IT : For allowing deduction under section 54/54F, extent of land appurtenant to residential house has to be determined with regard to locality where residential house is situated, social status and profession of individual and other factors for proper and convenient enjoyment of residential house
■■■
[2013] 37 taxmann.com 221 (Cochin - Trib.)
IN THE ITAT COCHIN BENCH
Tony J. Pulikal
v.
Deputy Commissioner of Income-tax, Central Circle -1, Kochi*
N.R.S. GANESAN, JUDICIAL MEMBER
AND B.R. BASKARAN, ACCOUNTANT MEMBER
AND B.R. BASKARAN, ACCOUNTANT MEMBER
IT APPEAL NOS. 154, 166, 249 & 270 (COCH.) OF 2012
[ASSESSMENT YEAR 2007-08]
[ASSESSMENT YEAR 2007-08]
AUGUST 16, 2013
I. Section 54F of the Income-tax Act, 1961 - Capital gains - Exemption of, in case of investment in residential house [Land appurtenant] - Assessment year 2007-08 - For claiming deduction under section 54F, assessee purchased 196.144 cents land and constructed house measuring 254.94 square meters - Revenue allowed proportionate value of only 5 cents of land being land appurtenant thereto, required for convenient enjoyment of said house - Whether, land appurtenant to residential house has to be determined with regard to locality where residential house is situated, social status of individual assessee, profession of individual and other factors for proper and convenient enjoyment of residential house - Held, yes - Whether, therefore, matter was to be remitted back for reconsideration - Held, yes [Para 6] [In favour of assessee]
II. Section 54F of the Income-tax Act, 1961 - Capital gains - Exemption of, in case of investment in residential house [Completion of construction] - Assessment year 2007-08 - Whether, where assessee had been issued completion certificate from Local Panchayat for purpose of electrification before expiry of three years, same was acceptable for allowing deduction under section 54F, as electricity supply is provided only after completion of construction - Held, yes [Para 12] [In favour of assessee]
III. Section 54B of the Income-tax Act, 1961 - Capital gains - Transfer of land used for agricultural purposes [Scope of exemption] - Assessment year 2007-08 - Whether, where assessee produced certificate from village officer and copies of bills for purchase of fertilizer to show that land sold was used for agricultural purposes, deduction could not be disallowed merely because assessee's brother, co-owner of property sold, had not claimed deduction under section 54B - Held, yes - Whether, therefore matter was to be remitted back for consideration of evidences produced by assessee - Held, yes [Para 7] [In favour of assessee]
FACTS
| ■ | The assessee, along with his brother, had purchased 79.072 cents of land, which was sold during the year under consideration and the assessee claimed exemption under section 54F in respect of investment made for construction of a residential house. The assessee had purchased 196.144 cents of land and constructed a house admeasuring 254.94 square meters. Though the Assessing Officer disallowed the entire claim of the assessee, the Commissioner (Appeals) found that only 5 cents of land could be treated as standard measure of a house. Accordingly, he disallowed the proportionate cost of land. | |
| ■ | On assessee's appeal: |
HELD
| ■ | For claiming exemption under section 54F, the assessee has to purchase a residential house one year before or two years after the date on which the capital asset was transferred or construct a residential house within 3 years from transfer. The dispute is with regard to the area of the land which is required for convenient enjoyment of 254.94 sq. mts. of residential house. The area of the land which is required for convenient enjoyment of the house has to be determined with regard to the social status and profession, etc. of the individual assessee, profession, etc. An agriculturist may require a reasonable extent of land for housing their cattle, agricultural implements, etc. An industrialist may require car sheds to park his cars, servant quarters. etc. Moreover, the locality where the land is, also needs to be considered. In villages, one may have vast extent of land for garden, play ground, etc. However, such things may not be possible in urban cities. Therefore, the land appurtenant to the residential house has to be determined with regard to the locality where the residential house is situated, the social status of the individual assessee, profession of the individual and other factors for proper and convenient enjoyment of the residential house. 5 cents of land determined by the CIT(A) is very less in the State of Kerala. Since the State of Kerala is mainly an agricultural area, the CIT(A) is not correct in restricting the land appurtenant to the building at 5 cents without considering the relevant factors which prevail in the State of Kerala. However, the locality where the land is situated and other factors are not available on record. Therefore, the Assessing Officer shall reconsider the issue afresh after considering all the factors mentioned above and thereafter determine the extent of land which is required for proper and convenient enjoyment of the residential house. Accordingly, the orders of the lower authorities are set aside and the issue of exemption under section 54F is remitted back to the file of the Assessing Officer. [Para 6] |
CASES REFERRED TO
CIT v. Smt. Zaibunnissa Begum [1985] 151 ITR 320/20 Taxman 120 (AP) (para 4), CIT v. Sardarmal Kothari [2008] 302 ITR 286 (Mad.) (para 4), Suryakumar Govindjee v. Krishnammal [1990] 4 SCC 343 (para 4), CIT v. Ms.Jagriti Aggarwal [2011] 339 ITR 610/203 Taxman 203/15 taxmann.com 146 (Punj. & Har.) (para 10), CIT v. Rajesh Kumar Jalan [2006] 286 ITR 274/157 Taxman 398 (Gau.) (para 10) and Prakash Nath Khanna v. CIT [2004] 266 ITR 1/135 Taxman 327 SC (para 11).
Mohan Pulickal for the Appellant. Smt. S. Vijayaprabha for the Respondent.
ORDER
N.R.S. Ganesan, Judicial Member - These cross appeals of the two independent assessees are directed against the separate orders of CIT(A)-I, Kochi dated 30-03-2012 and 12-07-2012, respectively for the assessment year 2007-08. Since common issue arises for consideration we heard all the appeals together and dispose of the same by this common order.
2. Let us first take the appeal filed by the assessee, Shri Tony J Pulickal in ITA No.154/Coch/2012.
3. The first issue arises for consideration is disallowance of exemption u/s 54F of the Act.
4. Shri Mohan Pulickal, the Ld.counsel for the assessee submitted that the assessee along with his brother purchased 79.072 cents of land on 24-12-1981. The above said land was sold during the year under consideration and the assessee claimed exemption u/s 54F of the Act in respect of investment made for construction of a residential house. According to the ld.counsel, the assessee has purchased 196.144 cents of land on 15-06-2007 for a consideration of Rs.3,79,95,000 and constructed a house admeasuring 254.94 square metres. Though the Assessing Officer disallowed the entire claim of the assessee, the CIT(A) found that only 5 cents of land could be treated as standard measure of a house. Accordingly he disallowed the proportionate cost of land. According to the ld.representative, the area required for construction of a house would depend upon the social status of the individual. Therefore, the land appurtenant to the residential house has to be determined with respect to the social status of the assessee. The ld.counsel placed his reliance on the judgment of the Andhra Pradesh High Court in CIT v. Smt. Zaibunnissa Begum [1985] 151 ITR 320/20 Taxman 120 (AP)and submitted that the expression 'land appurtenant' means the extent of land which is required for proper and convenient enjoyment of the residential house. Therefore, according to the ld.representative, the CIT(A) is not correct in restricting the area of land to only 5 cents. The ld.counsel has also placed reliance on the judgment of the Madras High Court in CIT v. Sardarmal Kothari [2008] 302 ITR 286. The ld.representative has further placed his reliance on the judgment of another Madras High Court judgment in CIT v. Smt. M Kalpagam [1997] 227 ITR 733/93 Taxman 283 and submitted that in the case before the Madras High Court 10 grounds 29 sq.ft. was used by the assessee by way of residence pathway, sit out, servant quarters, cow shed, etc. This area around the house was held by the Madras High Court as land appurtenant to the main building. The ld.counsel also placed reliance on the judgment of the Apex Court in the case of Suryakumar Govindjee v. Krishnammal [1990] 4 SCC 343. On a query from the bench what would be the area of land that may be required for convenient enjoyment of the house constructed in the locality where the assessee's house was situated, the ld.counsel submitted that 60 cents of land is required for convenient enjoyment of the house constructed in the locality where the house was situated.
5. On the contrary, Smt. S Vijayaprabha, the ld.DR submitted that the assessee has acquired 196.144 cents of land and constructed building consisting of plinth area of 254.94 sq.mtrs. This comes to 1.63% of the total area of the land. On a query from the bench what would be the extent of land required for convenient enjoyment of the house, the ld.DR submitted that 10 cents of land may be required for convenient enjoyment of the house and definitely not more than that. Therefore, according to the ld.DR, the entire cost of the land cannot be allowed as investment u/s 54F of the Act.
6. We have considered the rival submissions on either side and also perused the material available on record. We have also carefully gone through the provisions of section 54F of the Act. For claiming exemption u/s 54F of the Act, the assessee has to construct a residential house one year before or two years after the date on which the capital asset was transferred. In this case, after transfer of the capital asset, the assessee has purchased 196.144 cents of land and constructed a house admeasuring 254.94 sq.mtrs. The assessee has also invested Rs.81,41,120 towards the cost of construction of the property. There is no dispute with regard to the cost of construction of the building. The dispute is with regard to the area of the land which is required for convenient enjoyment of 254.94 sq.mts of residential house. The area of the land which is required for convenient enjoyment of the house has to be determined with regard to the social status and profession, etc. of the individual assessee, profession, etc. An agriculturist may require a reasonable extent of land for housing their cattle, agricultural implements, etc. An industrialist may require car sheds to park his cars, servant quarters. etc. Moreover, the locality where the land also needs to be considered. In villages, one may have vast extent of land for garden, play ground, etc. However, such things may not be possible in urban cities. Therefore, the land appurtenant to the residential house has to be determined with regard to the locality where the residential house is situated, the social status of the individual assessee, profession of the individual and other factors for proper and convenient enjoyment of the residential house. This Tribunal is of the considered opinion that 5 cents of land determined by the CIT(A) is very less in the State of Kerala. The State of Kerala mainly being an agricultural area, this Tribunal is of the considered opinion that the CIT(A) is not correct in restricting the land appurtenant to the building at 5 cents without considering the relevant factors which prevail in the State of Kerala. However, the locality where the land is situated and other factors are not available on record. Therefore, this Tribunal is of the considered opinion that the Assessing Officer shall reconsider the issue afresh after considering all the factors mentioned above and thereafter determine the extent of land which is required for proper and convenient enjoyment of the residential house. Accordingly, the orders of the lower authorities are set aside and the issue of exemption u/s 54F is remitted back to the file of the Assessing Officer. The Assessing Officer shall reconsider the issue afresh in the light of the discussion made above and the case laws relied upon by the assessee and thereafter decide the issue in accordance with law after giving reasonable opportunity of hearing to the assessee.
7. The assessee has taken two more grounds with regard to expenditure incurred towards development of the land which was sold and brokerage paid to the extent of Rs.11 lakhs. We heard the ld. counsel for the assessee and the ld.dR.
8. It appears from the material available on record that these grounds were not raised before the CIT(A) even though the assessee claimed them before the Assessing Officer. From the assessment order it appears that the claim made towards development charges and brokerage was withdrawn by a letter dated 16-12-2010. Since the assessee has withdrawn the claim before the Assessing Officer, probably, no ground was raised before the CIT(A) during the course of first appellate proceedings. This Tribunal is of the considered opinion that when the assessee withdrew the claim before the Assessing Officer by a letter dated 16-12-2010, the same cannot be reagitated either before the CIT(A) or before this Tribunal. Therefore, the grounds in respect of charges for development of the land and brokerage cannot be agitated before this Tribunal also. Accordingly, the grounds with regard to development charges and brokerage charges are dismissed.
9. Now coming to the revenue's appeal, the first ground of appeal is with regard to deposit of Rs.40 lakhs in the capital gain account scheme on 07-01-2008. Referring to section 54F(4) of the Act, Smt. S Vijayaprabha, the ld.DR submitted that the assessee was expected to deposit the amount within the due date provided for filing of the return of income u/s 139(1) of the Act. According to the ld.DR, the due date for filing the return of income u/s 139(1) was 31-07-2007. Therefore, the deposit of funds to the extent of Rs.40 lakhs in capital gain deposit scheme is beyond the time specified in section 54F(4) of the Act.
10. On the contrary, Shri Mohan Pulickal, the ld.counsel for the assessee submitted that section 139(4) gives extended time for filing the return of income. Therefore, the deposit made before the due date for filing the return of income u/s 139(4) has to be considered for the purpose of deduction 54F of the Act. The ld.counsel placed his reliance on the judgment of the Punjab & Haryana High Court in CIT v. Ms.Jagriti Aggarwal [2011] 339 ITR 610/203 Taxman 203/15 taxmann.com 146 (Punj. & Har.). The ld.counsel has also placed reliance on the judgment of the Gauhati High Court in the case of CIT v. Rajesh Kumar Jalan [2006] 286 ITR 274/157 Taxman 398 (Gau).
11. We have considered the rival submissions on either side and also perused the material available on record. We have also gone through the provisions of section 54F(4) of the Act. For claiming exemption u/s 54F the assessee has to deposit the net consideration in capital gain deposit scheme not later than the due date applicable for furnishing the return of income u/s 139(1) of the Act. The Gauhati High Court in the case of Rajesh Kumar Jalan(supra) and the Punjab & Haryana High Court in the case of Ms. Jagriti Aggarwal (supra) had an occasion to interpret section 54F(4) of the Act. Both the High Courts found that section 139(4) gives extended time for filing the return of income. Therefore, the amount deposited within the due date for filing the return of income u/s 139(4) also has to be considered for granting exemption u/s 54F of the Act. We find that the Apex Court in the case ofPrakash Nath Khanna v. CIT [2004] 266 ITR 1/135 Taxman 327 had an occasion to interpret the words "due date". Though it is in respect of prosecution, the Apex Court after considering various case laws on the subject found that the due date means the due date mentioned in section 139(1) of the Act. However, both the authorities below have not considered this judgment of the Apex Court. Moreover, the assessee also had no occasion to explain the consequences of this judgment of the Apex Court before the lower authorities or before this Tribunal. Therefore, this Tribunal is of the considered opinion that the Assessing Officer shall reconsider this issue also. In other words, since the major issue with regard to the investment in the residential house is remitted back to the file of the Assessing Officer, for the sake of consistency, the deposit in capital gain account also needs to be reconsidered. Accordingly, the orders of authorities below on this issue is also set aside and remitted back to the file of the Assessing Officer. The assessing officer shall reconsider the issue afresh in the light of the material available on record and thereafter decide the same in accordance with law after giving reasonable opportunity of hearing to the assessee.
12. The revenue has taken one more ground with regard to the completion of the construction of property before three years. According to the ld.DR, the assessee has produced a completion certificate from the Panchayat issued for the purpose of electrification. We heard Shri Mohan Pulickal, the ld.counsel epresentative for the assessee also. Completion certificate will be given by the local panchayat only after completion of the construction. It is common knowledge that electricity supply would be provided only after completion of the construction. Before completion, no regular power supply will be provided by the electricity board. This Tribunal is of the considered opinion that when the local panchayat has issued the completion certificate under the Local Bodies Act, the same has to be accepted unless and until the revenue has material to show that the building was not otherwise completed. This Tribunal is of the considered opinion that the authority is empowered to permit the assessee to construct the building under Local Bodies' Act is competent to and issue completion certificate. In the absence of any material to indicate that the house was not completed, this Tribunal is of the considered opinion that the completion certificate issued by the local panchayat has to be accepted. Therefore, we do not find any infirmity in the order of the lower authority with regard to the date of completion of the building.
13. In the result, ITA No.154/Coch/2012 is allowed for statistical purpose and appeal of the assessee in ITAT No.166/Coch/2012 is partly allowed for statistical purpose.
14. Now coming to the appeal filed by the assessee, Dr. Xavier J in ITA No.249/Coch/2012, the first ground of appeal is with regard to deduction u/s 54B of the Act.
15. Shri Jose Kappan, the ld.representative for the assessee submitted that the assessee claimed deduction u/s 54B of the Act. However, the Assessing Officer rejected the claim of the assessee mainly on the ground that the assessee's brother, Shri Tony J Pulickal has not made any claim that the capital asset was subjected to agricultural operation. According to the ld.representative, merely because the brother of the assessee omitted to claim deduction u/s 54B it would not disentitle the assessee to make a claim u/s 54B of the Act. The assessee has filed several documents such as bills, diary, etc. in the form of additional evidence to support claim that the capital asset was subjected to agricultural operations. According to the ld.representative, the capital asset was classified as agricultural land in the Government records and in fact the assessee cultivated the land. The assessee has produced a certificate from the village officer to show that the subject land was under cultivation. The assessee has also produced copies of the bills for purchase of fertilizer and entries in the diaries.
16. We have heard Smt. S Vijayaprabha, the ld.DR also. On a query from the bench, when the assessee has filed additional evidence to substantiate the claim that the land was subjected to cultivation why the Assessing Officer in the light of additional evidence filed by the assessee should not reconsider the issue? the ld.DR very fairly submitted that since the assessee has filed additional evidence to prove the cultivation, the matter may be remitted back to the file of the Assessing Officer for reconsideration.
17. We have considered the submissions on either side and also perused the material available on record. The Assessing Officer mainly disallowed the claim of the assessee on the ground that his brother has not claimed any deduction u/s 54B of the Act. The Assessing Officer has also observed that the land was not subjected to any agricultural operation and it is wetland. The assessee has now produced certificate from the village officer and copies of bills for purchase of fertilizer and entries made in the diary to show that the land in question was subjected to cultivation. These are fresh evidence filed before the Tribunal. Therefore, the lower authorities had no occasion to examine the same. Merely because the assessee's brother has not made any claim u/s 54B that cannot be a reason for disallowing the claim of the assessee. When the assesee has produced certain material before this Tribunal and claimed that the land was subjected to cultivation, this Tribunal is of the considered opinion that the Assessing Officer has to examine the documents independently and record finding whether the land in question is subjected to cultivation or not? Therefore, the omission of the assessee's brother to claim deduction u/s 54B cannot be a reason to disallow the claim of the assessee. Accordingly, the order of the lower authorities are set aide and the issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall reconsider the issue in the light of additional evidence filed by the assessee before this Tribunal and thereafter decide the same in accordance with law after giving reasonable opportunity to the assessee.
18. The next ground of appeal is with regard to investment in construction of the house.
19. Shri Jose Kappan, the ld.representative for the assessee submitted that the assessee has purchased 10.885 cents of land on 04-09-2007 and constructed residential building by investing 84,40,007. The assessee has also spent Rs.1,42,000 for completion of the residential house. According to the ld.representative, the Assessing Officer disallowed the entire claim on the ground that no material was produced before him. However, the CIT(A) found that the assessee has filed all the documents before the Assessing Officer for construction of the residential house. The assessee has also filed approved valuer's report with regard to the investment before the Assessing Officer along with the building plan, etc. Accordingly, the CIT(A) accepted the claim of the assessee towards construction. However, the cost of proportionate land was restricted to 5 cents of land. According to the ld.representative, the assessee has purchased only 10.885 cents of land which is essential for proper and convenient enjoyment of the house.
20. On the contrary, Smt. Vijayaprabha, the ld.DR submitted that the CIT(A) has rightly restricted the area of the land to 5 cents. On a query from the bench what would be the reasonable area that is required for proper and convenient enjoyment of the house, the ld.DR submitted that 10 cents of land may be reasonable for proper and convenient enjoyment of the house.
20.1 We have considered the rival submissions on either side and also perused the material available on record. Though the Assessing Officer rejected the entire claim of the assessee with regard to the cost of construction and purchase of land, the CIT(A) allowed the entire cost of construction and the cost of land to the extent of 5 cents of land. The cost of construction is not in dispute before this Tribunal. What is disputed is the extent of the land i.e. whether 5 cents of land is sufficient for proper and convenient enjoyment of the house or 10.885 cents of land is required for the same. The ld.DR submitted that 10 cents of land is required for proper and convenient enjoyment of the house.
22. There is no much of different 10 or 10.885 cents of land. This Tribunal is of the considered opinion that 10.885 cents of land anywhere in the State of Kerala is essential for convenient enjoyment of the house. This Tribunal is of the considered opinion that the CIT(A) is not justified in restricting the extent of land to 5 cents. In the absence of any dispute with regard to the cost of construction, this Tribunal is of the considered opinion that the entire investment claimed by the assessee has to be allowed since 10.885 cents of land is essential for proper and convenient enjoyment of the land. Therefore, we do not find any reason to uphold the order of the CIT(A). Accordingly, the order of the CIT(A) is modified and the Assessing Officer is directed to allow the entire cost of the land as claimed by the assessee.
22. Now coming to the departmental appeal, the only issue arises for consideration is claim of deduction u/s 54F(4) of the Act. This issue was considered by this Tribunal in the case of Shri Tony J Pulickal in the earlier part of this order. The issue was remitted back to the file of the Assessing Officer for reconsideration since the judgment of the Apex Court in the case of Prakash Nath Khanna (supra) was not considered by both the authorities below and the assessee also had no occasion to place his submission before the lower authorities. In view of the above, the order of the lower authorities on this issue is set aside and remanded back to the file of the Assessing Officer for reconsideration. The Assessing Officer shall reconsider the issue in the light of directions issued in the case of Shri Tony J Pulickal and thereafter decide the same in accordance with law after giving reasonable opportunity of hearing to the assessee.
23. In the result both the appeal of the assessee and the revenue are allowed for statistical purpose.
24. ITAT No.154/Coch/2012, ITA Nos 249 & 270/Coch/2012 are allowed for statistical purpose and appeal of the revenue in ITAT No.166/Coch/2012 is partly allowed for statistical purpose.
Regards
Prarthana Jalan
__._,_.___
No comments:
Post a Comment