Case Law Details
Shivkumar Lakshman Vs ITO (ITAT Chennai)
Cost of Improvement on Farm Land Allowable; Section 54F Exemption to Be Computed on Actual Sale Consideration, Not Section 50C Value: ITAT Chennai
The assessee appealed against the order of the Commissioner of Income Tax (Appeals)-16, Chennai, for Assessment Year 2010-11 challenging the disallowance of indexed cost of improvement, computation of capital gains, and levy of interest under Sections 234B and 234C. The assessee had sold an immovable property for ₹90 lakhs, claimed indexed cost of acquisition of ₹23,70,190 and indexed cost of improvement of ₹23,07,946, disclosed long-term capital gains of ₹83,62,888, and claimed exemption under Section 54F on investment in a residential property purchased from M/s Appasamy Real Estates Ltd. The Assessing Officer adopted the guideline value of ₹1,06,17,750 under Section 50C instead of the actual sale consideration and disallowed the claim of cost of improvement on the ground that no evidence had been produced and that the property sold was described as farm land without any building.
The assessee submitted that evidence regarding the improvements, including a letter from the person who carried out the work, had been produced. The Tribunal noted that copies of the letter, bills and vouchers had been filed before the Commissioner (Appeals), who forwarded them to the Assessing Officer for examination. It observed that improvements could be made even to farm land and were not confined to buildings. The Tribunal stated that expenditure may be required, for example, to improve low-lying land or provide fencing to make it marketable. Although the Tribunal observed that such matters are ordinarily remitted for verification, it considered remand unnecessary in view of the amount involved and accepted that the assessee had incurred the claimed expenditure of ₹23,07,946. Accordingly, it set aside the orders of the lower authorities and directed the Assessing Officer to allow the claim towards cost of improvement.
On the issue of computation of capital gains, the assessee contended that, for the purpose of exemption under Section 54F, the actual sale consideration disclosed in the sale deed should be adopted and not the value determined under Section 50C. The Revenue argued that the Assessing Officer had correctly adopted the Sub-Registrar’s guideline value under Section 50C. The Tribunal held that, for granting deduction under Section 54F, the actual sale consideration reflected in the sale deed should be adopted rather than the guideline value determined for registration purposes. It observed that there was no allegation or material indicating that the assessee had received any on-money over and above the consideration disclosed in the sale deed. Accordingly, it directed the Assessing Officer to adopt the actual sale consideration of ₹90 lakhs for the purpose of allowing exemption under Section 54F and set aside the orders of the lower authorities on this issue.
Regarding the levy of interest under Sections 234B and 234C, the Tribunal held that such interest is mandatory and consequential. It directed the Assessing Officer to recompute the interest while giving effect to the Tribunal’s order.
The appeal of the assessee was allowed.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-16, Chennai, dated 23.01.2015, and pertains to assessment year 2010-11.
2. The first issue arises for consideration is with regard to disallowance of indexed cost of improvement to the extent of 23,07,946/-.
3. Hemalatha.K, the Ld. representative for the assessee, submitted that the assessee sold an immovable property for a total consideration of Z 90 lakhs and claimed indexed cost of acquisition of 23,70,190/-. The assessee also claimed cost of improvement to the extent of 23,07,946/-. According to the Ld. representative, the assessee has disclosed long term capital gain to the extent of 283,62,888/- and also claimed exemption under Section 54F of the Income-tax Act, 1961 (in short ‘the Act’) on the investment made in the immovable property by him, which was purchased from M/s Appasamy Real Estates Ltd. However, the Assessing Officer refixed the sale value at 21,06,17,750/- as per the guideline value adopted by the Sub-Registrar, by applying the provisions of Section 50C of the Act. The Ld. representative further submitted that the assessee claimed that an amount of 22,25,600/- having spent in improvement of the property. However, the same was disallowed by the Assessing Officer on the ground that the assessee has not filed any evidence. According to the Ld. representative, the assessee has produced letter from the person who actually made the improvements. Therefore, it may not be correct to say that the assessee had not produced any evidence. Thus, according to the Ld. representative, the disallowance made by the Assessing Officer with regard to the indexed cost of improvement to the extent of 23,07,946/- is not justified.
4. On the contrary, Shri N. Madhavan, the Ld. Departmental Representative, submitted that the assessee claimed improvements to the extent of 23,07,946/-. However, the Assessing Officer disallowed the same. The assessee had not produced any evidence before the lower authorities. The bills, vouchers, etc. for the improvement said to be made to the landed property were not produced before the Assessing Officer. The Ld. D.R. further submitted that a statement from Shri T. Karthik was recorded and he could not throw any light with regard to improvements said to be made by the assessee. The Ld. D.R. further submitted that what was sold by the assessee was a vacant land. Therefore, there is no question of any improvement.
5. We have considered the rival submissions on either side and perused the relevant material on record. The assessee claimed a sum of 23,07,946/- towards cost of improvement. However, the same was disallowed by the Assessing Officer. The Assessing Officer disallowed the claim of the assessee on the ground that the immovable property was described as “Farm Land” in the sale deed. The Assessing Officer further found that there was no building on the said property. Hence, there could not have been any improvement. Accordingly, he disallowed the claim. From the material available on the record it appears that the assessee had filed a copy of the letter along with certain bills and vouchers before the CIT(Appeals) and the CIT(Appeals) also forwarded the same to the Assessing Officer. The Assessing Officer, after examining the bills and vouchers and other documents, came to a conclusion that the claim could not be accepted. The fact remains that the bills and vouchers were produced before the CIT(Appeals) and the same were sent to the Assessing Officer. The assessee’s claim was only a sum of 23,07,946/- as cost of improvement. Improvement can be made even to the farm land. It is not necessary that the improvements should be made only to the building. Suppose, the vacant land is low lying and it requires fencing, the assessee has to necessarily incur expenditure to keep the land to a marketable condition. Under normal circumstances, this Tribunal would have remitted back the matter to the file of the Assessing Officer for verification. Since what was claimed was only 23,07,946/-, this Tribunal is of the considered opinion that it may not be necessary to remit back the matter in view of the smallness of the amount claimed by the assessee. Accordingly, this Tribunal is of the considered opinion that the assessee would have spent Z3,07,946/-as per the letter filed before the lower authorities with regard to improvements. Therefore, there is no justification in disallowing the claim of the assessee. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to allow the claim of the assessee towards cost of improvements to the extent of 23,07,946/-.
6. The next ground of appeal is with regard to computation of capital gain.
7. Hemalatha.K, the Ld. representative for the assessee, submitted that the assessee sold the property for Z 90 lakhs. The Assessing Officer by provisions of Section 50C of the Act has taken the sale consideration at 21,06,17,750/- and computed excess capital gain. According to the Ld. representative, for the purpose of the considering exemption under Section 54F of the Act, the sale consideration has to be taken as reflected in the sale deed and not by applying the provisions of Section 50C of the Act.
8. On the contrary, Shri N. Madhavan, the Ld. Departmental Representative, submitted that Section 50C provides for adopting the value determined by the Sub-Registrar for registering document in case the value claimed by the assessee is lower. In this case, the sale consideration claimed by the assessee was only no However, the Sub-Registrar adopted the value at 21,06,17,750/-. Therefore, the Ld. D.R. submitted that the Assessing Officer has rightly adopted the provisions of Section 50C of the Act.
9. We have considered the rival submissions on either side and perused the relevant material on record. The question arises for consideration is that for the purpose of granting deduction under Section 54F of the Act, whether the sale consideration disclosed in the sale deed has to be taken or the value adopted by the Sub-Registrar for registering the document has to be taken. This Tribunal is of the considered opinion that for the purpose of granting deduction under Section 54F of the Act, the value disclosed in the sale deed has to be adopted rather than the value determined by the Sub-Registrar on the basis of guideline value. Actual sale consideration as reflected in the sale deed has to be adopted in the absence of any other material to indicate that the assessee has received any on-money over and above the amount disclosed in the sale deed. In this case, it is nobody’s case that the assessee received on-money over and above the sale consideration disclosed in the sale deed. Therefore, this Tribunal is of the considered opinion that the Assessing Officer has to adopt the actual sale consideration of no lakhs for the purpose of considering the claim of exemption under Section 54F of the Act.
10. In view of the above, the orders of the lower authorities are set aside and the Assessing Officer is directed to adopt the actual sale consideration for the purpose of considering exemption under Section 54F of the Act.
11. The next ground of appeal is with regard to levy of interest under Section 234B and 234C of the Act.
12. We have heard both Ld. representative for the assessee and the Ld. D.R. Levy of interest under Section 234B and 234C is mandatory and consequential. Therefore, while giving effect to the order of this Tribunal, the Assessing Officer shall re-compute the interest under Section 234B and 234C of the Act.
13. In the result, the appeal of the assessee is allowed.
Order pronounced on 29th May, 2015 at Chennai.
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