R.DAYANANDAN,CHENNAI vs. ITO NON CORPORATE WARD 23(4), CHENNAI

आदेश / O R D E R

Per A. Mohan Alankamony, AM:-

2 3078/Chny/2017 221/CIT(A)-10/2016-17 for the assessment year 2013-14 passed U/s.250(6) r.w.s. 143(3) of the Act. Since facts of both the cases of the assessees are identical, they are taken up together for hearing and disposed off by this common order.

3 3078/Chny/2017 of deduction U/s.54B/54F of the Act and thereby computed long term capital gain in the hands of Shri R.Dayanandan & Shri D. Thanigaivel, at Rs.1,07,09,248/- and Rs.1,49,22,094/- respectively for the relevant assessment year 2013-14.

4 3078/Chny/2017 5. Subsequently the assessee Shri R. Dayanandan sold his plot No.1 & 5 extending to 10,456 sq.ft., along with 1/10th share in common passage to M/s. Ruby Builders and Promoters for sale consideration of Rs.1,12,00,000/-. The assessee admitted the sale consideration in his return of income. Thereafter the sale consideration was reinvested in agriculture land in the name of his wife and daughter as detailed herein below and claimed deduction U/s.54B of the Act. S.No. Land Particulars Doc.No. & Date In favour of Purchase Cost as per Deed 1 21 Cents of vacant land situated in No.167, Perungalathur Village, Tambaram Taluk, Kancheepuram District, Survey No.399/2, Married daughter Rs.21 Lakh Patta No.5670. Sub Registration District, Smt D.Lavanya Padappai Doc. No.3834/2012 dated 07/06/2012 2 21 Cents of vacant land situated in the Married daughter same survey number above – Doc. Rs.21 Lakh Smt D. Lavanya No.3835/2012 dated 07/06/2012 3 21 Cents of vacant land situated in the Smt. D. Gowri, w/o same survey number above Doc. Rs.21 Lakh the assessee No.3837/2012 dated 07/06/2012 4 20.5 Cents of vacant land situated in the Smt. D. Gowri, w/o same survey number above Rs.20.5 Lakh the assessee Doc.No.3839/2012 dated 07/06/2012 Total Rs.83.5 Lakh 5.1 The Ld.AO opined that the assessee is not entitled to the claim of deduction U/s.54B of the Act due to the following reasons:- (i) The records from Taluk office furnished by the assessee shows that the land is classified as punjai land.

5 3078/Chny/2017 (ii) There was no mention about the nature of cultivation or yield in the records of Taluk office furnished by the assessee. (iii) The assessee had furnished a lease agreement entered by him with Mr. Chinnappan for cultivating chilly and gingerly on the land, wherein the assessee’s share of the produce was 50% and the assessee has paid an amount of Rs.5000 to Mr. Chinnappan for cultivation. However the Ld.AO opined that for the following reasons the transaction cannot be considered to be genuine:- a) Mr Chinnappan was summoned and as per the sworn statement recorded from him, he had stated that no such lease agreement was executed and he has not cultivated the land. b) Mr. Chinnappan further stated that there was no cultivation in the land for the past 35 years. c) It was further stated that he used to receive meager sum of Rs.50 or Rs.100 during the rare visit of the assessee and he was only a caretaker of the land. d) The amount of Rs.5000/- was given by the assessee towards his daughter’s marriage.

6 3078/Chny/2017 From the above, the Ld.AO arrived at the conclusion that the land was not cultivated or used for agricultural purpose during the past two years immediately preceding the date of transfer. Therefore the Ld.AO opined that the assessee had not fulfilled the conditions stipulated U/s. 54B of the Act and hence disallowed the claim of deduction U/s.54B of the Act. Thereafter the Ld.AO after verifying the value of the land from the Sub-Registrar’s office Tambaram as on 01/04/1981 which was 120 for 1 cent, computed the Long Term Capital Gain of the assessee rejecting the claim made by the assessee the value of the land to be Rs.30 per sq.ft.

5.2 On appeal, the Ld.CIT(A) agreeing with the findings of the Ld.AO confirmed his Order for not granting deduction U/s.54B of the Act. The Ld.CIT (A) also held the Fair Market Value of the land as on 01.04.1981 as arrived by the Ld.AO because the assessee did not furnish any details in support of his claim. The Ld.CIT(A) further denied exemption U/s.54F of the Act with respect to the purchase of the two residential flats on the same date 18.01.2013 at No.31,Arul Nagar, Irumbuliyur Village, East Tambaram, Flat No.F21 & F23 for purchase consideration of Rs.22,41,100/- and Rs.25,18,000/- respectively, along with registration cost of 7 3078/Chny/2017 Rs.2,76,900/- aggregating to Rs.50,36,000/- because he was of the same view with that of the Ld.AO that the assessee has not complied with the proviso to Section 54F(a)(i) of the Act.

5.3 Before us the Ld.AR submitted that the assessee was holding agriculture land wherein he was cultivating paddy crop for the past so many years. He also referred to page No.15 to 18 of the Paper-Book wherein the Adangal certificate issued by the Revenue Authorities stated that the assessee R.Dayanandan was cultivating paddy in his land Survey No.174/2 at Irumbuliyur Village, Tambaram Taluk, Kancheepuram District in the Fasli 1417 (Corresponding Period 01.07.07 to 30.06.08), 1418 (Corresponding Period 01.07.08 to 30.06.09), 1419 (Corresponding Period 01.07.09 to 30.06.10) & 1420 (Corresponding Period 01.07.10 to 30.06.11). The assessee has also produced the affidavit of Shri Mani stating that he was cultivating the land of the assessee prior to which Mr. A. Chinnappan was cultivating the land at Paper- Book page No.19 & 20. It was therefore pleaded that the land sold by the assessee was agricultural land and therefore he was entitled to claim deduction U/s.54B of the Act, because he has purchased agriculture land within the period stipulated under the Act. The 8 3078/Chny/2017 Ld.AR further submitted that he is also entitled to claim deduction U/s.54F of the Act, because he has purchased two adjacent flat as one unit. He relied in the decision of the Hon’ble Jurisdiction Madras High Court dated 03.03.2017 in the case CIT Vs. Shri Gumanmal Jain wherein the Hon’ble High Court after referring to various decisions concluded that the assessee would be entitled for deduction U/s.54F of the Act, even though he has purchased more than one flat. It was therefore pleaded that the assessee may be granted the benefit of Section 54B of the Act as well as Section 54F of the Act. The Ld.DR could not seriously controvert to the submission of the Ld.AR however he relied on the orders of the Ld.Revenue Authorities.

5.4 We have heard the rival submissions and carefully perused the materials on record. From the facts of the case, it is apparent that the assessee shri R. Dayanandan had inherited agriculture land from his father who in turn had inherited the same from the assessee’s grandfather. The Revenue records produced by the assessee before us also makes it clear that the land held by the assessee is agricultural land. From the Revenue records produced by the assessee it is abundantly clear that the assessee was 9 3078/Chny/2017 cultivating the land during the preceding few years prior to the sale of the land. The evidences produced by the assessee such as the Revenue records and the affidavit of the individuals cultivating the land could not be controverted by the Ld.Revenue Authorities. Moreover the Ld.AO has not offered an opportunity to the assessee to cross-examine the statement given by Mr. A. Chinnappan who was earlier cultivating the assessee’s land. In this situation, we are of the firm belief that the land held and sold by the assessee in Survey No.174/2 at Irumbuliyur Village, Tambaram Taluk, Kancheepuram District is agriculture land and he was cultivating the land for years preceding to the date of sale. Hence we are of the firm view that the assessee is entitled for the benefit of deduction U/s.54B of the Act. Therefore we hereby direct the Ld.AO to grant deduction to the assessee U/s.54B of the Act.

5.5 Further from the facts of the case, it is apparent that the assessee has purchased two residential flats on 18.01.2013 for an aggregate amount of Rs.50,36,000/- at No.31, Arul Nagar, Irumbuliyur Village, East Tambaram. The Hon’ble Jurisdiction Madras High Court cited supra has categorically held that the assessee would be eligible for deduction U/s.54F of the Act, even if case CIT Vs. Shri Gumanmal Jain cited supra is reproduced herein below for reference:-

“7. CONCLUSION:

(i) We therefore have no hesitation in holding that in the instant case the assessee having got 15 flats along with his two sons will not disentitle him from getting the benefit under Section 54-F of the IT Act only on the ground that all the 15 flats are not in the same Block, particularly in the light of the admitted factual position that all the 15 flats are located at the same address namely, 'Rain Forest' No.57, New No.36, Taylor's Road, Rem Street, Kilpauk, Chennai 600 010.

(ii) As a sequitur, we are unable to persuade ourselves that the 15 flats, even if they are located in different blocks would not disentitle the assessee from getting the benefit of Section 54-F of IT Act.

(iii) We have no hesitation in holding that the order of ITAT which has been called in question before us is correct, there is no infirmity in the said order, does not call for any interference and we are of the view that the said order deserves to be confirmed.

(iv) We also noticed that in all the judgements, irrespective of whether it is under Section 54 or 54-F of IT Act, which we have discussed supra, the judgements have proceeded only on the basis that the flats [being more than one flat] are in the same location/address. Therefore, once it is in the same location/address, the question of whether it is in the same block or in different blocks does not arise for consideration. To our mind, as long as all the flats are in the same address/location even if they are located in separate blocks or towers it does not alter the position. In the instant case, after all, all the flats are a product of one development agreement of the same piece of land being said land. Therefore, we make it abundantly clear that even if flats/apartments are in different blocks and different towers as long as they are in same address/location it does not disentitle the assessee from getting the benefit of Section 54-F of IT Act.

(v) Therefore, the sole and sheet anchor submission of counsel for Revenue that the 15 flats in the instant case are located in the different blocks does not impress us. We are unable to persuade ourselves that this will disentitle the assessee from getting the benefit of Section 54-F as all the flats are in the same location/address and all flats are by products of one development agreement with the same builder.

(vi) The logic behind our view is that the assessee, irrespective of whether it is one flat or many flats, gets proportionate undivided share in land only for the same

11 3078/Chny/2017 piece of land. Therefore, assessee does not buy more than one property in that sense of the matter. Flats, apartments are completely based on co-ownership. (vii) Owing to all that have been stated supra, we conclude that the assessee is entitled to the benefit of Section 54-F of IT Act.”

5.5.1 Considering the facts of the case and the decision of the Hon’ble Jurisdiction High Court we do not have any hesitation to hold that the assessee is entitled for deduction U/s.54F of the Act, for having purchased two flats at an aggregate cost of Rs.50,36,000/-. Therefore we hereby direct the Ld.AO to grant deduction to the assessee U/s.54F of the Act.

5.6 With respect to the valuation adopted by the Ld.AO as on 01.04.1981, the Ld.AR has neither advanced any arguments nor furnished any details / evidence etc., therefore We do not find it necessary to adjudicate on this issue.

5.7 Accordingly the ground raised by the assessee with respect to the claim of deduction U/s.54B and 54F of the Act of the Act are decided in favour of the assessee and the ground with respect to adoption of fair market value as on 01.04.1981 at Rs.30 per sq.ft is dismissed.

12 3078/Chny/2017 6. The assessee Shri Thanigaivel had also sold his plot No.2, 3, 8 & 9 aggregating to 30,479 sq.ft., in Survey No.174/2, Chandran Nagar, Irumbuliyur, Tambaram Taluk, Kancheepuram District inherited from his father Shri R.Dayanandan who in-turn had inherited from his father to M/s. Ruby Builders & Promoters for sale consideration of Rs.1,50,00,000/- on 31.05.2012. Further the assessee had also invested in two agricultural land on 07.06.2012 for an aggregate amount of Rs.45,65,000/- claiming deduction U/s.54B of the Act. The assessee had also purchased two residential flat F.No.21 for Rs.22,41,100/- and F.No.23 for Rs.25,18,000/-, Registration cost of both the flats Rs.2,76,900/- aggregating to Rs.50,36,000/- at No.31, Arul Nagar, Irumbuliyur Village, East Tambaram and had claimed deduction U/s.54F of the Act. The Ld.AO rejected the claim of deduction U/s.54B & 54F of the Act to the assessee for the same reasons as was in the case of his father Shri R. Dayanandan, which was subsequently confirmed by the Ld.CIT(A).

13 3078/Chny/2017 decision what we have held in the case of Shri R. Dayanandan shall hold good in the case of the assessee Shri Thanigaivel also. Therefore we hereby direct the Ld.AO to grant deduction to the assessee Shri Thanigaivel U/s.54B & 54F of the Act. Further since we have held against the assessee on the ground of valuation of the land in the case of Shri R. Dayanandan, the same decision shall hold good in the case of the assessee Shri Thanigaivel also.

Order pronounced on the 14th August, 2018 at Chennai.