TaxTMI 
TaxTMI 
TaxTMI 
2015 (5) TMI 71
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....e shall first take up the case of Smt. Uma Devi. The assessee Smt. Uma Devi has raised 11 grounds of appeal against the order passed u/s 263 by the CIT. Ground No.1 is general in nature, hence no specific adjudication is required. 3. Ground No.2 raised by the assessee is as under: "The ld CIT failed to appreciate the fact that the AO passed the order after detailed scrutiny and after examining all the issues and applying his mind to the issues and thereby erred in holding that the assessment so passed is erroneous and prejudicial to the interest of revenue and revising the assessment". 3.1 Ground No.2 is against the order of the CIT in assuming jurisdiction u/s 263. We find that the AO has passed cryptic, non speaking order and hence we are of the opinion that the jurisdiction assumed u/s 263 by the CIT is justified. Our opinion is based on the decision of Apex Court in CIT vs. Toyota Motor Corpn.(306 ITR 52). 4. Ground No.3 raised by the assessee is given below: "The ld CIT erred in directing to disallow deduction u/s 54Fon the ground that the assessee owns more than one residential house on the date of transfer without appreciating the fact that the other property owned by t....
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....for residential purpose u/s 23(1) and exemption given under Wealth Tax Act for one residential house. The word "residence" signified a man's abode or continuance in a place and where there is nothing to show that it is used in a more extensive sense. In P.N. Shukla vs. CIT (2005) 276 ITR 642, the Allahabad High Court held that "The nature of the user of the building let out determines the grant or denial of relief envisaged by clause (b) of the second proviso to section 23(1) of the Act. Had the object of the Legislature been to allow this concession irrespective of the user of the building, it was not necessary to qualify the word 'unit' by the expression 'residential'. An owner may construct a building with selfcontained floors with the object of letting out the same to tenants, but such letting out has to be for the purpose of residence of the tenants and not otherwise. Admittedly, in this case, the units, which were let out to the bank, were not constructed as residential units. A residential unit is that which is used as a residence". 4.4 It was submitted further that the intention of the assessee was to construct the building for non residential purpose a....
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....ed the submissions as made before the CIT and submitted that under the provisions of Income Tax Act, 1961 income from property whether commercial or residential is to be offered for taxation under the head "Income from House Property" unless the same assessable under any other head of income like business or income from other sources. If the income from a property is offered under the head house property, it cannot be presumed that it is a residential property. As the assessee has offered income from Pancom chambers office under the head "income from house property", it cannot be presumed that it is a residential property. Further, by virtue of fiction created by section 64(IA) of the I.T. Act, 1961, the incomes of properties owned by the two minor daughters, were clubbed in the hands of the assessee since the date of purchase of the said properties. The investment for purchase of said properties has come from the independent sources of these daughters, which has been accepted by the Department year after year. Simply, by virtue of inclusion of rental income of minor daughters u/s 64(IA) of the I.T. Act, 1961, it cannot be presumed that the assessee was owner of these properties. T....
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....essee for the superstructure of those flats. There was no difference between the cost of acquisition and sale consideration of superstructure of these flats. However, gain on transfer of undivided share in land along with those flats had been offered as long term gain by the assessee. 5.3 The full value of consideration in respect of surrender of the assessee share of land to the developer has been taken as the market value of the superstructure of flats and not cost of construction of flats to the developer as proposed by the CIT for the following reasons: a) As required u/s 48 of I.T. Act, 1961 for working out capital gain, first full value of consideration received or accruing as a result of transfer of the capital asset is to be found out. Where the consideration for the transfer is in kind, as for instance, in a transfer by way of exchange of capital assets or is partly in cash and partly in kind, the fair market value of the property granted in exchange as on the date of the exchange shall have to be ascertained in order to arrive at the figure of consideration received as held by the Hon'ble Supreme Court in the case of George Henderson and Co. Ltd (1967) 66 ITR 622. ....
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....g common spaces, parking spaces in the following ratios: i) OWNERS : 50% ii) DEVELOPER: 50% 11. That after completion of the construction, the OWNERS on one hand and the DEVELOPER on the other hand, shall become the absolute OWNERS of 50%:50% of the built up areas together with all common areas, facilities amenities and services provided in the building along with proportionate undivided share of land and rights in the terrace and the parking areas etc...." 5.5. The CIT further observed that the total number of flats proposed to be constructed was 40. 50% of it would be 20 flats i.e. 10 flats each to the share of the assessee and her sister. In other words, the assessee was to get 10 flats in lieu of her transfer of the extent of her share in the land in question. Total area of the plot was 5000 sq. yards. The share of the assessee in the said plot was half i.e. 2500 sq.yards. The assessee happened to take possession of the 10 flats from the builder M/s. Lumbini Constructions Ltd in June/July 2005 and in a matter of 6 months thereafter, the assessee happened to dispose of all the 10 flats. The question is at what point the long term capital gain can be said to arise legally i.e....
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....nce. The gist of the said decision is that the expression "full consideration" occurring in the statutory provision relating to capital gains under the 1922 Act does not connote market value of the transferred asset but only the full value of the thing received by the transfer in exchange for the capital asset transferred. If the ratio is applied to the present case, what would constitute full consideration for the transfer of the assessee's share in Somajiguda land. Needless to say that the full consideration in this case would be the 10 flats i.e. the value embodies in the 10 flats as per the builder's account books, not the sale proceeds of the flats as contended by the assessee. For example, in the present case, the assessee happened to dispose of the flats in the year of possession itself. Now there could be different situations, for example where an assessee retains all the flats for personal family use or for commercial exploitation as let out properties. In the later type of situation, what would be the long term capital gain and what would the cost of construction of the 10 flats as per the builder's account. If the contention of the assessee is accepted, then ....
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....3 years is to be calculated from the date of this sale. What is to be seen is the date of investment and not the date when the house property was handed over to the assessee. Even otherwise also, without prejudice to the stand that the construction of the new asset is within three years, the ld CIT erred in appreciating the legal provision that for such failure to construct the new residential unit within three years, the long term capital gains is to be brought to tax only in such year when the period of three years from the date of transfer expires and not in the year in which it is claimed. 6.2 We heard both the parties. The ITAT Hyderabad "B" Bench in ITA No.234/Hyd/2012 (35 Taxmann.com 90) has held as follows: "Provision contained under section 54F being a beneficial provision has to be construed liberally. In various judicial precedents it has been held that the condition precedent for claiming benefit under section 54F is only that the capital gain realized from the sale of capital asset should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. If the assessee has invested the money in construction of res....
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....T erred in issuing directions to treat Rs. 10.00 lakhs as additional sale consideration without appreciating the fact that total deposit received by the assessee was refunded back to the Developer". 9.1 According to the AO, as per the development agreement, the advance deposit received by the assessee from the developer is refundable on delivery of assessee's share of flats. The advance deposit received from the developer is assessable to tax in the hands of the assessee as there was no evidence available on record of refund of such deposit to developer after receipt of assessee's share of flats. 9.2 In this regard, the assessee submitted that it received a deposit of Rs. 20.00 lakhs which was returned to the developer by the assessee on 6.7.2005 vide ack. No.100822 of HDFC Bank Ltd, photocopy of which was enclosed. Hence the question of taxing advance received from the developer does not arise. 9.3 According to the ld CIT (A) this issue pertaining to the advance deposit received by the assessee from the builder i.e. Lumbini Constructions Ltd. It is the case of the assessee that such deposits were refundable to the builder and that she had refunded such amounts. The ld C....
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....he assessee Smt. S. Umadevi and Smt. V.Shailaja have had equal shares in everything connected with this transaction, the amount of Rs. 20.00 lakhs has to be divided equally between both of them in the ratio of Rs. 10.00 lakhs each. In completing the assessment the AO had not at all applied his mind to his aspect. Such omission on his part has rendered the assessment not only erroneous but also prejudicial to the interests of the revenue. Therefore, the ld CIT (A) directed the AO to bring to tax Rs. 10.00 lakhs as long term capital gains in addition to the cost of construction of 10 flats as per the builders account in the hands of the present case". 9.5 Assessee reiterated its submission that the amount of Rs. 20.00 lakhs received as deposit from the developer and the same had been refunded back, copy of the confirmation letter in this regard from Lumbini Constructions Ltd was enclosed. Hence no amount can be added on this count. We have perused the evidence for return of the amount of deposit and are satisfied with the assessee's claim that no amount can be added on this count. This ground of appeal is allowed. 10. Ground No.9 raised in assessee's appeal is given below: ....
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.... the receipt of the same. Corpus Fund Rs. 50,000/-, water and electricity Rs. 1,10,000/- and solar water heating systems Rs. 25,000/- will be paid before taking the delivery of the possession". 10.4. The CIT held that "from the above extract, it can be seen that in addition to Rs. 12,21,600/-, there was further obligation to pay Rs. 1,85,000/- i.e. corpus fund Rs. 50,000/- water and electricity Rs. 1,10,000/- and solar water heating system Rs. 25,000/-. It is clear that the assessee had taken into account the amount of Rs. 12,21,600/- she had not taken into account the further amount of Rs. 1,85,000/-. There can be no doubt that the further amount of Rs. 1,85,000/- is a part of sale consideration of the flats in question. This feature is noticed in respect of all the 10 flats sold by the assessee. The AO had completed the assessment without examining this aspect and without applying his mind to this issue. This omission on his part had rendered the assessment not only erroneous but also prejudicial to the interests of the revenue. Hence, the CIT (A) directed the AO to bring to tax, as a part of short term capital gains i.e. part of sale proceeds of the flats i.e. Rs. 18,50,000/-(....
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....ice, particularly in purchase and sale of shares in which prices of shares are subject to unforeseen and unexpected frequent fluctuations. d) Incurring of the expenditure was a continuous process but quantified at the close of the year. e) Similarly the expenditure incurred for advice on sale of shares forms part of cost of sales of the shares before they are transferred. Unless both transfers viz., transfer in the name of the assessee while purchasing and transfer in the name of the purchaser while selling, the transaction is not complete and the resultant gain or loss would not arise. Thus the aforesaid expenditure is wholly and exclusively incurred in connection with transfer as contemplated u/s 48(1) of the Act and hence allowable. Reliance was placed on the Hon'ble Apex Court in the case of Dham Dadabhay Kadadia vs. CIT (1967) 63 ITR 651. 11.3. The ld CIT (A) in this regard observed that section 48 of the I.T. Act, 1961 lays down the mode of computation of capital gains. The permissible deductions are: i) Expenditure incurred wholly and exclusively in connection with such transfer ii) The cost of acquisition of the asset and the cost of any improvement thereto. 11.4 ....
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....ng the fact that the due date for this A.Y was extended till 31.10.2006 by the CBDT". 13. The ld Counsel submitted as follows: - The CIT, while directing to disallow the claim for deduction u/s 54F erred in giving a finding that the deduction is claimed against short term capital gains without appreciating the fact that the sale of flats included sale of undivided share of land, which is a long term capital asset. - The CIT erred in directing to disallow deduction u/s 54F on the ground that the assessee's deposit in Bank account made in October, 2006 is beyond the due date for filing of return of income of 31.07.06 without appreciating the fact that the due date for filing return of income for this A.Y was extended till 31.10.2006 by the CBDT (vide order No.142/41/2005 TPI CPE dated 24.07.2006: 284 ITR (ST) 62). - During the course of assessment proceedings, the assessee has filed date-wise details of investment in new residential house situated at Visakhapatnam. A copy of the same was enclosed which indicate that the assessee has made substantial investment within three years from the date of sale of original assets. In order to get benefit u/s 54F, assessee need not compl....