Sub registrar, SAS Nagar. A copy of the sale deed has been furnished by the assessee. A perusal of the documents shows that the nature of the property sold has been mentioned as industrial plot as is clear from the following portion of the sale deed. “whereas I am the absolute owner and in possession of Industrial Plot No. C-10 (alongwith construction), Sector-57-A, Focal Point, S.A.S. Nagar, Mohali, the area of which is 4166.70 Sq. Yards. The total covered area of the construction on this plot is 52105 square feet. The Conveyance Deed of the above property was executed on 13.06.1973 in the officer of Estate Officer, Urban Estate, Punjab, Chandigarh, and was registered in the name officer of Sub Registrar Kharar at Serial No. 1545, Book No. 1, Dated 07.07.1973. The ownership of the above property was transferred in my name by the Estate Officer, Puda, Mohali vide letter No. 4376 dated 23.03.1999. The above industrial plot and the construction erected thereon, are free from all sorts of encumbrances and no litigation is going on regarding the same. Now I in my full sense of mind have sold above said Industrial Plot alongwith the construction erected thereon,including all its rights to water, electricity, air, light, including all type of connection, including all deposited securities, including all those rights which at present are available to us, for a total sale consideration of Rs 9,25,00,000/- half of which comes to Rs. 4,62,50,000/-.” 6.3.3 From the above submissions of the assessee made during the assessment proceedings, it is amply clear that the assessee himself acknowledges and accepts the fact that the impugned property is an industrial plot. The character of properties has been clearly demarcated, in sync with need for proper urban governance, into several categories that include industrial, residential etc. Merely the claims that the assessee has erected a residence in an industrial plot (in clear infraction of the urban laws and estate authorities rules) would not alter the character of the property. For Income Tax purposes sale & purchase of properties and their distinctive categories have clearly been enunciated. The provisions guiding capital gains clearly distinguish between agricultural land, such agricultural land that is a capital asset, residential property and the residuary clause any other long term capital asset. In that light the industrial plot sold by the assessee can not become a residential property for purposes of capital gains and does not befit the appurtenant relief on account of investment of the proceeds in a specified manner. The assessee has tried to pass off the sale as one of a residential property (which it was not) and to that extent wrongly claimed deduction under section54 of the Act. For this purpose, during the course of appellate proceedings the assessee has laid emphasis on the Valuation Report. The valuation report was examined. The valuation report clearly mentions the property in question to be an 'industrial plot'. Further the Cost of construction is not apportioned between the different components of the property. The assessee's plea that it had Aadhar Card, bank a/c etc from the same address do not accord the status of a residential house to the property. The laws guiding Aadhar Card, bank account opening etc do not go into the distinctions between an industrial plot and a residential property. Unauthorized constructions,, electricity connection, proof of address etc. do not confer residential rights over such property. This is something akin to what happens in the cases most of such claims about unauthorized constructions in illegal colonies etc. There too claims about the ownership of such plots and the legality thereof are made on the basis of electricity meters installed, water connections, Aadhar Card etc. Such evidences do not make the entire things legal and make the claimants rightful owners of the spaces they occupy and have created residences upon. The assessee has not canvassed any evidence of change in land use of the plot either. Neither has any evidence been adduced to witness that the claimed residence had been disclosed to the department as being been assessable under the head 'Income from House Property'. 6.3.4 Further, the case laws cited by the assessee during appellate proceedings are clearly distinguishable. The case of Meenu Bansal in dated 8/10/2018 is on the issue of 263 order passed by the PCIT, holding the AO's order to be erroneous. Further the issue under contention was one of a Shop-cum-Flat and not that of an industrial plot. The other cited case was that of Shri Shrey Sharma Guleri in IT Appeal no. 6147 of 2016. ITAT Mumbai had held that basement of a residential house was also part & parcel of the residential unit befitting exemption under section 54/54F of the Act. The facts of the third case viz Smt. Harpreet Kaur in ITA no. 293/Chd/2014 reveal that the ITAT, Chandigarh vide its order dated 03/06/2015 had again gone into the validity of proceedings u/s 263 undertaken by the CIT. 6.3.5 In light of all the above there are no grounds to intervene with the order of the AO to deny claims u/s 54 of the IT Act, 1961 in light of the fact that, in the entire factual matrix of the case, he has rightfully restricted thebenefit to the deduction available u/s 54F of the IT Act, 1961. Grounds of appeal no.1&2 are dismissed.”
4. Against the said findings and order of the Ld.CIT(A), the assessee is in appeal before us.
During the course of hearing, the Ld. AR reiterated the submissions as made before the lower authorities and our reference was drawn to the original sale deed, by virtue of which, the assessee has purchased the said property. It was submitted that the said property was a residential house and no machinery was installed in the property to run as a factory building and the said property was used as a residential house before the sale of the said property by the assessee. Further reliance was placed on the decision of the Hon'ble Karnataka High Court in the case of Shri Navin Jolly Vs. ITO, of 2011, dated 18.06.2020.
Per contra, the Ld. DR relied upon the findings of the lower authorities.
We have heard the rival contentions and perused the material available on record. The assessee has claimed deduction u/s 54 of the Act. Section 54 talks about deduction in respect of profit on sale of property used for residence. It talks about a situation where an assessee being an individual or a HUF has transferred a long-term capital asset being buildings or lands appurtenant thereto and being a residential house and the capital gains arising from the transfer of such long-term capital asset is chargeable under the head ‘income from house property’.
Where the assessee transfers such a residential house and thereafter within a period of one year before or two years after the date on which the transfer took place, has purchased or has within a period of three years after that date constructed a residential house, in such a situation instead of capital gains 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 provisions of clauses (i) & (ii) to sub-section (1) to section 54 of the Act.
In the instant case, the limited dispute relates to whether the assessee has transferred a residential house or not. On perusal of the Sale Deed executed by the assessee, it is noticed that what has been transferred is an industrial plot No.C-10 alongwith construction thereon situated at Sector 57-A, Focal Point, SAS Nagar, Mohali having an area of 4166.70 sq.yard. In the said Sale Deed, there is a clear mention that the assessee is the absolute owner and in possession of the said industrial plot and the assessee in his full sense of mind has sold the said industrial plot alongwith construction erected thereon. Therefore, as borne out from the contents of the Sale Deed duly executed by the assessee and registered with the office of Sub Registrar, SAS Nagar, Mohali, it is clear that what has been transferred is an industrial plot (alongwith the construction thereon) and not a residential plot. Further, there is a Valuation Report which has been placed on record by the assessee during the course of assessment proceedings. The said Valuation Report has been prepared by M/s Syal& Associates, Chartered Engineers as on 12.01.2015 about a month prior to the execution of the Conveyance Deed on 10.02.2015 which shows the locality of the property, usage and specification of the constructed area just prior to the execution of the Conveyance Deed. On perusal of the Valuation Report, it is noted that the subject property was located in an industrial area having an area of 4166.70 sq.yd and a covered area of 52,105 sq.ft. The construction has been carried out in form of parking area, office space, residential and recreational area covering basement, ground floor and first floor. The parking area has been built in the basement floor covering 15000 sq.ft. having RCC framed structure, RCC retaining walls with Tremix flooring. The office area is built on the ground floor covering 18805 sq.ft. consisting of RCC framed structure, Aluminium windows, vitrified tile flooring. The residential area is on first floor with a covered area of 15304 sq.ft. having specification of masonry structure, granite flooring, ceramic tiles in the bathrooms, wooden doors and windows. If we look at the residential area, though it talks about masonry structure, granite flooring and ceramic tiles which is more a broad specification of a built up area which could possibly be used for residential purposes, however, at the same time, it does not have all the necessary attributes of a residential house in terms of bedrooms and kitchen facility. In any case, what the law contemplates is a transfer and sale of property which is being used for residential purposes. Therefore, what is essential is that the property should necessarily and solely be a residential house and used for residential purposes only. In the instant case where on an industrial plot of land, there is an office built up area on ground floor and so-called residential built-up area on the first floor, can it be said that what has been transferred is a residential house. To our mind, the answer to the same cannot be in affirmative and what has been transferred is an industrial plot of land having mixed constructed area consisting of office-cum-residential area.
We, therefore, agree with the findings of the Ld.CIT(A) that the transacted property is an industrial plot and not a residential plot which is clearly borne out from the contents of the Sale Deed to which the assessee is himself a signatory and duly acknowledges the contents thereof. In the light of the same, subsequent oral evidence in form of an affidavit cannot be accepted and we affirm the findings of the Ld.CIT(A) that merely having Aadhar Card and Bank Account showing the same address do not accord the status of a residential house to the property under consideration and claim of the assessee cannot be accepted.
We have also gone through the decision of the Hon'ble Karnataka High Court in the case of Shri Navin Jolly Vs. ITO (supra) and find that the facts of the said case are distinguishable from the facts of the case in hand and the legal proposition laid down therein, therefore, does not support the case of the assessee. The grounds of appeal
raised by the assessee are dismissed.
11. In the result, the appeal of the assessee is dismissed. Order pronounced on 12.01.2022.