Case Law Details
Section 54F benefit remains intact even if Assessee transfer New house acquired to claim S. 54F to acquire another house
Assessee sold a long term capital asset being land at Velacherry on 5.5.2005 for Rs. 81 lakhs whereon assessee earned long term capital gains. The assessee invested Rs. 75 lakhs in the purchase of house property at Alwarpet on 1.10.2005 and therefore, was allowed exemption of long term capital gains u/s 54F to the extent of Rs. 73,94,157/- in the assessment of assessment year 2006-07. Thereafter, the assessee sold the house at Alwarpet on 13.11.2006. Assessee, thereafter, again purchased another residential house at Spur Tank Road, Chetpet on 15.11.2006 for Rs. 70,80,620/-. The Assessing Officer opined that the long term capital gains of Rs. 73,94,157/- which was allowed as exemption in the assessment year 2006-07 is to be withdrawn in the assessment of the assessment year 2007-08.
On Appeal ITAT Held that :-
Assessing Officer was justified in treating Rs. 73,94,157/- as long term capital gains of the year under consideration as because the assessee in its Return of Income for Assessment Year 2006-07 claimed exemption with reference to investment made in the house property at Alwarpet. However, we find that the assessee has invested in purchase of new residential house at Rs. 70,80,620/- within the period of two years in which the transfer took place and therefore, the assessee was eligible for deduction u/s 54F(1) of the Act in respect of the said investment out of this deemed long term capital gains. In our considered opinion, the Assessing Officer was not justified in not granting exemption u/s 54F with reference to this investment made by the assessee in computing long term capital gains of the year under consideration. The ld. CIT(A)’s order is actually to the above effect only. As it is not in dispute that the capital gains of the assessee was Rs. 48,94,157/- only whereas the assessee was eligible for exemption of more than that amount u/s 54F of the Act for investment of Rs. 70,80,620/- in purchase of residential house, in our considered opinion the ld. CIT(A) was justified in deleting the addition of Rs. 48,94,157/-.
INCOME TAX APPELLATE TRIBUNAL, CHENNAI
I.T.A.No.887/Mds/2011 – Assessment year : 2007-08
ACIT vs Ms. Sultana Nazir
Date of Pronouncement : 23-3-2012
O R D E R
PER N.S. SAINI, ACCOUNTANT MEMBER
This appeal filed by the Revenue is directed against the order passed by the ld. CIT(A)-XII, Chennai, dated 11.2.2011, for assessment year 2007-08.
2. The first issue involved in this appeal is that the ld.CIT(A) erred in allowing deduction u/s 54 to the extent of Rs. 48,94,157/-.
3. We have heard the rival submissions and perused the orders of the lower authorities and the material available on record. The undisputed facts of the case are that the assessee sold a long term capital asset being land at Velacherry on 5.5.2005 for Rs. 81 lakhs whereon assessee earned long term capital gains. The assessee invested Rs. 75 lakhs in the purchase of house property at Alwarpet on 1.10.2005 and therefore, was allowed exemption of long term capital gains u/s 54F to the extent of Rs. 73,94,157/- in the assessment of assessment year 2006-07. Thereafter, the assessee sold the house at Alwarpet on 13.11.2006. Assessee, thereafter, again purchased another residential house at Spur Tank Road, Chetpet on 15.11.2006 for Rs. 70,80,620/-. The Assessing Officer opined that the long term capital gains of Rs. 73,94,157/- which was allowed as exemption in the assessment year 2006-07 is to be withdrawn in the assessment of the assessment year 2007-08. Further, according to the Assessing Officer, assessee suffered capital loss of Rs. 25 lakhs on the sale of house property situated at Alwarpet and therefore, allowing set off of such loss, he brought to tax the balance amount of Rs. 48,94,157/-.
4. On appeal, the ld. CIT(A) deleted the aforesaid addition of Rs. 48,94,157/- for the reasons mentioned as under:
“After careful consideration of the facts of the case, material available on record, written and oral submissions made by the appellant, the issue involved in this appeal is discussed and decided in the ensuing paragraphs.
Facts of the case are that the appellant sold her landed property at Velachery in May 2005 for a consideration of Rs.81.00 lakhs and consequently purchased a property at Alwarpet for a consideration of Rs.75.00 lakhs by way of an irrevocable Power of Attorney (POA). However, the appellant had not invested the balance amount, out of the sale consideration of the Velachery property, in any of the Capital Gains scheme since 93% of the sale consideration from the Velachery property was invested in the Alwarpet property held by the appellant by way of an irrevocable Power of Attorney.
However, in the meantime, for the inherent disadvantages and drawbacks felt by the appellant which led to the belief and trust in the mind of the appellant that holding the Alwarpet property would not give any positive effects due to the ‘Vaastu defects’, appellant decided to dispose off the Alwarpet property, and on 13.11.06 the same was registered in the name of Shri P. Sairam, for a consideration of Rs.50.00 lakhs by way of a sale deed registered in document No.1221/2006 before the Sub-Registrar, Chennai Central. Consequent to the which the appellant purchased a property, Flat No.11, I Floor, Anugraha Apartments, No.66, Spur Tank Road, Chetpet, Chennai 600031 on 15.11.2006 for a consideration of Rs.70,80,620/-, where the appellant presently resides.
Here, it was the contention of the Assessing Officer that the appellant was eligible for claim of deduction u/s 54F(3) of the Income-tax Act, 1961 to the extent investment made by the appellant in respect of the Alwarpet property purchased after the sale of the Velachery Property and the Assessing Officer had finalised the impugned order accordingly.
This was for the reason that the appellant had not held the Alwarpet property for the requisite number of years required under the said provisions of the Income-tax Act, 1961 and hence, the Assessing Officer had added back the amount of Rs.73,94,157/- to the income returned. However, the Assessing Officer had considered loss of Rs.25.00 lakhs on the sale of Alwarpet property and arrived at the net longterm capital gain taxable in the hands of the appellant in. respect of the sale of Alwarpet property at Rs.48, 94,157/ -.
Further the Assessing Officer had held that RS.25.00 lakhs as unexplained investments. This was for the reason that the appellant had explained the investment in the new property held by her at Spur Tank Road, Chetpet, Chennai to the extent of Rs.50.00 lakhs only by way of cash-flow statement and the balance stood unexplained.
The dispute that requires to be settled is whether the sale of the Alwarpet property was a sale made by the appellant or not and that if at all it is held that the sale of the Alwarpet property does not involve the appellant, then whether the Alwarpet property transacted at Rs.75,00,000/- was sold for Rs.50,00,000/-. During the course of the appellate proceedings, it was contended by the authorised representative of the appellant that the sale of the Alwarpet property was by way of conveyance of the irrevocable Power of Attorney transferred to the new owner by way of another power of attorney and that the same was mainly for the purpose of reducing the burden of paying stamp duty often and again.
The authorised representative further contended that the Assessing Officer had viewed the sale of the Alwarpet property, held by the appellant by way of an irrevocable POA to the new owner, as sale by the appellant and that the appellant had not held the sale proceeds of the Velachery property as investments in the appropriate Long-term’ Capital Gains Scheme was not acceptable to him for the reason that the grant of exemption from Capital Gains Tax is available in a case only when a property is purchased by a person for personal use and own occupation.
Moreover, I am unable to comprehend, when the Assessing Officer was ready to accept that the value of Alwarpet property was Rs.75,00,000/- and while adding back LTCG for contravening the provisions of Sec.” 54F(3) of the Income-tax Act, 1961, the same was taken at Rs.73,94,157/-, how suddenly, the Assessing Officer could arrive at a conclusion that the Alwarpet property was sold only for Rs.50.00 lakhs, as per the document.
During the course of appellate proceedings, the authorised representative of the appellant had relied on the decision of the Bengaluru Bench of the ITAT reported in 110 TTJ 223 in the case of Nipun Mehrotra vs. ACIT.
In this connection, it is pertinent to reproduce the relevant Section 54F(4):-
“4. The amount of the net consideration 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 deposit being made in any case not later than the due date applicable in the case of tile assessee for furnishing the return of income under subsection (1) of section 139) in an account in any such bank or institution as may be 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; and, for the purposes of sub-section (1), the amount, if any, already utilized by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset. “
A perusal of the above section shows that the appellant is required to utilize the amount for the purchase or construction of the new asset before the date of furnishing the return of income under section 139. Hence, one cannot interpret that section 139 mentioned should be read as section 139(1). Similar language is appearing in section 54(2) of the Income tax Act. Moreover, Section 139 mentioned will not only include section 139(1) but will also include all sub-sections of section 139.
In the light of the above discussion, material available on record and the submissions made by the authorized representative of the appellant, the scenario that emerges is that the sale proceeds of the Velachery land was blocked a advance in regard to purchase of another property and due to which it was not possible of the appellant to have the proceeds from the sale of Velachery invested in any capital gains scheme. Further, the sale of Velachery property was in May 2005 and that though the appellant advanced Rs.75.00 lakhs with a view to purchase a flat at Alwarpet, Chennai, the same did not get through owing to the reasons that the Alwarpet property had certain inherent disadvantages and drawbacks in the opinion of the appellant which led to the belief and trust in the mind of the appellant that holding the Alwarpet property would not give any positive effects due to the ‘Vaastu defects’ which are quite personal in nature and are naturally acceptable.
Buying a property for self-occupation does not take place in a minute or hour. It requires lot of thinking and ultimate satisfaction of the buyer that the property to be purchased would deliver the benefits that are always anticipated, which was not so in the mind of the appellant in respect of the Alwarpet property and it cannot be taken otherwise also. The mindset differs from one individual to another individual and that these are personal beliefs which are not to be interfered with in any democratic country. It happens to each and every individual, when a property is purchased, when a family is relocated etc.
This had all led to lot of confusion in the mind of the appellant and the appellant had finally decided to dispose off the Alwarpet property, which was acquired by her by way of an irrevocable POA, by paying advance only and hence, the sale of Alwarpet property by the owner under the said POA in any way cannot be construed as a sale by the appellant. It is an understanding between one individual and another and hence, this aspect as held by the Assessing Officer in the impugned order does not have any base.
Further, when a property was agreed to be sold for Rs.75.00 lakhs, i.e. in respect of the Alwarpet property, by way of a Power of Attorney, I am unable to understand as to what was the logic or reasoning that made the Assessing Officer to come to a conclusion that the same property was sold for Rs.50.00 lakhs within a few months.
In the light of the above discussions, it is held that the proceeds from the sale of the Velachery land by the appellant was held as advance for the purchase of the Alwarpet property, which had not worked in favour of the appellant for the reasons discussed above and the deal of purchase of Alwarpet property had not materialized as expected. Further that the appellant had ultimately purchased the property at Spur Tank Road, Chetpet, Chennai, for a consideration of Rs. 70,80,620/- which was nothing but the advances paid for the purchase of Alwarpet property got back. And hence, the appellant is eligible for the claim of exemption u/s 54F(3) of the Income tax Act, 1961 and the Assessing Officer is directed to revise the impugned order accordingly, allowing capital gains exemption to the extent invested in the property held by the appellant at Spur Tank Road, Chetpet, Chennai. Thus, the appellant succeeds in her appeal.”
5. We find that the provisions of sub-section (3) of section 54F read as under:
“54F. (3) Where all the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1) shall be deemed to be income chargeable under the head “Capital gains” relating to long-term capital assets of the previous year in which such new asset is transferred.”
6. Thus, from a reading of the above provisions, in our considered opinion, the Assessing Officer was justified in treating Rs. 73,94,157/- as long term capital gains of the year under consideration as because the assessee in its Return of Income for Assessment Year 2006-07 claimed exemption with reference to investment made in the house property at Alwarpet. However, we find that the assessee has invested in purchase of new residential house at Rs. 70,80,620/- within the period of two years in which the transfer took place and therefore, the assessee was eligible for deduction u/s 54F(1) of the Act in respect of the said investment out of this deemed long term capital gains. In our considered opinion, the Assessing Officer was not justified in not granting exemption u/s 54F with reference to this investment made by the assessee in computing long term capital gains of the year under consideration. The ld. CIT(A)’s order is actually to the above effect only. As it is not in dispute that the capital gains of the assessee was Rs. 48,94,157/- only whereas the assessee was eligible for exemption of more than that amount u/s 54F of the Act for investment of Rs. 70,80,620/- in purchase of residential house, in our considered opinion the ld. CIT(A) was justified in deleting the addition of Rs. 48,94,157/-. We, therefore, confirm the order of the ld. CIT(A) and dismiss this ground of appeal of the Revenue.
7. Second issue involved in this appeal is that the ld. CIT(A) erred in deleting the addition of Rs. 25 lakhs made as unexplained investment.
8. We have heard the rival submissions and perused the orders of the lower authorities and the material available on record. The relevant facts are that the assessee invested Rs. 70,80,620/- in the purchase of house property at Spur Tank Road, Chetpet, Chennai on 15.11.2006. The assessee explained the source of the said investment as out of sale proceeds of property at Alwarpet. The Assessing Officer observed that as per the registered sale deed, in respect of Alwarpet property, the total consideration paid by purchaser was Rs. 50 lakhs only. According to the assessee, the sale value of the property was Rs. 75 lakhs. The Assessing Officer found the explanation of the assessee as not acceptable. He treated the source of investment in property at Chetpet to the tune of Rs. 50 lakhs only as expenditure out of sale proceeds of Alwarpet property. He, therefore, treated Rs. 25 lakhs as unexplained investment and added the same to the income of the assessee.
9. On appeal, the ld. CIT(A) deleted the above addition by observing that the Assessing Officer has accepted the investment in the Alwarpet property of the assessee Rs. 75 lakhs and therefore, also allowed exemption of long term capital gains to the extent of Rs. 73,94, 157/- and in this view of the matter, the Assessing Officer was not justified in treating the sale value of the very same property at Rs. 50 lakhs.
10. Before us, the ld. D.R. submitted that as the apparent value in the registered sale deed No. 1221/2006 before the Sub-Registrar, Chennai in respect of Alwarpet property was Rs. 50 lakhs the Assessing Officer was justified in treating the said consideration of that property at Rs. 50 lakhs and therefore, the ld. CIT(A) was not justified in assessing sale value thereof as Rs. 75 lakhs without any positive material.
11. On the other hand, the ld. A.R. supported the order of the ld. CIT(A). He further submitted that apart from sale proceeds of Alwarpet property, Rs. 6 lakhs was also available with the assessee out of sale proceeds of Velacherry land which was sold for Rs. 81 lakhs and out of which Alwarpet property was purchased for Rs. 75 lakhs.
12. We find that it is not in dispute that the sale value of the property as per registered sale deed was Rs. 50 lakhs only. We find that the assessee has brought no material on record either before any of the lower authorities or before us to show that it actually received any amount more than the amounts shown in the registered deed of sale. It is well settled position of law that what is apparent is assumed as correct and the onus lies on the person who claims otherwise. In the instant case, the assessee, apart from stating that lesser sale consideration was mentioned in the deed of sale, to avoid payment of stamp duty, has not been able to bring on record any positive material to prove that he actually received any amount more than Rs. 50 lakhs from the purchaser of the property. In the absence of any positive material on record, in our considered opinion, the ld. CIT(A) was not justified in accepting the sale proceeds at Rs. 75 lakhs on 15.11.2006 merely because the assessee purchased the very same property on 5.5.2005 for Rs. 75 lakhs. Considering the entire facts and circumstances of the case, we find that the assessee has invested Rs. 70,80,620/- in the house property at Chennai on 15.11.2006 and out of which source to the extent of Rs. 50 lakhs stands explained from the sale of property at Alwarpet and Rs. 6 lakhs stands explained from the sale of Velacherry land. Thus the assessee was not able to explain the source of investment of balance amount of Rs. 14,80,620/- only, which alone should have been added to the income of the assessee u/s 69 of the Act. We, therefore, modify the order of the ld. CIT(A) and restore back the addition to the extent of Rs. 14,80,620/-. Thus, this ground of appeal of the Revenue is partly allowed.
13. In the result, appeal filed by the Revenue is partly allowed.
Order pronounced in the open court on 23-3-2012.
Female assessee having two commercial properties sold as under-
1) COA: Rs 328840 dated 11.01.2008 sold for Rs 450000 on 15.07.2011
2) COA: Rs 120000 dated 17.05.1994 sold for Rs 1460000 on 30.08.2011
and purchased a residential house property in dec 2011 for Rs 1215500
so,
for the 1st property there will be capital loss amounting to Rs 18493 (450000- 328840 * 785/551)
and for the second house property there will be capital gain amounting to Rs 183592 (1460000- 120000*785/259) – (1096293 * 1215500/1460000) (Is exemption u/s 54F available?)
Are these calculations correct??
And, net capital gain amounting to Rs 165099 be taxed at flat 20% rate or will be aggregated in total income of the assessee?
Please help in the matter as soon as possible.