S.SAILAKSHMI,CHENNAI vs. ACIT, CHENNAI

आदेश / O R D E R

PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER

The assessee in this appeal is aggrieved on an addition

made by the ld. Assessing Officer under the head ‘’Long Term Capital

Gains’’ and denying it exemption claimed u/s. 54 of the Income Tax

Act, 1961 (in short ‘’the Act’’).

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days. Assessee has filed a condonation petition. Reasons shown for

the delay seem to be justified. Ld. Departmental Representative did

not raise any serious objection. Delay is condoned. Appeal is

admitted.

impugned assessment year disclosing an income of �27,03,870/-.

Through a conveyance deed executed on 06.04.2009, assessee had

sold a house property at No.26, Thanikachalam Road, T. Nagar,

Chennai-17. Assessee had claimed exemption u/s. 54 of the Act on

the gains arising out of the above sale. Ld. Assessing Officer was of

the opinion that assessee could not be allowed exemption u/s. 54 of

the Act, since the new house on which such exemption was claimed

was acquired more than two years from the date of sale, and sought

explanation from the assessee. Reply of the assessee was that she

had received sums aggregating to �25,07,000/-, on the sale of the

property during previous years ending 31.03.2000 and 31.03.2003

and possession of the property was handed over to the buyer in

financial year 2006-2007. According to the assessee, sale price was

fully received in advance in earlier years and possession was also

handed over in financial year 2006-07. Thus according to her long

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term capital gains could be considered only for assessment year 2007-

2008. Further, as per the assessee the guideline value of �77,00,000/-

could not be substituted for the actual consideration received by her

since the transfer stood complete in financial year 2006-07.

Ld. Assessing Officer was however not impressed by the 4.

above reply. According to him, in the sale deed dated 06.04.2009, it

was clearly mentioned that vacant possession of the property was

handed over to the purchaser only on that day. According to him,

registration of the sale deed as well as handing over of the property

happened only in financial year 2009-2010. Ld. Assessing Officer also

held that assessee was not entitled for exemption claimed u/s. 54 of

the Act since the investment in new residential house was done more

than two years back. He substituted the sale consideration

mentioned in the sale deed with the value fixed for stamp duty

purposes by the competent authority. An addition of �77,00,000/- was

made under the head long term capital gains.

Commissioner of Income Tax (Appeals). Contention of the assessee

was that transfer in terms of Sec. 2(47) (v) of the Act was completed

in financial year 2006-2007. As per the assessee, she had constructed

a residential house in Neelankarai with the proceeds of the sale, which

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was received in financial years ended 31.03.2000 and 31.03.2003.

Therefore, according to her, she was entitled for exemption u/s. 54 of

the Act. Argument of the assessee was that delivery of vacant

possession mentioned in the registered document only confirmed the

legality of the possession with the buyer. Specific contentions raised

by the assessee before ld. Commissioner of Income Tax (Appeals)

were as under:-

‘’2.She had opted to sell this flat to her family friends by name Shri K Sridhar Reddy and Sri K. Narahai Reddy, constituting their HUF and located in Nellore. The parties agreed to the sale consideration of Rs.25,OO,OOO/- and the appellant received it in advance, as under.

₹ Year ended From buyer 31.03.2009 Account 20,07,000/- 31.03.2009 HUF 5,00,000/- ---------------- 25,07,000 -----------------

3.The buyer, Mr. Sridhar Reddy, fell sick and was in a serious condition for a long time. Therefore, the sale could not take place even though it was agreed between the appellant and the purchaser as earlier in the financial year 1999-2000 when the advance was received. After prolonged illness, he passed away on 30.05.2005 (fin. year 2005-06), leaving behind his wife and children. Since Sri K. Sridhar Reddy passed away, Mr. K. Narahari Reddy took over :the possession of the flat in financial year 2006-07 and requested the appellant to take care of its maintenance, since he was located in Andhra Pradesh. The copy of his letter dt.28.1.1.2006 is enclosed (page :10).

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4.They did not have enough even to register the property as the family had to spend on medical treatment of Mr. K. Sridhar Reddy. Therefore, it took a long time for the buyer's family to arrange for registration. As they closely known to the appellant and the agreement was already reached in the fin. year 1999-2000, for the sale Price at Rs.25 lakhs, they did not want to go back on their agreement and the Sale Deed was registered on 6.4.2009, relevant to the assessment year 2010-2011 in the name of deceased Mr. K. Sridhar Reddy’s Daughter, Ms. K. Keerthi on the consideration of ₹25 lakhs received by the appellant’’.

Assessee also filed a affidavit of Shri. K. Narahari Reddy in support of

the above averments. Assessee also submitted that expenditure

incurred by it for constructing Neelankari property for which claim u/s.

54 of the Act was preferred, included the following amounts:-

Year ended � 31.03.2002 Land Cost 28,58,680 31.03.2002 Construction expenses 3,00,000 --------------- 31,58,680

31.03.2003 Construction expenses 29,93,077 31.03.2004 Construction expenses 18,29,110 31.03.2007 Construction expenses 1,67,344

Total 81,48,211

Thus, as per assessee (i) the property was sold at an agreed price of

�25,07,000/-, (ii) the agreement was reached as early as previous

year relevant to the assessment year 2000-01 and possession handed

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over in financial year 2006-07. (iii) the entire sale proceeds were

invested in the construction of another residential property within the

time limit (iv) the long term capital gains arose only in assessment

year 2007-08 and (v) Such gains were exempt u/s. 54 of the Act.

Assessee also placed reliance on the decision of Delhi Bench of the

Tribunal in the case of ITO vs. Modipan Ltd (ITA No.2049/Del/2009,

dated 9.11.2005).

However, ld. Commissioner of Income Tax (Appeals) was not 6.

impressed by the above arguments. According to him, delivery of

possession, mentioned in registered sale deed could not be ignored

and this was rightly relied upon by the ld. Assessing Officer. Further,

as per ld. Commissioner of Income Tax (Appeals) Shri. K. Narahari

Reddy in the sworn affidavit had mentioned that assessee was

continuing to take care of the property and this by necessary

implication meant that possession was with the assessee only. Ld.

Commissioner of Income Tax (Appeals) also noted that sale giving rise

to the capital gains having taken place on 06.04.2009, and

construction of property at Neelankarai on which deduction under

section 54 of the Act was claimed having been carried out between

31.03.2003 to 31.03.2007, there was a gap of more than two years,

disentitling the assessee from making such a claim. Thus, according to

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him, assessee was rightly denied deduction u/s. 54 of the Act also.

He thus, upheld the order of the ld. Assessing Officer.

assailing the orders of the lower authorities submitted that the entire

consideration for sale of the property was received by the assessee

between 2000 to 2003. According to him, buyer Shri. K. Sridhar Reddy

had fallen sick and this was why the registration got delayed.

Contention of the ld. Authorised Representative was that assessee had

handed over possession of the property during financial year ended

31.03.2007. The transfer, according to him was complete in the said

year. Thus, according to him, assessee was eligible for exemption u/s.

54 of the Act also. Reliance was placed on the judgment of

jurisdictional High Court in the case of D. Kasturi vs. CIT, 323 ITR 40

that of Hon’ble Karnataka High Court in the case of CIT vs. Dr. T.K.

Dayalu, 60 DTR 403 and that of Amritsar Bench of this Tribunal in the

case of ACIT vs. Janak Raj Chauhan, (2006) 102 TTJ 297.

supported the orders of the authorities below.

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orders of the authorities below. The registered deed of absolute sale

entered by the assessee with Smt. K. Keerthi, surplus from which hs

been subjected to capital gains tax assessment, is placed before us

as paper book pages 20 to 34. The preamble of this deed is

reproduced hereunder:-

‘’This deed of absolute sale is executed at Chennai this the 6th day of April, 2009 by Mrs. Sailakshmi, wife of Mr. C.S. Sanjay and Daughter of Mr. K.P. Sankaran, Hindu, aged about 39 years, now residing at No.5/18, Blue Beach Road, Nellangarai, Chennai 600 041, herein after called the Vendor which term wherever the context so requires or permits shall mean and include herself, her legal heirs, legal representatives, executors, administrators and assigns of the One Part (IT PAN AAOPS 9257P)

WHEREAS the Vendor herein. represents that she as originally the sole and absolute owner of the house. ground and premises. situated at Plot No.108, Old No.21. New No.29 Sugna Vilas", Thanikachalam Road; T.Nagar Chennai -17,compnsed in Old T.S. 6406, as per Patta T.S. No.6405/2 of Block No.139 of Theyagarayanagar Nagar Village, Mambalam Guindy Taluk, Chennai Dist, measuring an extent of 1 ground 1413 sq.ft or thereabouts purchased from Mr. T. Rajendra Bhagavai and Others by means of sale deed dated 11.03.1981, registered as document No.676 of 1981 on the file of the Sub Registrar, T. Nagar and

Whereas the Vendor herein had demolished the existing building thereon and constructed four apartment on the land after demolition as aforesaid, and .WHEREAS out of four apartments constructed by' her, the Vendor already sold three apartments together with proportionate undivided share. in land, after retaining - one apartment bearing No.3 in Second Floor, having a super built up area of 1753 Sq.ft., (which includes share in the common built uparea) together with its proportionate undivided share in land in extent 1569.75 Sq.ft., of the

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Residential Apartments Building; together with one number earmarked covered car parking in the Ground Floor and exclusive Private Open Terrace measuring an extent of 1100 sq.ft attached to the apartment retained by her and

Whereas the Vendor herein has decided to sell the aforesaid retained apartment No.3 in the Second Floor having a super build up area of 1753 sq. ft or thereabout (which includes share in the common built up area) together with its proportionate undivided share in land in extent 1569.75 sq.ft of the Residential Apartments Building, together with one number earmartked car parking in the Ground floor and exclusive Private Open terrace measuring an extent of 1100 sq.ft or thereabout, more fully described in the Schedule hereunder and

Whereas Vendor got the property assessed to property tax by the Chennai Corporation and the property has been assigned with New No.32/3, Old No.26/3, Thanikachalam Road, T. Nagar, Chennai 600 017, and thus the Vendor has been paying Property tax, water charges, and sewer tax, association, subscription etc, in her own right and

Whereas the Vendor has been n absolute possession and enjoyment of the property ever since she had taken possession of the property as aforesaid and thus the Vendor is the absolute' owner of the property more fully described in the. Schedule hereunder 'and Whereas the Vendor herein has offered to sell the Schedule Property to the purchaser and represented to the purchaser that she is the absolute owner of the schedule property with possession and enjoyment of the same and that the Schedule property is free from all encumbrances, mortgages charges, claims, demands, liens, maintenance, court proceedings, attachments, awards, litigation, ULC proceedings and the schedule property is not the subject matter of any security etc., and believing the representation made by the Vendor to be true, the Purchaser has agreed to purchase the Schedule property for a total consideration of ₹25,00,000/- (Rupees Twenty Five Lakhs Only) without any encumbrances whatsoever and the Vendor has agreed for the same’’..

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Clause 10 of the sale deed is also very important and this is

reproduced hereunder:-

‘’10. The Vendor has this day delivered vacant possession of the Schedule Property to the Purchaser. The Vendor has also handed over the Xerox copies of the title deeds pertaining to the Schedule property to the purchaser’’.

The registered conveyance deed clearly shows that assessee was the

sole and absolute owner of the house which was sold on 06.04.2009

and she was until that date of sale in absolute possession and

enjoyment of the property. In other words, she had delivered vacant possession of the property only on 6th day of April, 2009. As against

the above, pleading of the ld. Authorised Representative is that

consideration was paid and possession handed over much earlier. In

support, assessee had filed an affidavit from one Shri. K. Narahari

Reddy. In the first place, what we find is that the purchaser of the

above property was not Shri. K. Narahari Reddy. Even otherwise an

assessee cannot be allowed to lead evidence in the nature of an

affidavit, which go against the clauses of a registered conveyance

deed. That apart, assessee could not produce any agreement for sale

that she would have entered into if her version that she had received

consideration of �25,00,000/- much earlier, was correct. So we

cannot fault the ld. Assessing Officer in computing the capital gains

considering the date of transfer as per the registered sale deed. Ld.

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Assessing Officer was also well within his rights to apply Sec. 50C of

the Act, since value fixed by the stamp authorities for the property

was �77,00,000/-.

As for the judgment of Hon’ble Jurisdictional High Court in 10.

the case of D. Kasturi (supra) and Karnataka High Court in the case of

Dr. T.K. Dayulu (supra) and the decision of another Bench of this

Tribunal in the case of Jank Raj Chauhan (supra) relied on by the ld.

Authorised Representative, in all these cases, there were written

agreements for sale which was acted upon by the concerned parties.

As against this admittedly, there was no written agreement for sale

between assessee and the buyers.

Coming to the claim u/s. 54 of the Act, admittedly 11.

construction of the house at Neelankari was completed on 31.03.2007

which was more than two years before the date of transfer. In such

circumstances, we are of the opinion that lower authorities were

justified in computing capital gains in the impugned assessment year

applying Sec. 50C of the Act and denying the claim of exemption u/s.

54 of the Act. We do not find any reason to interfere with the orders

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of the lower authorities.

Order pronounced on Thursday, the 29th day of June, 2017, at Chennai.

Sd/- Sd/- (एन.आर.एस. गणेशन)) (अ�ाहम पी. जॉज�) (N.R.S. GANESAN) (ABRAHAM P. GEORGE) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai �दनांक/Dated:29th June, 2017 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