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Income Tax Appellate Tribunal, ‘A’ (SMC
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER Assessee in this appeal is aggrieved that deduction of �30,03,000/- claimed by her u/s.54F of the Income Tax Act, 1961 (in short ‘’the Act’’) was not allowed.
Facts apropos are that assessee, Managing Director of one M/s. Eden Leather Manufacturing & Exports Pvt. Ltd had filed her return for the impugned assessment year disclosing income of �3,72,220/-. During the course of assessment proceedings, it was noted by the ld. Assessing Officer that assessee had claimed deduction u/s.54F of the Act on capital gains arising out of the sale of a property.
Ld. Assessing Officer, required the assessee to furnish details regarding the reinvestment on which deduction u/s.54F of the Act was claimed. Thereupon, it was mentioned by the assessee that such claim was made on an additional construction done to an existing building.
Assessee also filed a corporation tax receipt as proof for the additional construction. Additional construction was done in premises No. 1002, New No.98, I- Block, 6th Avenue, Anna Nagar West, Chennai 600 040 owned by the assessee. However, ld. Assessing Officer was of the opinion that what assessee constructed was only an extension of an existing building and by virtue of the judgment of Hon’ble Jurisdictional High Court in the case CIT vs V. Pradeep Kumar, 290 ITR 90, extension of an old existing house would not be equivalent to construction of a new residential house. He denied the claim made by the assessee u/s.54F of the Act.
Aggrieved, assessee moved in appeal before the ld. Commissioner of Income Tax (Appeals). According to the assessee what was constructed was a new floor which was an independent residence by itself. Contention of the ld. Authorised Representative was that the new construction was a self contained residential unit and deduction u/s.54F of the Act could not be denied. Further, as per the assessee, there were two separate connections for sewerage water and electricity. Reliance was placed on the judgment of Hon’ble Delhi High Court in the case of Addl. CIT vs. Vidya Prakash Talwar, 132 ITR 661 and that of Hon’ble Kerala High Court in the case of CIT vs. A.R.
Mathavan Pillai, 219 ITR 696.
Ld. Commissioner of Income Tax (Appeals) sought a remand report from the ld. Assessing Officer on the submissions made by the assessee. In such remand report ld. Assessing Officer stated as under:-
(i) Providing kitchen on a floor would not mean that the existing asset is converted into more than one dwelling unit.
(ii) Construction of first floor was only an extension of existing residential property.
(iii) Property tax receipt clearly indicated that there was only an increase in area and no new separate unit came into existence.
(iv) Inspection report of Chennai Metropolitan Water Supply & Sewage Board produced by the assessee did not have a signature or official seal.
Ld. Commissioner of Income Tax (Appeals) after going through the remand report of the ld. Assessing Officer held that assessee had done only an extension of existing residential house and this did not tantamount to purchase of a new asset as required u/s.54F(1) of the Act. Ld. Commissioner of Income Tax (Appeals) thus confirmed the order of the ld. Assessing Officer. .
Now before us, the ld. Authorised Representative strongly assailing the orders of the lower authorities submitted that there was a separate staircase and separate kitchen in the first floor which was constructed by the assessee. As per the ld. Authorised Representative, it was a self contained dwelling unit, eligible for deduction u/s.54F of the Act. Relying on a letter dated 12.03.2012 issued by Area Engineer VIII, Chennai Metropolitan Water Supply and Sewerage Board, Chennai 600 040, ld. Authorised Representative submitted that existence of two dwelling units stood substantiated.
Further, as per the ld. Authorised Representative, Chennai Corporation had revised its property tax assessment indicating the new building unit put up by the assessee.
Per contra, ld. DR strongly supporting the order of the ld. Commissioner of Income Tax (Appeals) submitted that by virtue of the judgment of Hon’ble Jurisdictional High Court in the case of V.
Pradeep Kumar, (supra) claim of the assessee could not be allowed.
We have considered the rival contentions and perused the orders of the authorities below. Claim of the assessee is that she had put up a new dwelling unit on the first floor of her existing residential house and the cost incurred for constructing such new dwelling unit was eligible for deduction u/s.54F of the Act. As against this, contention of the ld. Departmental Representative is that the construction was only an extension of the existing building and there was no new dwelling unit or residential house. On a question from the Bench, ld. Counsel for the assessee submitted that there was separate staircase for the construction done in the first floor. Letter dated 12.03.2012 issued by Area Engineer, VIII, CMWSS Board to the assessee is reproduced hereunder:-
Lr. No.CMWSSB/AreaVIII/Depot 95/un paid amount /2012 Dated 12.3.2012 Sir, Sub: CMWSSB- Area VIII- Depot 95- Premises No.1022 Street Name 6th Avenue, CMC No.05/064/6197100. Notice for payment due to CMWSSB Board – Reg.
Ref: Site inspection by Depot Engineer 95 on 12.03.2012. 1. On inspection of your premises it is noticed that (a) You have put up additional construction in your premises. (b) Your building is not assessed after paying the Advance tax. (c) You have made change of category in your building (d) You have to pay unpaid/underpaid infrastructure development charges. 2. On account of the above, you are required to remit the following charges to CMWSSB Board.
Sl. Details No. of Rate per Amount dwelling (₹) ₹ No equivalent dwellings 1 Sewer connection 2 Nos. 7500 15000 charges 2 Water connection 2 Nos. 7500 15000 charges 3 Advance Tax (No. of half years) 4 Meter testing charges 5 Other charges, if any Total connection charges 30,000 The number of dwelling units is mentioned as two, both for sewage connection as well as for water connection. No doubt, ld. Assessing Officer has questioned the authenticity of the above letter, for want of seal and signature. However, in our opinion, the letter above produced could not have been disbelieved since it was issued on a standardized format and carried specific reference number with factum of a site inspection done by the Depot Engineer. In any case it is not disputed by the lower authorities that the construction in the first floor had a separate kitchen in it. Separate water connection, separate sewage connection and existence of a kitchen clearly in our opinion indicate that what was constructed by the assessee in the first floor was an independent dwelling unit. We also find that there were separate EB meters for the two units and EB cards evidencing this has been placed at paper book page 9 to 12. Assessee had also placed on record photos of separate EB meters. In such circumstances, we are of the opinion that assessee’s case that it had constructed new residential house in the upper floor of its existing residence is on a strong wicket.
Coming to the judgment of Hon’ble Jurisdictional High Court in the case of V. Pradeep Kumar (supra), their lordships held that burden was on the assessee to prove construction of a new residential house. In the said case, there was no tangible material to form a belief that a residential house was constructed. There was only an extension of an existing building by 382 Sq.ft. that too after demolishing an existing ACC roofed outhouse. In our opinion, facts in the said case were entirely different that what are available before us.
Here the assessee had constructed n independent dwelling unit in the floor. In our opinion, assessee was eligible to claim deduction u/s.54F of the Act on the cost of such new dwelling unit. Orders of the lower authorities are set aside. Ld. Assessing Officer is directed to give the deduction sought by the assessee u/s.54F of the Act.
In the result, the appeal of the assessee is allowed.
Order pronounced on Monday, the 18th day of June, 2018, at Chennai.