TaxTMI 
TaxTMI 
2017 (5) TMI 1096
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....e LTCG as under : i) u/s.54EC Exemption FY 2011-12 Rs. 50,00,000/- ii) REC Bonds 2012-13 Rs. 50,00,000/- iii) u/s.54F investment in property Rs.8,56,89,844/- 9,56,89,844 The assessee was asked to substantiate its claim u/s.54F of the Act vide letter dt.6.3.15 stating that the assessee had purchased property from the Debt Recovery Tribunal vide DRC 211/2012 for a consideration of Rs. 10.10 crores by public auction. As per the documents it is seen that the assessee has purchased 43,600 sq.ft. of land described in Schedule A and Schedule B of the agreement with five parts. However, as per provisions of sec.54F of the Act, only investment in a residential house property is eligible for deduction. Further, as per schedule 1 A of the registered document, the land value is Rs. 8,72,00,000/- and the building value is Rs. 1,38,00,000/- and the assessee is not allowed the deduction for vast stretch of land included in the sale, further the schedule B property has no residential building itself, therefore, the AO disallowed the claim u/s.54F of the Act. 3.1 In response, the assessee substantiated the claim vide lett....
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....9) Further, the assessee drew attention to the patta, chitta and adangal issued in respect of the above mentioned property by the Revenue Department, conveying the fact that the said property is a single unit. The assessee further submitted that the action of the AO in disallowing the claim of exemption u/s.54F of the Act is erroneous and unjustified and pleaded to direct the AO to delete the disallowance made. 4. The CIT(Appeals) observed that the issue in this appeal is whether the assessee invested the capital gains in a residential property which also comprised of some land. According to the CIT(Appeals), the starting point in this could be the newspaper advertisement for e-auction sale made by the Debts Recovery Tribunal-III(DRT) at Chennai dated 18.9.2013. The advertisement was captioned "in the matter of State Bank of India, SAM Branch, Chennai v. M/s. Agnite Education Ltd. & Others". The auction which was originally to be held on 18.9.2013 was rescheduled for 17.10.2013, in the description of properties Schedule A and Schedule B were spelt out in detail. The AO has reproduced relevant portions in his order to show that the assessee had invested in 60 cents / 26,136 sq....
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.... the property could not be purchased in pieces i.e. Schedule A and Schedule B separately and it follows that it had to be a composite purchase of the property which included the house property and land appurtenant thereto. 4.3 The CIT(Appeals) observed that the provisions as contained in sec.54F of the Act provides for relief from capital gains to be charged on transfer of certain capital assets in the case of investment in residential house. According to the CIT(Appeals), the issue which arises for consideration is with regard to investment in "residential house" and observed that would residential house in this context include land appurtenant thereto or it should be viewed in a isolated manner. The CIT(Appeals) further observed that by way of common prudence the person desiring to benefit from the capital gain by investment prescribed in sec.54F of the Act would settle for purchase of a residential property and the quantum of capital gains to be invested was to the extent of Rs. 10 crores. The CIT(Appeals) observed that the property in question which was purchased by the assessee fitted the bill. The assessee having noticed that a residential property is for sale by auction b....
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....f the Madras High Court in the case of CIT v. Smt. M. Kalpagam (227 ITR 733(Mad), wherein, the Court was seized with the matter where the assessee has sold the entire plot consisting of main building, cow sheds, sit-outs, path ways and vacant land. With the sale proceeds it purchased a new house and claimed relief u/s.54F of the Act. The AO bifurcated the entire land into two parts, one area consisting of cow sheds, sit-outs etc. considered as appurtenant to main building and another consisting of vacant land considered as not appurtenant to main building and accordingly, he bifurcated the sale consideration. The ITAT held, after looking into the property plan, that the entire property was utilized by the assessee and, therefore, entire plot should be considered as one unit. Further that no part of the land could be separated and treated as separate asset and the entire property should be treated as one unit of land and building. The CIT(Appeals) further observed that in ITO v. P.B.Rodriques (11 TTJ 347), the Tribunal Mumbai 'B' Bench seized with the matter where the assessee sold a residential house which occupied only one tenth area of the land held that the exemption was availab....
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....g in the hands of the assessee and the same cannot be dissected / bifurcated to land and building separately as has been done by the AO. Against this, the Revenue is in appeal before us. 5. We have heard both the parties and perused the material on record. For better understanding, provisions of section 54F which deal with provisions of Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house, read as under :- "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,..." 6. It is crystal clea....
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....ential house, is invested in the purchase or construction of a residential house. The new residential house is not debarred from having a land appurtenant to any size and it is also not the case of the Assessing Officer that the land appurtenant to the building is not entitled to exemption under section 54F. Had it been a case of land not appurtenant to the building so constructed, then the contention of the Assessing Officer to the effect that investment of capital gains made in the second plot i.e. schedule 'B' which is not appurtenant to the building so constructed is not eligible for exemption, can be favourably accepted. On the contrary, the expression "land appurtenant" in section 54F of the Act was held to be construed in a broad and non-technical sense and it was held that the meaning given to that expression in other Acts should be irrelevant. The Hon'ble Delhi High Court in the case of Sunita Aggarwal (284 ITR 20(Delhi)) has observed that while claiming exemption under section 54, the property though purchased from two different persons by virtue of four different.sale instances in the shape of four different parcels, constitutes one single residential unit of the ass....
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....bovesaid decision of this court in T. C. (A.) No. 656 of 2005 and granted the benefit to the assessee under section 54F of the Income-tax Act on the investment made in the four flats. 13. Hence, the abovesaid decisions of this court make it clear that the property should be assessed as one unit even though different flats are available. Here also, as per the assessment order, all the flats have one door number, namely, Door No. 29F, Race Course, Coimbatore." 7.1 Similar view was fortified by the jurisdictional High Court in the G.Chinnadurai Vs. ITO in 96 CCH 148 (Mad.). Similar issue came for consideration before the Mumbai Tribunal in the case of ITO Vs. P. B. Rodriques in [1981] 11 TTJ 347 (ITAT[Bom]) wherein held that:- "6. We have considered the rival contentions advanced by both the sides. It would be better to set out s. 54 below necessary for the proper appreciation of issues involved in this appeal: " 54(1), Where a capital gain arises from the transfer of a Capital Asset to which the provisions of s. 53 are not applicable, being buildings or lands appurtenant thereto the income of which is chargeable under the head `Income from house property', which....