[2008] 19 SOT 655 (COCHIN)

In the ITAT Cochin Bench

M. Anil

v.

Income-tax Officer, Ward 2(2), Salary Ward, Trivandrum

N. Barathvaja Sankar, Accountant Member

And Riyaz S. Padvekar, Judicial Member

IT Appeal No. 905 (Coch.) of 2004

[Assessment year 1997-98]

July 28, 2006

Section 48, read with section 45, of the Income-tax Act, 1961 - Capital gains - Computation of - Assessment year 1997-98 - Assessee had sold his land, which was situated in a village to a party for development and construction of residential flats - While working out capital gain, assessee had taken fair market value of land as on 1-4-1981 at Rs. 25,000 per one cent - Assessing Officer, however, adopted Rs. 4,000 per one cent as fair market value of land and, accordingly, worked out capital gain - Commissioner (Appeals) found that assessee had not furnished any comparable data in support of higher claim of cost of his property - He, therefore, considering locality where land was situated and road accessibility, directed Assessing Officer to adopt Rs. 12,000 per one cent as a fair market value of property as on 1-4-1981 for working out indexed cost of acquisition - Whether Commissioner (Appeals) had adopted a reasonable approach, and, therefore, his order needed no interference - Held, yes

Section 54, read with section 54F, of the Income-tax Act, 1961 - Capital gains - Profit on sale of property used for residential house - Assessment year 1997-98 - Whether applicability of section 54 is restricted to capital asset which is building or land appurtenant thereto and which is used for residential purpose; but as far as section 54F is concerned, it is applicable to any capital asset - Held, yes - Whether where assessee had transferred vacant land and not building or any residential house, Assessing Officer was justified in rejecting claim of assessee in respect of exemption under section 54 - Held, yes

Facts

The assessee sold his land which was situated in a village to a party for development and construction of residential flats. Consideration was paid partly in cash and partly in form of two flats. The assessee had computed the long-term capital gain by taking the fair market value of the land as on 1-4-1981 at Rs. 25,000 per one cent, and after working out the cost of acquisition by applying index and claiming exemption under section 54, the assessee had declared taxable capital gain at nil. The Assessing Officer adopted fair market value of property at rate of Rs. 4,000 per one cent and, accordingly, worked out the capital gain. As far as exemption under section 54 was concerned, the Assessing Officer was of view that long-term capital gain was in respect of property other than residential house and, hence, assessee was eligible for deduction under section 54F and not under section 54. The Commissioner (Appeals) found that the assessee had not furnished any comparable data in support of higher claim of cost for his property. He, therefore, considering locality where land was situated and road accessibility, held that fair market value of property should be at Rs. 12,000 per one cent and, accordingly, directed the Assessing Officer to adopt Rs. 12,000 per one cent as a fair market value of property as on 1-4-1981 for working out indexed cost of acquisition.

On second appeal :

Held

As far as the first issue in respect of fair market value for working out of the indexed cost of acquisition was concerned, the assessee had claimed Rs. 25,000 as the fair market value per one cent of land on 1-4-1981. The Assessing Officer had adopted Rs. 4,000 as the fair market value on 1-4-1981 per one cent of land. The Commissioner (Appeals) had adopted Rs. 12,000 as the fair market value as on 1-4-1981. The grievance of the assessee was that the Commissioner (Appeals) had arbitrarily fixed the fair market value of the land as on 1-4-1981 at Rs. 12,000. Except oral submissions, nothing had been brought on record by the assessee to support his claim. It is well-settled principle of law that if the claim is made by the assessee, then the burden is upon the assessee to prove by leading some evidence that his claim is right or correct. Even the assessee had made no efforts to get the opinion of the registered valuer in respect of the fair market value of the said land as on 1-4-1981. In such circumstances, it could be said that the assessee was not justified in taking the fair market value of the land as on 1-4-1981 at Rs. 25,000 per one cent. On a perusal of the reasons given by the Commissioner (Appeals), it was found that much more reasonable approach had been adopted by the Commissioner (Appeals) and, in fact, the claim of the assessee itself appeared to be arbitrary. The Commissioner (Appeals) had after considering locality where land was situated and road accessibility, held that fair market value of property should be at Rs. 12,000 per one cent. There was no reason to interfere with the order of the Commissioner (Appeals) on the issue. Therefore, the order of the Commissioner (Appeals) was confirmed. [Para 5]

The next issue was in respect of the applicability of section 54 in place of section 54F for claiming exemption. The assessee had agitated this issue before the Assessing Officer but the Assessing Officer rejected the assessee’s claim that the assessee was eligible for exemption under section 54, and allowed the exemption under section 54F.

An assessee is entitled to claim exemption under section 54 if he is an individual or HUF in respect of the long-term capital gain arising from the transfer of the capital asset being the building or land appurtenant thereto and being a residential house. Hence, as per the condition prescribed under the said section, the assessee can claim exemption. From the reading of section 54, it is clear that for claiming the exemption under this section, the nature of the asset transferred is decisive. It means that the capital asset which is transferred by the assessee should either be building or land appurtenant thereto which is a residential house. Now, under section 54F, the assessee is eligible to claim exemption to the extent prescribed under the said section in fulfilment of the conditions in respect of the capital gain arising from the transfer of any long-term capital asset other than the residential house. From a perusal of the language used in section 54F, this section is applicable where there is a transfer of any capital asset and capital gain arising from such transfer is a long-term capital gain irrespective of the nature of the capital asset. The assessee is eligible to claim exemption if he made the investment by way of construction or by way of outright purchase in the residential house to the extent as per conditions laid down in that section. There is a basic difference in respect of the nature of the capital asset transferred. As far as section 54 is concerned, the applicability of section 54 is restricted to the capital asset which is building or land appurtenant thereto and which is used for residential purpose, but as far as section 54F is concerned, it is applicable to any capital asset. The contention of the assessee was that the property which was transferred by him was having a house therein and, hence, the assessee was eligible to claim exemption under section 54. On a perusal of the agreement and the schedule thereof, it was clear that what the assessee had transferred was 24.5 cents of vacant land and not the building or any residential house. Therefore, the Assessing Officer had rightly rejected the claim of the assessee in respect of the exemption under section 54. The order of the Commissioner (Appeals) on this issue was to be confirmed. [Para 7]

The appeal was to be dismissed accordingly.