SHANTILAL M JAIN, DOMBIVALI V. DCIT CIR 3, KALYAN

CO 174/MUM/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0416 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 21-08-2014
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA NO. 4 330 / MUM/20 1 3 ( / ASSESSMENT YEAR : 200 9 - 10 ) DCIT, CIRCLE - 3, 2 ND FLOOR, RANI MANSION MURBAD ROAD, KALYAN(W), THANE - 421301 VS. SHRI SHANTILAL JAIN, PROP - M/S RAKESH JEWELLERS, KETAN APARTMENT, PHAKE ROAD, DOMBIVLI (E) - 421201 ./ ./ PAN/GIR NO. : A A RPJ 3584 B ( / APPELLANT ) .. ( / RESPONDENT ) AND CO NO. 174 / MUM/201 4 ( / ASSESSMENT YEAR :200 9 - 10 ) SHRI SHANTILAL JAIN, PROP - M/S RAKESH JEWELLERS, KETAN APARTMENT, PHAKE ROAD, DOMBIVLI (E) - 42 1201 VS. DCIT, CIRCLE - 3, 2 ND FLOOR, RANI MANSION MURBAD ROAD, KALYAN(W), THANE - 421301 ./ ./ PAN/GIR NO. : AA RPJ 3584 B ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI NEIL PHILIP /ASSESSEE BY : SHRI N.A.KULKARNI / DATE OF HEARING : 1 9 /03/2015 / DATE OF PRONOUNCEMENT 25 / 03/2015 / O R D E R PER R.C.SHARMA (A.M) : TH E REVENUE HAS FILED APPEAL AND THE ASSESSEE HAS FILED CROSS O BJECTION AGAINST THE ORDER OF CIT(A) DATED 25 - 1 - 2013 FOR THE ASSESSMENT YEARS 200 9 - 2010. ITA NO . 4330/13 & CO NO.174/14 2 2. THE GRIEVANCE OF THE REVENUE RELATES TO CIT(A)S ACTION FOR ALLOWING CLAIM OF EXEMPTION U/S.54F IN RESPECT OF 2 FLATS PURCHA SED BY THE ASSESSEE. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. B IEF FACTS OF THE ISSUE UNDER CONSIDERATION ARE THAT DURING THE YEAR, THE ASSESSEE HAS SHOWN TO HAVE EARNED THE LONG TERM CAPITAL GAINS OF RS. 43,61,308/- AND CLAIMED THE DEDUCTI ON U/S. 54F ON ACCOUNT OF THE PURCHASE OF THE FOLLOWING RESIDENTIAL FLATS : - (I) FLAT NO. A - 501, NEW JALARAM KRUPA CHS LTD., NEHRU ROAD, B /H GANESH MANDIR, DOMBIVLI (E) (II) FLAT NO. A - 502, NEW JALARAM KRUPA CHS LTD., NEHRU ROAD, B /H GANESH MANDIR, DOM BIVLI (E) (III) FLAT NO. A - 401, NEW JALARAM KRUPA CHS LTD., NEHRU ROAD, B /H GANESH MANDIR, DOMBIVLI (E) THE AO DID NOT ACCEPT THE ABOVE CLAIM OF EXEMPTION U/S. 54F IN RESPECT OF THE PURCHASE OF ABOVE THREE RESIDENTIAL FLATS . ACCORDING TO THE AO, THE AS SESSEE HAS PURCHASED THREE PROPERTIES FOR WHICH THREE SEPARATE AGREEMENTS WERE MADE. ASSESSEE CLEARLY VIOLATES THE PROVISIONS OF SECTION 54F UNDER WHICH ASSESSEE HAS CLAIMED DEDUCTION . 4. BY THE IMPUGNED ORDER, THE CIT(A) ALLOWED ASSESSEES CLAIM FOR DEDUC TION IN RESPECT OF TWO FLATS NAMELY, A - 501 & 502, WING - A, OUT OF THREE FLATS BY OBSERVING AS UNDER : - 4.4. A PLAIN READING OF THE PROVISIONS OF SECTION 54(1) SHOWS THAT WHEN AN INDIVIDUAL ASSESSEE OR HINDU UNDIVIDED FAMILY SELLS A RESIDENTIAL HOUSE OR LAN DS APPURTENANT THERETO IN THE CONTEXT OF SECTION 54(1) AND DESIRES TO AVAIL OF THE BENEFIT OF SECTION 54, HE WILL HAVE TO PURCHASE OR CONSTRUCT A RESIDENTIAL HOUSE WITHIN THE STIPULATED PERIODS BY INVESTMENT OF THE CAPITAL GAIN. THE PHRASE 'A RESIDENTIAL H OUSE' CLEARLY CONVEYS THAT FOR GETTING THE BENEFITS OF SECTION 54, THE CAPITAL GAIN CAN BE INVESTED IN ONLY ONE SUCH HOUSE ITA NO . 4330/13 & CO NO.174/14 3 AND NOT MORE THAN ONE. UNDER SECTION 54F ALSO ONLY ONE RESIDENTIAL HOUSE IS CONTEMPLATED UPTO A PERIOD OF ONE YEAR. 4.5. IN THE INS TANT CASE, THE APPELLANT HAS PURCHASED TWO HOUSES I.E. FLAT NO. A - 501, AND 502, WING 'A' IN NEW JALARAM KRUPA CHS LTD., NEHRU ROAD, B/H GANESH MANDIR, DOMBIVLI (E) AND ANOTHER FLAT NO. B - 401, WING 'B' IN THE SAME SOCIETY. THE APPELLANT CLAIMS THAT THE ABOV E THREE FLATS HAVE BEEN COMBINED TO MAKE ONE RESIDENTIAL UNIT WITH COMMON ENTRANCE AND KITCHEN AND THEREFORE HE IS ELIGIBLE FOR EXEMPTION U/S. 54F. 4.6. THE ABOVE CONTENTIONS OF THE APPELLANT CAN BE PARTLY ACCEPTED. AS FAR AS FLAT NO. A - 501, AND 502, WIN G 'A' ARE CONCERNED, THEY ARE LOCATED SIDE BY SIDE IN THE SAME WING AND CAN BE COMBINED TO MAKE SINGLE RESIDENTIAL UNIT WITH COMMON ENTRANCE AND KITCHEN. BUT THE THIRD FLAT NO. B - 401, THOUGH IN THE SAME SOCIETY BUT IS LOCATED IN THE OTHER, WING 'B' AND ON A DIFFERENT FLOOR AND HOW THIS CAN BE LINKED TO OTHER TWO FLATS IN DIFFERENT WING AND DIFFERENT FLOOR, IS DIFFICULT TO UNDERSTAND. EVEN, IF, THE CONTENTION OF THE APPELLANT IS ACCEPTED THAT THE TWO WINGS ARE. INTER - LINKED, HOW THE TWO FLATS CAN BE INTER - LI NKED IN TWO DIFFERENT WINGS, THAT TOO ON DIFFERENT FLOORS IS AGAIN DIFFICULT TO UNDERSTAND. 4.7. IN THE PROVISIONS OF SECTION 54F, AS MENTIONED ABOVE, THE PHRASE LA RESIDENTIAL HOUSE CONVEYS THAT FOR GETTING THE BENEFITS OF THE CAPITAL GAIN CAN BE INVEST ED IN ONLY ONE SUCH HOUSE AND NOT MORE THAN ONE. THE LEGISLATIVE INTENT OF THE SECTION IS THAT IN LITERAL MEANING A RESIDENTIAL UNIT SHOULD BE ONE RESIDENTIAL UNIT ONLY. 'WHEN WORDS USED ARE NOT AMBIGUOUS, LITERAL MEANING HAS TO BE APPLIED [DENTAL COUNCIL OF INDIA VS. HARI PRAKASH (2001) 8 SCC 61]. THERE IS NO QUESTION OF INTERPRETATION IF THE WORDS OF THE STATUTE ARE CLEAR. GRAMMATICAL CONSTRUCTION HAS BEEN ACCEPTED AS THE GOLDEN RULE [RAGHUNANDAN SARAN ASHOK SARAN VS. PEAREY LAL AIR 1986 SC 1682]. 4.8. THERE ARE MANY JUDICIAL PRONOUNCEMENTS ON THE ISSUE WHEREIN IT HAS BEEN HELD THAT FOR THE PURPOSES OF EXEMPTION U/S. 54F, THERE HAS TO BE ONE RESIDENTIAL UNIT. EVEN, IF, TWO ADJACENT FLATS ARE COMBINED BUT WITH ONE COMMON ENTRANCE AND ONE KITCHEN, THE EXEM PTION U/S. 54F WILL BE AVAILABLE TO ANY PERSON. 4.9. IN THE CASE OF ITO VS SUSHILA M. JHAVERI (2007) 107 ITD 327 (MUM) ( SPECIAL BENCH), WHILE DEALING WITH AN IDENTICAL ISSUE, IT WAS HELD THAT 11 IF THE ASSESSEE HAS PURCHASED MORE THAN ONE UNIT AND MADE INTO ONE UNIT FOR THE PURPOSE OF RESIDENCE, IT WILL BE CONSIDERED AS ONE HOUSE FOR CLAIMING EXEMPTION U/S. 54 OR 54F AS THE CASE MAYBE.' 4.10. SIMILARLY, IN THE ACIT VS SUDHA GURTOO (2011) 048 SOT 0393(DEL - TRIB), THE ITAT HAS HELD AS UNDER : - 'WHAT T HE ASSESSEE HAD, IN FACT, WAS ONE RESIDENTIAL UNIT AND NOT TWO, MAKING THE ASSESSEE ELIGIBLE FOR CLAIMING DEDUCTION UNDER SECTION 54FAND THAT EVEN IF IT WERE TO BE HELD OTHERWISE, I. E. THAT ITA NO . 4330/13 & CO NO.174/14 4 THERE WERE TWO DIFFERENT RESIDENTIAL UNITS, THE ASSESSEE WOULD BE ELIGIBLE FOR THE DEDUCTION UNDER SECTION 54F, SINCE BOTH THESE UNITS WERE ADJACENT TO EACH OTHER, BEING GROUND FLOOR AND THE FIRST FLOOR OF THE SAME PREMISES. ' 4.11. AS PER THE PLAN OF THE RESIDENTIAL HOUSES PLACED ON RECORD BY THE AR OF THE APPELLANT, THE FLAT NO. A - 501, AND 502, WING 'A'. ARE AT THE S' FLOOR OF THE BUILDING AND THEY ARE LOCATED SIDE BY SIDE IN THE SAME WING. IN THE RESIDENTIAL HOUSE PLAN IN RESPECT OF THESE TWO FLATS, THEY ARE SHOWN AS JOINED TO MAKE ONE SINGLE RESIDENTIAL UNIT. THERE FORE, THE CONTENTION OF THE APPELLANT CAN BE ACCEPTED THAT THESE TWO FLATS HAVE BEEN COMBINED TO MAKE SINGLE RESIDENTIAL UNIT WITH COMMON ENTRANCE AND KITCHEN, WHICH IS APPARENT FROM THE COPY OF THE PLAN PLACED ON RECORD BY THE APPELLANT. BUT, AS FAR AS TH E FLAT NO. B - 401, WHICH IS LOCATED IN THE OTHER WING 'B' AND ON A DIFFERENT FLOOR I.E 4TH FLOOR, IN RESPECT OF THIS FLAT THE CONTENTION OF THE APPELLANT CANNOT BE ACCEPTED THAT THE SAME IS ALSO PART OF THE SINGLE RESIDENTIAL UNIT ALONG WITH THE FLAT NO. A - 501, AND 502, WHICH ARE ON THE 5TH FLOOR OF WING 'A' OF THE SOCIETY. THE APPELLANT HAS NOT BEEN ABLE TO PLACE ANY EVIDENCE ON RECORD TO PROVE THAT THIRD FLAT NO. 401 WHICH IS LOCATED ON A DIFFERENT FLOOR AND IN OTHER WING 'B', IS LINKED INTERNALLY WITH THE OTHER TWO FLATS LOCATED ON 5TH FLOOR IN THE WING 'A' TO MAKE THE THREE FLATS INTO A SINGLE RESIDENTIAL UNIT. 4.12. IN VIEW OF THE ABOVE, THE CLAIM OF EXEMPTION U/S. 54F IN RESPECT OF THE FLAT NO.A - 501, AND 502, WING 'A', SINCE THESE ARE ADJACENT FLATS A ND COMBINED TO MAKE A SINGLE FLAT WITH COMMON ENTRANCE AND KITCHEN, SHOULD BE ACCEPTED AND EXEMPTION U/S.54F TO THE EXTENT OF THE INVESTMENT OF CAPITAL GAINS IN THESE TWO FLATS HAVE TO BE ALLOWED. THE AO IS DIRECTED TO ALLOW THE EXEMPTION U/S. 54F ACCORDIN GLY. NO EXEMPTION HAS TO BE ALLOWED IN RESPECT OF THIS FLAT NO. B - 401, LOCATED IN WING B. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT OUT OF THREE FLATS SO PURCHASED BY UTILISING THE SALE PROFITS OF ANOTHER RESIDENTIAL HOUSE, THE CIT(A) HAS A LLOWED THE BENEFIT OF SECTION 54F IN RESPECT OF INVESTMENT IN TWO ADJACENT FLATS ON THE SAME FLOOR WHICH CAN BE COMBINED TO MAKE A SINGLE RESIDENTIAL UNIT WITH COMMON ENTRANCE AND KITCHEN. AFTER FOLLOWING JUDICIAL PRONOUNCEMENT RENDERED BY THE SPECIAL BENC H OF THE TRIBUNAL IN CASE OF SUSHILA M. JHAVERI (2007) ITD 327 (MUM) AND THE DECISION OF THE DELHI TRIBUNAL IN THE CASE OF SUDHA GURTOO (2011) 048 SOT 0393, THE CIT(A) ALLOWED THE EXEMPTION U/S.54F IN RESPECT OF FLAT NO. A - 501 & 502 AT WING - A. THE DETAILED FINDING RECORDED BY CIT(A) AT PARA 4.4 TO 4.12 HAVE NOT BEEN CONTROVERTED BY BRINING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ITA NO . 4330/13 & CO NO.174/14 5 ORDER OF CIT(A) FOR ALLOWING EXEMPTION U/S.54F IN RESPECT OF TWO ADJOINING FLAT S SITUATED AT WING - A AND COMBINED TO MAKE A SINGLE FLAT WITH COMMON ENTRANCE AND KITCHEN. 6. THE CROSS OBJECTION IS JUST SUPPORTIVE TO THE ACTION OF THE CIT(A). AS WE HAVE ALREADY DISMISSED THE APPEAL OF THE REVENUE, THEREFORE, THE CROSS OBJECTION FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS. 7 . IN THE RESULT, APPEAL OF THE REVENUE AS WELL CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 25 /03/ 201 5 . SD/ - SD/ - ( ) ( SANJAY GA RG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 25/03 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//