PER HARI OM MARATHA, JUDICIAL MEMBER: This appeal of the assessee, for assessment year 2006-07, is directed against the order of the ld. CIT, dated 24.3.2011, passed u/s
PER HARI OM MARATHA, JUDICIAL MEMBER: This appeal of the assessee, for assessment year 2006-07, is directed against the order of the ld. CIT, dated 24.3.2011, passed u/s 263 of the Act.
2. The facts of the case, in short, are that the assessee filed its return of income for the assessment year 2006-07 on 31.7.2006 declaring a total income of ` 1,26,450/- besides disclosing Long Term Capital Gain(LTCG) of ` 46,76,192/-. The assessment was completed ITA 953/11 :- 2 -: u/s 143(3) on 31.12.2008 by accepting the returned income. Subsequently, the ld. CIT called for the records and proposed to revise the assessment order with reference to the long term capital gain claimed by the assessee. It was found that during financial year 2003- 04, the assessee had entered into a joint development agreement with M/s Coromondel Engg Co. for developing the assessees land alongwith building thereon admeasuring 769 sq ft, situated at Cenotaph Road, Chennai. The agreement was to develop the property into residential apartments with a total built-up area of 24,744 sq ft with the arrangement that the assessee would be given 60% of built-up area and land area, the balance 40% being retained by the developers. On completion of the project during the period relevant to assessment year 2006-07, the assessee admitted LTCG of ` 47,76,192/- on sale of constructed portion of 7697 sq ft alongwith the undivided land area of 11088 sq ft; out of the total constructed area of 14,864 sq ft and land area of 15,600 sq ft. While calculating the LTCG, the assessee had adopted the sale price at the rate of ` 3,000/- per sq ft and thereafter deducted therefrom the commission charges paid and the indexed cost of land and also the construction cost of 5736 sq ft at the rate of `1900 per sq ft. The ld. CIT has construed from these facts that on completion of the project, the assessee-HUF had exchanged 40% of the land for 14,864 sq ft of built-up area during the period relevant to ITA 953/11 :- 3 -: assessment year 2006-07 and out of this it had sold a portion admeasuring 5736 sq ft @ ` 3,000/- per sq ft and returned LTCG thereon. With reference to sub-clause(i) of section 2(47) of the Act, in which definition of transfer in relation to any capital asset has been given, the ld. CIT has finally come to the conclusion, after show causing the assessee that the fair market value of the land sold at ` 14,30,000/- as on 1.4.1982, was not backed by any proof. The assessee claimed the benefit of section 54F by deducting ` 1,08,98,400/- from the sale price of the portion of the constructed area while calculating the capital gain. The benefit of section 54F was not allowed as it had owned more than one residential unit other than the new asset at the time of transfer because the assessee-HUF was already in possession of constructed flats measuring 14,864 sq ft area. According to the ld. CIT, this issue was not at all considered by the Assessing Officer and hence, on this ground the assessment order has become erroneous and also prejudicial to the interests of the Revenue. Therefore, he has set aside the assessment with a direction to re- examine all these issues in accordance with the relevant provisions of law, especially section 2(47) of the Act, and accordingly, to compute the capital gains that had arisen in the hands of the assessee. He further directed that the Assessing Officer shall, while calculating ITA 953/11 :- 4 -: deduction u/s 54F, consider the value of only one residential unit subject to fulfilling the other conditions prescribed thereunder.
3. The main grievance of the assessee is against the direction given by the ld. CIT to the Assessing Officer that while computing the exemption u/s 54F particularly with respect to mentioning that the assessee is entitled to this deduction in respect of only one flat. The view of the assessee is that it [the assessee-HUF] is entitled to this benefit qua more than one flat for its (family) members the flats being contiguous, this should be considered to be a residential unit and would thus be entitled to exemption u/s 54F in the light of the following decisions: CIT vs Jeo B.Fernandez 322 ITR (St.) P. 8 CIT vs D. Ananda Basappa 180 Taxman Part 1 Prabhanandam Parikant vs ITO 22 SOT (Hyd) 58 CIT vs Kolandas Chancholmal 155 ITR 273 (Guj)
4. The ld.AR submitted that the assessee has fulfilled all the conditions as contained in section 54F of the Act. The main grudge of the ld.AR is against the direction given by the ld. CIT. In this regard, the assessee has taken Ground Nos.10 to 12, which read as under:
10. The Commissioner of Income-tax erred in holding that the appellant owned more than residential unit other than the new asset at the time of transfer. The appellant does not own any residential flat at the time of transfer of the land to the developer and the residential unit came into existence only when the developer handed over the flats to the appellant and not at the time of transfer of the capital asset. ITA 953/11 :- 5 -:
11. The appellant therefore submits that the order of the Commissioner of Income-tax is not correct in directing the assessing officer to deduct the indexed cost of the entire land from the value of built up area received and to allow deduction under section 54F in respect of only one flat.
12. The appellant therefore prays that the Hon'ble Income-tax Appellate Tribunal may be pleased to cancel the order of the Commissioner of Income-tax passed under section 263 as not valid in law or in the alternative the Hon'ble Income-tax Tribunal may be pleased to cancel the specific directions given to the assessing officer as invalid and not sustainable in law and render justice.
5. It was pleaded before us that the order of the ld. CIT may be sustained, but the direction given with regard to the computation of capital gains should be expunged/removed from his order. On the other hand, the ld.DR has relied on the order of the ld. CIT.
6. After hearing both sides, we are of the considered opinion that the ld. CIT , while setting aside the assessment order on a particular issue, cannot bind the Assessing Officer with certain directions. The issue has to be left open, but the direction can be given to examine the issue at length after considering the view point of the assessee. Invariably, the Assessing Officer treats the directions given in the order of the higher authority as dictum and does not fairly decide the issue afresh as per law. The ld. CIT cannot direct the Assessing Officer to decide an issue in a particular manner without giving free hand to deal with the same as per his conscious and prudence, which is against ITA 953/11 :- 6 -: the known cannons of law. Therefore, we delete the directions given by the ld. CIT in this regard and leave this issue open to the wisdom of the Assessing Officer to decide the same afresh after hearing the version of the assessee without being guided by the directions given in the ld. CITs order. Consequently, we allow this appeal, in part, by modifying the ld. CITs order, for statistical purposes only.
7. In the result, the appeal is partly allowed for statistical purposes. Order pronounced in the open court on 23.6.2011. Sd/- Sd/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER Dated: 23rd June, 2011 Copy to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR