ACIT, BANGALORE vs. SHRI. PRASHANTH PRAKASH, BANGALORE

Per N.V. Vasudevan, Judicial Member

ITA No.864/B/14 is an appeal by the Revenue against the order dated 28.3.2014 of the CIT(Appeals), LTU, Bangalore relating to

assessment year 2009-10. The assessee has filed the Cross Objection

against the very same order of the CIT(Appeals).

to the order of CIT(Appeals) whereby the CIT(A) allowed the claim of

assessee for deduction u/s. 54F of the Income Tax Act, 1961 (Act).

is Assessment year 2009-10. For the Assessment Year 2009-10 the return of income was filed by the assessee on 30.09.2009 declaring a total

income of Rs.2,09,08,576. The case was selected for scrutiny and

assessment was completed U/s. 143(3) of the Act. Following additions were made to the returned income:

Returned Income 2,09,08,576

Add : Disallowance of Deduction U/s. 54F 49,27,996 Disallowance of Interest Paid in Computing Long Term Capital Gain 7,82,394 ----------------- Assessed Income 2,66,18,966 -----------------

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returned gross Long Term Capital Gain of Rs.1,65,57,000 on sale of shares. This gain arose on account of sale of shares of Musigma Inc.,

consideration for which was received on 04.09.2008. Out of the above gain

a sum of Rs.49,27,996 was claimed as deduction u/s. 54F on account of investment in residential property. On 21.11.2006, the assessee had

entered into two agreements with M/s. Total Environment Building Systems Private Limited as follows:-

a) Land agreement for purchase of land at Hoodi Village for a consideration of Rs.79,63, 872/-. b) Construction agreement for construction of residential house for a consideration of Rs.45, 14,712.

Against the above agreements, during the Financial Year 2008-09, following payments were made by the assessee.

Rs . 08.06.2008 : 56,70,000 03.11.2008 : 16,97,333 12.11 .2008 : 12,00,000 -------------- 85,67,333 -------------- Proportionate deduction of Rs. 49,27,996/- was claimed u/s. 54F of the Act.

54F has been disallowed on fo1lowing grounds :-

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a) Construction agreement was entered into by the assessee on 21.11.06 which is beyond one year of the receipt of sale consideration for the sale of shares. b) For buying and selling of immovable property, provisions of Registration Act, 1908 have to be adhered to. The assessee has registered the purchase on 02.05.2011 and possession of the property was taken in May 2011. c) No sums have been deposited by the appellant under the capital gain account scheme. d) Construction of the residential house commenced in November 2006. e) Residential House has been purchased in May 2011, beyond the limitation period of 2 years which ends on September 2010.

allow the claim of the assessee for deduction u/s. 54F of the Act,

observing as follows:-

“9.5 I have gone through the appellant’s submission and the judicial decisions relied upon. The agreement with the builder company dt. 21.11.2006 is clearly described as a “construction agreement” and the impugned residential property has been given possession by May 2011. Only where the investment in a residential house, for the purposes of deduction u/s. 54F, is in the form of “purchase” and the investment precedes the transfer of capital assets does the statute prescribe that such purchase should have been done within one year prior to the date of transfer of capital asset. Where the investment is by way of construction, this requirement is not mentioned in section 54F nor is anything prescribed in the provisions about the date of commencement of constructions. This has also been endorsed by the Hon’ble Karnataka High Court in the case of CIT vs J. R Subramanya Bhat (1987) 165 ITR 571. The other judicial decisions cited in the context of requirement of registration of transfer deeds support the appellant’s grounds. On consideration of the facts and the applicable judicial precedents, therefore, it is reasonably concluded that the appellant’s contentions arc correct. The AO is directed to allow the deduction u/s 54F. These grounds, therefore, succeed.”

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the present appeal before the Tribunal. The grounds of appeal raised by the Revenue read as follows:-

“2. The ld. CIT(A) ought to have appreciated that the assessee had failed to fulfil the requisite conditions stipulated u/s. 54F for claiming deduction under the said section. 3. The ld. CIT(A) erred in directing the AO to allow the deduction u/s. 54F when there is no explicit provision regarding investment in construction of the property for the purpose of claim of deduction under the said section in the statute. 4. The ld. CIT(A) had erred in considering the agreement for ‘construction of building’ which had not even been registered for reckoning the period prerequisite for claim of deduction u/s. 54F.”

“54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say, — (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45:

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Provided that nothing contained in this sub-section shall apply where— (a) the assessee,— (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property".

the grounds raised by the Revenue in the appeal would show that there is

no merit in the grounds raised by the Revenue in its appeal. Section 54F(1) lays down that any capital gain arising from transfer of long term

capital asset, not being a residential house, will be allowed exemption, if the assessee has after the date on which the transfer took place, within a

period of three years after that date, constructed residential house, the assessee will be entitled to claim deduction, even after the capital gain is

invested in construction of a residential house. It cannot be disputed by the

Revenue that the payment made by the assessee to the builder is for the purpose of construction of a residential house. It is pertinent to mention

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that there is no requirement regarding registration and valid title, as a

condition for availing exemption u/s. 54F(1). The purport of the section is investment in construction of a property and the fact that provisions of

section 54F(1) does not use that expression will not mean money spent for

construction of residential property will not be eligible for deduction u/s. 54F of the Act. It is therefore clear that none of the grounds raised by the

Revenue in the grounds of appeal has any merit and accordingly the appeal by the Revenue is dismissed.

for deduction u/s.54F of the Act and our observations on those reasons are as follows:-

(a) The construction agreement with M/s. Total Environment Building

Systems Pvt. Ltd. was dated 2l November, 2006. According to the AO, the Assessee received Rs.1,65,75,000 on sale of shares on 4th September,

2008. Section 54F stipulates that the new asset that is the residential house should be purchased within the period of one year before or two

years after the date on which the transfer took place. According to the AO

therefore the Assessee has not purchased within the stipulated time as it is only a contract for construction. In our view this conclusion is

unsustainable. Sec.54F gives exemption for purchase as well as for construction. If it is a case of purchase the full value of consideration can

be invested 1 year before transfer or 2 years after the transfer of the capital

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asset giving raise to long term capital gains. This is clear from the

expression used in Sec.54F of the Act, which reads thus:

“within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset),”.

(b) According to the AO purchase or sale of immovable property will be

complete only on due registration under the provisions of the Registration

Act, 1908. According to the AO the registration of the property in the name of the Assessee happened only on 2nd May. 2011 and the possession of

the property was given to you only in May, 2011. The AO in this regard relied on a letter dated 07-05-2011 by M/s Total Environment Building

Systems Pvt Ltd in response to notice u/s.133(6) issued by him. This

objection in our view is also unsustainable because the Assessee claims exemption for investing consideration received on transfer by constructing

a house. For construction of a house there is no requirement of registration under the Registration Act, 1908.

(c) According to section 54F(2) the amount of capital gain which is not

appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset

took place, or which is not utilized by him for the purchase or construction

of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such

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deposit being made in any case not later than the due date applicable in

the case of the assessee for furnishing the return of income under section (1) of section 139] in an account in any such bank or institution as may he

specified in and utilized in accordance with, any scheme which the Central

Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit. According

to the AO the Assessee failed to fulfill the above required condition, making the Assessee ineligible to claim deduction under section 54F. This

objection in our view is also unsustainable. The requirement of the section

in the case of utilization of capital gain for construction of house is to deposit the unutilized capital gain in capital gains account before the due

date for filing return u/s.139 of the Act. This is clear from the language of section 54F(4) which uses the following expression.

“capital gain which is not appropriated by the assessee towards… the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilized by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139”

The Hon’ble Karnataka High Court judgment in the case of Fatima Bai v.

ITO, [2009] 32 DTR 243 (Kar). In the aforesaid case, the facts were that the capital gains were invested on or before the due date specified u/s.

139(4) of the Act, but the unutilized capital gain had not been deposited in

the specified bank account on or before the due date prescribed u/s. 139(1)

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of the Act. On the above facts, the Hon’ble Karnataka High Court held as

follows:-

“The s. 54(1) declares that when the assessee sells any long- term capital asset, the assessee should purchase the building within one year before the transfer or within two years after the transfer by investing capital gains. In which event the assessee will not be liable for capital gain tax. Section 54(2) declares that within one year from the date of transfer if the capital gain is not invested in purchase of building, he should deposit the amount in the Capital Gain Account Scheme or else the assessee should invest the capital gains before filing of return within the permitted period under s. 139. In which event, the assessee will not be liable to pay capital gain tax. The s. 139(4) declares that the assessee should file returns within the time prescribed, if he fails to file returns, he may file returns for any previous year at any time before expiry of one year from the end of relevant assessment year. In the instant case, the due date for filing of return is 30th July, 1988. Under s. 139(4) the assessee was entitled to file return in the extended time, which is within 31st March, 1990. The extended due date under s. 139(4) would be 31st March, 1990. The assessee did not file the return within the extended due date, but filed the return on 27th Feb., 2000. However, the assessee had utilised the entire capital gains by purchase of house property within the stipulated period of s. 54(2) i.e., before the extended due date for return under s. 139. The assessee technically may have defaulted in not filing the return under s. 139(4). But, however, utilised the capital gains for purchase of property before the extended due date under s. 139(4). The contention of the Revenue that the deposit in the scheme should have been made before the initial due date and not the extended due date is an untenable contention. The Gauhati High Court in CIT vs. Rajesh Kumar Jalan (2006) 206 CTR (Gau) 361 : (2006) 286 ITR 274 (Gau) has taken a similar view that the time-limit for deposit under the scheme or utilisation can be made before the due date for filing of returns under s. 139 (4).

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For the reasons and discussions made above we answer the substantial question of law in favour of the assessee. The appeal is allowed.”

In the present case the capital gain was utilized by the Assessee on Rs .

08.06.2008 : 56,70,000 03.11.2008 : 16,97,333 12.11 .2008 : 12,00,000 -------------- 85,67,333 --------------

The above dates are well within the due date for filing return u/s.139 of the Act, for AY 09-10. The objection of the AO in this regard is therefore

without any merit.

(d) According to the AO, the information furnished by M/s. Total Environment Building System Pvt. Ltd. u/s 133(6), showed that the

registration of the said property was made only in May 2011 as evidenced

by the sale deed dt. 2nd May, 2011. According to the AO, u/s 54F(4) deduction is allowable only has within a period of three years after receipt

of full value of consideration on transfer of capital asset giving raise to long term capital gain constructed a residential house, it is only then the cost of

the new asset would be allowed as deduction in computing the capital gain.

Since the assessee’s case the construction commenced in November 2006, the AO held that the requirements of Sec.54F are not complied with

by the Assessee. In our view, this objection is also without any merit. The Assessee has utilized the consideration received on transfer on which

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exemption is claimed u/s.54F in construction of the property. The

requirement of the section is that the capital gain should be invested in construction. The investment should be within 3 years from the date of

transfer of the capital asset. There is no requirement that the construction

agreement should also be within the period set out in Sec.54F(4) of the Act. The Hon’ble Karnataka High Court, in the decision rendered in the case of

Sambandam Udaykumar 251 CTR 317, had taken a view that under the provisions of section 54F of the Act, the condition precedent was that the

capital gain realized from sale of capital asset should have been parted by

the assessee and invested in constructing a residential house. If the money is invested in constructing the residential house, merely because

the construction was not complete in all respects and was not in a condition to be occupied within the stipulated period, that cannot be a ground for

rejecting the benefit of deduction u/s. 54F to the assessee. The Hon’ble Court observed that the essence of the provisions of section 54F is whether

the assessee who received the capital gain has invested in the house.

Once if it is demonstrated that the consideration received on transfer has been invested in construction of the residential house, then though the

construction is not complete in all respects and as required under law, the assessee should be given the benefit of section 54F. A reading of the

aforesaid decision of the Hon’ble Karnataka High Court would show that

there is no particular stage of completion of construction that is contemplated. It is not in dispute that the later the construction was

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completed and has occupied the residential house. In such circumstances,

we are of the view that no fault can be found with the order of the CIT(Appeals) allowing benefit of deduction u/s. 54F of the Act to the

assessee.

CO 86/Bang/2015

“2. On the facts and circumstances of the case and the law applicable, the interest on borrowed funds utilized for acquisition of property constituted cost of acquisition and same should have been allowed as such while computing the Long Term Capital Gain on sale of property.”

for consideration are as follows. One, M/s. Concorde Housing Corporation (hereinafter referred to as “Concorde Housing”), a developer of residential

layout of sites as well as builder, developed housing sites known as Silicon

Valley in Sy. Nos. 85, 164, 165 & 166 of Doddathogur Village, Begur Hobli, Bangalore South Taluk. The assessee purchased a house site bearing

No.197. Concorde Housing also agreed to convey the land and construct a Villa for the assessee. One of its sister concerns, Concorde Shelters Pvt.

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Ltd. (hereinafter referred to “Concorde Shelters”) agreed to construct a villa

on the site sold by Concorde Housing to the assessee. By a registered sale deed dated 21.10.2004, the site was conveyed to the assessee for a

sale consideration of Rs.9 lakhs. The cost of construction of Villa was

Rs.24,39,526. The assessee had to pay the cost of construction of Villa in instalments as set out in the agreement dated 4.10.2004 between the

assessee and Concorde Shelters. Ultimately construction of Villa got completed in the year 2008 only. The assessee agreed to sell the land as

well as Villa under an agreement for sale dated 5.5.2008 to one Shakti

Mohan for a consideration of Rs.58,96,006. The land as well as Villa was ultimately sold to Shakti Mohan under a registered sale deed dated

10.10.2008. The sale consideration mentioned in this sale deed is a sum of Rs.21 lakhs. The Revenue has not chosen to take cognizance of the

sale consideration as reflected in the sale deed, but has proceeded only on the basis of sale consideration as set out in the agreement dated 5.5.2008.

which the land as well as Villa was agreed to be sold by the assessee to Shakti Mohan was a transfer and capital gain on such transfer was

chargeable to tax in the A.Y. 2009-10. The assessee computed capital

gain by bifurcating the capital gain on sale of land and capital gain on sale of Villa. According to assessee, the land was purchased under sale deed

dated 21.10.2004 and was sold after construction of Villa thereon on 5.5.2008. The land, according to assessee, was held for a period of more

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than 36 months and therefore transfer of land would give rise to long term

capital gain.

2008 and same was sold on 5.5.2008 within a short period and therefore

sale of Villa would give rise to short term capital gain. The computation of

long term and short term capital gains made by the assessee was as

follows:-

Land Rs. . Sale consideration from Concorde property land 36,81,926 Less: Indexed cost of acquisition 9,90,920 = Rs.12,01,491 480X 582 Interest paid on borrowing: Rs. 7,82,394 19,83,885 16,98,042 Building Concorde property building 22,14,080 Less: Cost of construction 22,14,080

assessee. The only objection of the AO was with regard to claim of

assessee for deduction of a sum of Rs.7,82,394 which was interest paid on

borrowing, which was claimed as deduction while computing long term

capital gain on sale of land. According to AO, Section 48 provides the

mode of computation for charging capital gain to tax. Income chargeable

under the head capital gain shall be computed by deducting from the full

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value of the consideration received or accruing as a result of the transfer of

the capital asset (i) expenditure incurred wholly and exclusively in connection with such transfer, and (ii) cost of acquisition of asset and the

cost of any improvement thereto. In view of the above provision, he was of

the view that the sum of Rs.7,82,394 claimed as deduction cannot be allowed as it is neither cost of acquisition or improvement to the land nor is

it wholly and exclusively incurred in connection with the transfer. The AO therefore added the said amount to capital gains and brought to tax.

the CIT(Appeals). The CIT(Appeals) had to address the question as to whether the interest paid on loans borrowed for acquiring the property

which was not allowed as a deduction while computing capital gain, can be allowed as a deduction? The CIT(A) without going into this question, went

into the question of correctness of the assessee having bifurcated the

capital gain on sale of land and Villa into long term and short term capital gains. According to CIT(A), the transaction for purchase of land and

building was a single integrated transaction and therefore AO ought not to have accepted the bifurcation of capital gain on sale of land and building

into long term and short term capital gains. The CIT(A) was of the view

that consequent benefit and indexation while computing long term capital gain ought not to have been allowed to the assessee. The CIT(A) in this

regard referred to agreement dated 4.10.2004 to construct the Villa on the land proposed to be purchased by the assessee from Concorde Housing

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and came to the conclusion that sale of land and construction of Villa was a

single transaction. When the factum of land having already been registered in the name of assessee consequent to sale deed dated

21.10.2004 and the recital in the sale deed that assessee was given

possession of the property by Concorde Housing was brought to the notice of the CIT(A), he observed that such possession was only a paper transfer.

The CIT(A) also referred to the fact that the assessee was making composite payments for the land & Villa and therefore the transaction with

Concorde Housing and Concorde Shelters had to be treated by the

assessee as one holistic transaction routed through a common ledger. The assessee placed reliance on the decision of Hon’ble Andhra Pradesh High

court in CGT v. Ethirajalu, 93 ITR 366 and the jurisdictional ITAT decision in T.S. Krishnamurthy v. DCIT, ITA No.569/Bang/2012 dated 14.2.14,

wherein the concept of “possession” and the expression “held” were held to be words not having the same meaning.

follows:-

“8.3 For purposes of considering assessibility under the head of “Capital Gains”, the interpretation of the word “held” is much wider than notions of ‘ownership’ and the Hon’ble Supreme Court in the case of CIT vs Podar Cement Pvt Ltd. (1997) 226 ITR 625 held that the owner is the one who effectively controls the property and not merely the one who holds title to the same (emphasis added). In the appellant’s case, in spite of the appearance of the sale deed having been registered in respect of ‘land’ the effective possession and control of this capital asset remained with the Concorde Group, and its possession along

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with the constructed villa, was handed over to the appellant in FY 2008-09 shortly before the entire property was sold to Sakthi Mohan. The issue in dispute here is not whether the sale consideration received from Sakthi Mohan could have been bifurcated into consideration for ‘land’ and ‘building’ with separate treatment of each. The issue, essentially, is the period of holding in respect of the component of ‘land’ comprised in the property sold to Sakthi Mohan. Since the period of holding of both the land and the constructed villa thereon was less than 36 months as discussed above, the proceeds of the transfer are to be considered for computation of Short Terms Capital Gains only.”

gain as short term capital gain by adopting the full value of consideration on

transfer at Rs.58,96,006.

ITA No.573/Bang/2012 appeal before the Tribunal. This Tribunal by an order dated 20.3.2015 has held as under:-

“15. “We have given a very careful consideration to the rival submissions. From a perusal of agreement dated 4.10.2004 between the assessee and Concorde Shelters, it is clear that Concorde Shelters agreed to construct a Villa on the plot sold by Concorde Housing. Clause 5 of the said agreement is very material and it reads as follows:- “5. The first party hereby irrevocably permits and authorizes the second party to hold the schedule property to develop the same by constructing a residential villa for him by obtaining the sanctioned plan. The first party shall not revoke the permission so granted, till completion of the entire villa with the plan and the specifications agreed to in Annexure-I and II as the agency created herein is one coupled with interest in so far as the second party constructing a residential villa in the schedule property.”

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(iii) agricultural land in India, etc. The key words of the definitions of capital asset found in s. 2(14) are the property of any kind and the term comprehends and includes within itself any interest in the property. It may be movable or immovable property or any interest thereon. The term 'short-term capital asset' is defined in s. 2(42A) of the Act as under : "Short-term capital asset" means a capital asset held by an assessee for not more than sixty months immediately preceding the date of transfer". During the relevant period, s. 2(42A) of the Act prescribed the period of thirty six months. The emphasis that is given in s. 2(42A) is that the capital assets should be held by an assessee for a period not more than 36 months immediately preceding the date for the asset to be termed as a short-term capital assets. Here also, the emphasis is given on the expression held by an assessee. The mode of computation of the capital gain is provided under s. 48 of the Act which reads as under : "The income chargeable under the head 'Capital gains' shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :- (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the capital asset and the cost of any improvement thereto". Sec. 80T of the Act grants deduction in respect of the long-term capital gains in the case of an assessee other than companies where the gross total income of an assessee not being a company includes any income chargeable under the head "Capital gains" relating to capital assets other than short-term capital assets. In the case of buildings or land, separate deduction is provided under s. 80J(b) of the Act. It is relevant to note when s. 80T grants deduction, it uses the expression both the buildings or land or any rights in building or lands. The question that arises for consideration is whether it is possible to bifurcate the capital gains that arises on the

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sale of the land and building, when it is sold as one unit. The decision of this Court in Park View Enterprises (cited supra) makes it clear that the Indian law recognises dual ownership of the land and building. The Privy Council in Narayan Das vs. Jatindranath AIR 1923 PC 135 has also taken the view that having regard to the law in India it is possible to have separation of ownership of the building from the ownership of the land. This view of the Privy Council was approved by the Supreme Court in Bishan Das vs. State of Punjab . In so far as the definition of capital asset is concerned, as already seen, the definition of capital asset includes property of any kind and the land held by the assessee is a capital asset and the building held by the assessee is also a capital asset and it is possible to bifurcate the capital gain arising with reference to the sale of the land and building even if they are sold as one unit, if the lands are held by the assessee for a period more than that prescribed under s. 2(42A) of the Act. It is not possible to say that by construction of the building, that the land which was a long-term capital asset, has ceased to be a long-term capital asset. The land is an independent and an identifiable capital asset, and it continues to remain as an identifiable capital asset even after construction of building and at the time of the sale of the house. Since the land was held by the assessee for a period exceeding 36 months, the land cannot be regarded as a short-term capital asset only by virtue of the construction of building thereon. Hence we are unable to accept the contentions of learned counsel for the Revenue that it is not possible to bifurcate the capital asset into two. We are of the opinion that the Tribunal has come to a correct conclusion that it is possible to work out capital gain with reference to sale of building and land separately. The decision of the Supreme Court in State of Kerala vs. P. P. Hassan Koya (supra) relied on by the learned counsel for the Revenue has no application to the facts of this case as it deals with the case where compensation was payable in respect of land and building and in that situation, the Supreme Court has held that both the land and building should be valued as one unit and hence, the decision rendered by the Supreme Court with reference to determination of compensation under the Land Acquisition Act has no application, particularly in the light of s. 80T of the Act. It is impermissible for the learned counsel to rely on a decision for a point which was not decided in that case. In CIT vs. Vimal Chand

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Golecha (supra), the Rajasthan High Court held that even if the land and building are sold as one unit for a consolidated price, the assessee is entitled to bifurcate the same and the capital gain arising from the sale of the land had to be treated as long-term capital gains. We are in agreement with the view expressed by the Rajasthan High Court in the above case. We are of the view that the land can be regarded as capital asset as per s. 2(14) of the Act and in accordance with the scheme of the Act, land would be considered as a separate capital asset, even if a building is constructed thereon. We are also of the opinion that where the land having been held for more than a prescribed period, the gains arising from the sale of the land could be considered as a long-term capital gains, though the building thereon was a new construction held for a period less than 36 months. Since the Tribunal has come to the correct conclusion by applying the well settled principles of law, we are of the opinion that no referable question of law arises out of the order of the Tribunal. Therefore, we reject the tax case petition. No costs.” 17. We are therefore of the view that bifurcation of capital gain as made by the assessee should be accepted. We, however, desist from making any observations with regard to claim of assessee for deduction of interest paid on borrowings while computing long term capital gain on sale of land, as the same is not subject matter of appeal before us. With these observations, the appeal of the assessee is allowed.”

assessee did not raise the issue with regard to deduction of Rs.7,82,394 which was interest paid on borrowing claimed as deduction while

computing long term capital gain on sale of land. This sum of Rs.7,82,394 was interest paid on funds that the assessee borrowed to acquire the land.

The AO did not allow the said claim for the reason that it could neither be considered as expenditure incurred in connection with transfer nor cost of

acquisition nor cost of any improvement thereon. The assessee

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challenged this part of the order of AO before the CIT(Appeals). The CIT(Appeals) did not adjudicate this issue at all. In the Cross Objection, the submission of the assessee is that the CIT(Appeals) failed to adjudicate this issue.

Pronounced in the open court on this 11th day of June, 2015.

Sd/- Sd/- ( ABRAHAM P. GEORGE ) ( N.V. VASUDEVAN ) Accountant Member Judicial Member Bangalore, Dated, the 11th June, 2015. /D S/

ITA No. 864/Bang/2014 & CO 86/Bang/2015 Page 24 of 24

Copy to: 1. Appellant 2. Respondents 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file

By order

Assistant Registrar / Senior Private Secretary ITAT, Bangalore.