TaxTMI 
TaxTMI 
2017 (11) TMI 379
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....uction resulting into increase in Long Term Capital Gain. The construction cost as per the assessee and AO (without indexation is as under:- As per Assessee As per AO Floors Constructed A.Y. related to Construction Cost of Construction A.Y. related to Construction Cost of Construction Decrease in cost of construction. Ground Floor 2005-06 12,25,000/- At the time of allotment - 12,25,000/- First Floor 2006-07 4,00,000/- 1991-92 1,89,600/- 2,10,400/- Second Floor 2007-08 10,55,000/- 2007-08 5,95,270/- 4,59,730/- Total 26,80,000/- 7,84,870/- 18,95,130/- The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by accepting the construction cost of Rs. 26,80,000/- as declared by the assessee. (c) In the facts and circumstances of the case and in law the CIT(A) has erred in confirming the action of the ld. AO in denying the exemption u/s 54 of Rs. 39,19,596/-. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief my pleas....
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....ng the cost of construction. The Assessing Officer computed the long term capital gain at Rs. 44,94,343/- on the basis of reworking of the cost of construction. The AO rejected the claim of the assessee that the first floor of the house was constructed in the year 2006- 07. The AO took the cost of construction as per valuation report with the ICICI Bank for obtaining the house loan and therefore, the Assessing Officer held that the construction of first floor was completed in the year 1991-92 as against the claim of the assessee in the years 2005-06 and 2006-07. Further, the cost of construction was also recomputed by the Assessing Officer by applying PWD rates against the claim of the assessee. Thus the AO has substantially reduce the cost of construction of Rs. 26.80 lacs to Rs. 7,84,870/- so far as the construction of first floor and second floor house is concerned. The ground floor house was part of the original allotment in the year 1981-82 and hence was not in dispute. Therefore, the claim of the assessee cost of construction was reduced by the Assessing Officer by a sum of Rs. 18,95,130/-. Aggrieved by the action of the AO the assessee filed an appeal before the CIT(A) and c....
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.... has thus argued that the first floor of house was constructed only after 21.12.1994 as on the said date conveyance deed has clearly stated that the property was consisted only ground floor. The valuation report mentions the construction during the year 1991 which is contrary to the fact recorded in the conveyance deed. Thus valuation report cannot be placed reliance upon for deciding the period of construction of different floor of the house. The authorities below have ignored the bank loan statement and solely relied upon the valuation report both these are indirect evidence available to contradicting to each other therefore, accepting one indirect evidence and rejecting the other is not justified. The ld. AR as thus stressed that the AO as well as ld CIT(A) both have erred in placing blind reliance on the valuation report of ICICI Bank for the purpose of determining the period of construction when the valuation report is unsubstantiated. The period of construction as claimed by the assessee is financial year 2005-06 to 2007-08 has been supported by the corroborative evidence of cash withdrawal from the Bank, payment made by the assessee and his son to Bansal Traders which has be....
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....very small amounts and in the absence of any supporting evidence these small and petty withdrawals are normally used for other household and personal expenditure and not for the construction of the house. No confirmation of construction materials supplier or contractor has been furnished by the assessee in support of the claim. Thus the assessee failed to discharge primary onus to prove with supporting evidence that the construction of the house was carried out in the F.Y. 2005-06 onwards. The ld. DR has referred to the valuation report which was prepared for the purpose of obtaining the loan from the ICICI Bank and submitted that the report has clearly mentioned the property consist ground + first floor and therefore, at the time of the said valuation report the first floor was very much inexistence. Hence, the claim of assessee regarding the cost of construction is unacceptable. The Assessing Officer has applied PWD rates which are proper and justified therefore, no fault cannot be found in the valuation adopted by the AO. The payment was claimed to M/s Bansal Traders and Agarwal Traders but it has not been explained the purpose for which these payments to Bansal Trader and Agarw....
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....y there is no quarrel on the point that the valuation of the property as per estimates of the valuer for the purpose of loan against the property cannot be taken as conclusive proof of valuation for the purpose of income tax. Further the valuation was got prepared by the bank for their own purpose of securing the loan given to the assessee and not as actual cost of construction incurred by the assessee for the construction of the house. The valuation report gives the estimated value of property at that relevant point of time cannot substitute the real cost of construction incurred by the assessee at a different point of time. Though, the valuation as estimated in the valuation report got prepared by the bank for the purpose of granting loan is not conclusive proof however, the fact recoded in the valuation report of existence of the first floor cannot be doubted as this is not on the basis of any estimate but this fact is based on the existence of the structure on the plot of land. Therefore, to the extent the existence of the first floor as on the date of valuation report prepared for the purpose of loan the same cannot be denied. Still question of actual cost of construction rema....
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.... Before us, the ld. AR of the assessee has submitted that the assessee has complied with the conditions required u/s 54 and therefore, the assessee is eligible for benefit u/s 54. The assessee sold residential houses and has invested the proceeds into two residential house the entire consideration for purchase of two house has flow from the assessee and not a single penny rent was contributed by any other person. He has further submitted that the assessee has purchased new houses in the name of his wife and once the entire investments was made from the sale proceeds and there was no contribution from the wife then the claim of section 54 cannot be denied in support of his contention. He has relied upon the decision of Hon'ble Madras High in case of CIT vs. V. Natarajan 287 ITR 271 as well as decision of Hon'ble Delhi High Court in case of CIT vs. Wahal 351 ITR 4 and submitted that the Hon'ble High Court has held that the new residential house need not be purchased by the assessee in his own name nor it is necessary that it should be purchased exclusively in his name. Therefore, the house purchase in the name of his wife was held to be eligible for the benefit u/s 54/54F. The ld AR ....
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....he new house was offered in the hand of the wife. The ld. DR has also relied upon the decision of Hon'ble Punjab and Haryana High Court in case of Pawan Arya Vs. CIT 200 Taxman 66 and submitted that the Hon'ble High Court after considering the decision of Hon'ble Karnatka High Court has held that the exemption against the purchase of two flats situated at different location is not available. He has also relied upon the decision of Mumbai Bench of the Tribunal in case of Smt. Myrtle D. Souza Vs. ITO 53 SOT 236. In the rejoinder the ld AR of the assessee has submitted that the decision of Hon'ble jurisdictional High Court in case of Kalya vs. CIT (supra) is not applicable in the facts of the assessee's case as the said decision in respect of the exemption u/s 54B and not in respect of the claim u/s 54 whereas the decision relied upon by the assessee are directly on section 54 of the Act. 11. I have considered the rival submissions as well as relevant material on record. The first aspect of this issue is regarding the investment made by the assessee in the new residential houses in the name of his wife and claim of exemption under section 54 against the acquisition of these two hou....
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....x Act. 8. On facts, it is shown by the assessee that the apartments are situated side by side. The builder has also stated that he has effected modification of the flats to make it as one unit by opening the door in between two apartments. The fact that at the time when the inspector inspected the premises, the flats were occupied by two different tenants is not the ground to hold that the apartment is not a one residential unit. The fact that the assessee could have purchased both the flats in one single sale deed or could have narrated the purchase of two premises as one unit in the sale deed is not the ground to hold that the assessee had no intention to purchase the two flats as one unit. Thus, it is clear that the claim of the assessee was for purchase of apartments situated side by side to make it one unit by opening door in between two apartments. Therefore when more than one apartments are so situated and contiguous that it can be used as one residential unit as per the requirement of the assessee's family and particularly the members of HUF. Similarly in case of CIT vs. K.G. Rukminiamma (supra) the Hon'ble High Court has again was dealing with a case when the a....
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....ial flats bearing No. G-01 and G-02, and, claim deduction in respect of both these flats in accordance with s. 54 read with s. 54F of the Act for the asst. yr. 1996-97? (b) whether the proviso to s. 54F of the Act, as it stood prior to the amendment brought about by the Finance Act, 2OOO, can be read to mean that for the asst. 5rr. 1996-97 the assessee would be entitled to relief in respect, of more than one dwelling unit for the purpose of claiming exemption under the head ' Capital Gains' ?" 4. In the provision of s. 54(1) of the Income-tax Act, the relevant portion is extracted herein for convenient reference : "Subject to the provisions of sub-s. (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head ' Income from house property' (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 o....