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Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: S/SHRI N.S SAINI & PAVAN KUMAR GADALE
IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK
BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER
ITA No. 468/CTK/2014 Assessment Year :2008-09
Income Tax Officer, Ward- Vs. Gaya Santara, Plot No.63/A, 3(2), Bhubaneswar Sector-A, Zone-D, Mancheswar Industrial Estate, Bhubaneswar. PAN/GIR No.ADQPS 3243 J (Appellant) .. ( Respondent)
ITA No. 483/CTK/2014 Assessment Year :2008-09
Gaya Santara, Plot No.63/A, Vs. Income Tax Officer, Ward- Sector-A, Zone-D, 3(2), Bhubaneswar Mancheswar Industrial Estate, Bhubaneswar PAN/GIR No.ADQPS 3243 J (Appellant) .. ( Respondent)
Assessee by : Shri S.K.Agarwalla, AR Revenue by : Shri Subhendu Dutta, DR
Date of Hearing : 26/07/ 2017 Date of Pronouncement : 28 /07/ 2017
O R D E R Per N.S.Saini, AM These are cross appeals filed by the Revenue and the assessee
against the order of CIT(A)-I, Bhubaneswar, dated 23.9.2014, for the
assessment year 2008-09.
Ground No.1 in Revenue’s appeal reads as under:
2 ITA No. 468/CT K/ 2014 ITA No. 483/CT K/ 2014 Asse ssment Year :20 08- 09 “1. On the facts and in the circumstances of the case, the CIT(A) is not justified in allowing exemption u/s.54F of the Act to the assessee without considering that the assessee did not fulfil all the conditions for claiming such exemption. 3. Ground No.1 in assessee’s appeal reads as under:
“1. That, the Ld. Authorities below are wrong in interpreting the provisions of section 54F of the Act and wrong in holding the meaning assigning to word "a house" as "one house" and therefore the disallowance of exemption of capital gain u/s 54F is liable to be deleted.
Ground No.1 of the appeal of the Revenue’s appeal and Ground No.1
of the assessee’s appeal are interconnected, therefore, they are being
disposed of together for the sake of convenience.
The brief facts of the case are that the Assessing Officer observed
that the assessee had purchased Plot No.88/1189, at Pokhariput,
Bhubaneswar during April, 1988 and done some improvement on the plot
for construction of his own house. The Assessing Officer also observed that
the assessee executed an agreement dated 4.1.2008 with builder, M/s. S.B.
Realcon (P) Ltd., Bhubaneswar for construction of flats on the plot and in
exchange of the land, the assessee will get 28% of the built-up area.
Accordingly, the builder M/s. S.B.Realcon (P) Ltd., Bhubaneswar
constructed the building in the land and delivered 4 flats bearing Nos.101,
103, 104 & 304 to the assessee towards his share of 28% of the constructed
area. The assessee filed return u/s.148 of the Act, showing long term
capital gains amounting to Rs.60,18,026/- as exempt u/s.54F of the Act.
3 ITA No. 468/CT K/ 2014 ITA No. 483/CT K/ 2014 Asse ssment Year :20 08- 09 According to the Assessing Officer, out of four flats delivered to the
assessee by the builder, the Flat No.103 was rented out, Flat No.s101 &
104 were occupied by the assessee and Flat No.304 was vacant at the
relevant time. The Assessing Officer observed that the assessee has
acquired/purchased 4 independent residential flats within a period of two
years from the date of transfer of original capital assets for which the
assessee is not entitled to claim exemption u/s.54F of the Act. Accordingly,
he denied the claim of exemption u/s.54F of the Act to the assessee in
respect of all flats acquired by the assessee in exchange of land
On appeal, the CIT(A) observed that in view of the decision of ITAT
Mumbai Special Bench in the case of ITO vs. Sushila M Jhaveri, 107 ITD
327(Mum)(SB), the assessee is entitled to one residential unit as per
preference and, accordingly, directed the Assessing Officer to allow
exemption u/s.54F of the Act in respect of one Flat bearing No.101 for
which assessee has given preference.
Before us, ld A.R. of the assessee relied on the decision of Hon’ble
Karnataka High Court in the case of CIT vs. Smt. K.G.Rukminiamma, 331
ITR 211 (Kar), wherein, it was held that expression “a residential house”
used in Section 54 should be understood in a sense that the building should
be of residential nature and “a” should not be understood to indicate a
singular number, assessee was entitled to claim exemption under section
54 in respect of four residential flats acquired by her.
4 ITA No. 468/CT K/ 2014 ITA No. 483/CT K/ 2014 Asse ssment Year :20 08- 09 8. Further, he relied on the decision of Hon’ble Madras High Court in the
case of CIT vs. V.R.Karpagam, 373 ITR 127(Mad), wherein, it was held
prior to amendment of section 54F by Finance No.(2) Act, 2014 w.e.f.
1.4.2015, with regard to word “a” a residential house would include multiple
flats/residential units, thus where under the development agreement
assessee was entitled to receive certain built-up area, which got translated
into five flats, exemption u/s.54F in respect of all five flats in a multi-storey
construction would be available.
He further relied on the decision of Hon’ble A.P. High Court in the
case of CIT vs. Sayed Ali Adil, 352 ITR418(AP), wherein, it was held that
deduction under section 54 of the Act is allowable with respect to residential
house consisting of several independent units also..
On the other hand, ld D.R. relied on the order of the Assessing Officer.
We have heard the rival submissions, perused the orders of lower
authorities and materials available on record. In the instant case, the
assessee entered into an agreement with M/s. S.B.Realcon Pvt Ltd.,
Bhubaneswar for construction and sale of flats on his land situated at Plot
No.88/1189, Pokhariput, Old Town, Bhubaneswar during the financial year
2007-08. Thus, there was a deemed transfer of land within the meaning
of section 2(47) of the I.T.Act, read with section 53A of the Transfer of
Property Act during the financial year 2007-08 relevant to assessment year
2008-09. The assessee declared full value of consideration of capital asset
5 ITA No. 468/CT K/ 2014 ITA No. 483/CT K/ 2014 Asse ssment Year :20 08- 09 of Rs.70,89,600/- and deducted therefrom indexed cost of acquisition of
capital asset of Rs.2,73,003/-, Rs.6,78,571/- towards indexed cost of
improvement and Rs.1,20,000/- towards expenses on transfer of capital
asset. Accordingly, the net long term capital gain was arrived at
Rs.60,18,026/-, which was fully claimed as exempt under section 54F of
the Act. From the letter dated 21.4.2012 of the builder, it is noted by the
Assessing Officer that the builder had handed over four flats bearing
No.101,103104 and 304 to the assessee towards his share consisting of
1,826 sq.ft, 1149 sq.ft, 1455 sq.ft, and 1455 sq.ft super built up area (1306
sq.ft, 885 sq.ft. 1120 sq.ft and 1120 sq.ft) plinth area respectively. The
Assessing Officer observed that the assessee has calculated the cost of four
flats by applying Rs.1600/- per sq.ft and arrived at the cost of the
assessee’s share as under:
Flat Type Plinth Super built up Cost of the area(sq.ft) No. area(sq.ft) flat(Rs.) 103 2BR 885 1149 25,65,000/- 101 3BR 1306 1826 36,00,000/- 104 3BR 1120 1455 32,00,000/- 304 3BR 1120 1455 32,00,000/- 1,25,65,000/-
The Assessing Officer further observed that the assessee was allotted
four flats as his share which is not one residential unit but four different
independent units. According to the provisions of section 54F of the Act,
the assessee is not entitled to exemption u/s.54F of the Act because he has
acquired/purchased four independent residential units within a period of
6 ITA No. 468/CT K/ 2014 ITA No. 483/CT K/ 2014 Asse ssment Year :20 08- 09 two years from the date of transfer of the original capital asset and
therefore, he concluded that the assessee is owner of more than one
residential flat and hence, the claim of exemption u/s.54F of the Act is not
allowed.
On appeal, the CIT(A) held that the assessee was entitled to
exemption u/s.54F of the Act for one residential unit as per his preference.
The assessee has asked for exemption of capital gains in respect of flat
No.101 u/s.54F of the Act. Therefore, he directed the Assessing Officer to
allow exemption u/s.54F of the Act in respect of one flat No.101.
We find that the assessment year under appeal is Assessment year
2008-09. According to the decision of Hon’ble Karnataka High Court in the
case of Smt. K.G.Rukminiamm (supra), wherein, the assessment year
involved is 2004-05, the Hon’ble Court has held that the expression “a
residential house” used in Section 54 should be understood in a sense that
the building should be of residential nature and “a” should not be
understood to indicate a singular number. Still further, the Hon’ble Madras
High Court in the case of V.R.Karpagam (supra), wherein, the assessment
year involved is 2007-08 has held that prior to amendment of section 54F
by Finance No.(2) Act, 2014 w.e.f. 1.4.2015, with regard to word “a” a
residential house would include multiple flats/residential units, thus where
under the development agreement assessee was entitled to receive certain
built-up area, which got translated into five flats, exemption u/s.54F in
respect of all five flats in a multi-storey construction would be available. To
7 ITA No. 468/CT K/ 2014 ITA No. 483/CT K/ 2014 Asse ssment Year :20 08- 09 the same effect is the decision of Honble A.P. High Court in the case of CIT
vs. Sayed Ali Adil,(supra).
Respectfully following the above quoted decisions of various Hon’ble
High Courts, we hold that the assessee is entitled to deduction in respect
of all four flats received by him from the builder under a development
agreement entered into by the assessee with the builder. Therefore, we
set aside the orders of lower authorities and allow the ground of appeal of
the assessee and reject the ground of appeal of the revenue.
Ground No.2 of revenue’s appeal reads as under: 2. On the facts and in the circumstances of the case, the CIT(A) is not justified in reducing the market price of flats by 25% of the same determined by the AO for the purpose of calculating the long term capital gain.” 17. Ground No.2 of assessee’s appeal reads as under:
That, the Ld. Income Tax Officer legally not correct in not allowing the exemption of capital gain of' 1,19,00,411 u/s 54F and the Ld. Commissioner of Income Tax (Appeals-I), Bhubaneswar has committed an error of law in restricting the disallowance of exemption to the extent of' of" 60,59,161 and therefore the total long term capital gain are liable to be allowed as exemption u/s 54F of the Act.”
Ground No.2 of the revenue’s appeal and Ground No.2 of the
assessee’s appeal is interconnected and, therefore, they are being disposed
of together as under:
In view of our decision in Ground No.1 of the Assessee’s appeal and
Ground No.1 of Revenue’s appeal , this ground of appeal of the assessee
8 ITA No. 468/CT K/ 2014 ITA No. 483/CT K/ 2014 Asse ssment Year :20 08- 09 and revenue has become only academic in nature, hence, infructuous and
dismissed.
In the result, appeal filed by the revenue is dismissed and the appeal
filed by the assessee is partly allowed.
Order pronounced on 28 /07/2017 . Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 28 /07/2017 B.K.Parida, SPS
Copy of the Order forwarded to : 1. The Appellant : /Revenue: Income Tax Officer, Ward-3(2), Bhubaneswar 2. The Respondent/Assessee: Gaya Santara, Plot No.63/A, Sector-A, Zone-D, Mancheswar Industrial Estate, Bhubaneswar 3. The CIT(A)-1, Bhubaneswar 4. Pr.CIT-1, Bhubaneswar 5. DR, ITAT, Cuttack BY ORDER, 6. Guard file. //True Copy//
SR.PRIVATE SECRETARY ITAT, Cuttack