DEVDAS NAIK, MUMBAI V. ITO 21(1)(1), MUMBAI

CO 69/MUM/2011

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6005 (ITAT-MUMBAI)
• Duration Of Justice: 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 24-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN KUMAR
• Assessee Lawyers: K S CHOKSHI
• Keywords: Cost of acquisition; Valuation report
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D : MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA. NO. 3785/MUM/2010 ASSESSMENT YEAR 2007-2008 I.T.O.WARD 21 (1) (1) MUMBAI. VS. SHRI DEVDAS NAIK MUMBAI 56 PAN AABPN0674N (APPELLANT) (RESPONDENT) C.O. NO. 69/MUM/2011 ARISING OUT OF ITA. NO. 3785/MUM/2010 ASSESSMENT YEAR 2007-2008 SHRI DEVDAS NAIK MUMBAI 56 PAN AABPN0674N VS. I.T.O.WARD 21 (1) (1) MUMBAI. (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI SHRAVAN KUMAR (D.R.) FOR ASSESSEE : SHRI K.S. CHOKSHI ORDER PER D. MANMOHAN, V.P. 1. THESE CROSS-APPEALS ARE DIRECTED AGAINST THE OR DERS PASSED BY THE CIT(A)-32, MUMBAI AND THEY PERTAIN TO THE ASSESSMENT YEAR 2007-2008. APPEAL FILED BY THE REVENUE WAS LIS TED FOR HEARING TODAY WHEREIN THE ONLY ISSUE IS WITH REGARD TO THE ELIGIBILITY TO CLAIM DEDUCTION UNDER SECTION 54 OF THE ACT, REFERABLE TO THE COST OF TWO FLATS PURCHASED BY THE ASSESSEE. 2. THE CASE OF THE REVENUE IS THAT THE EXPRESSION A RESIDENTIAL HOUSE MEANS ONLY ONE FLAT AND DEDUCTIO N IS NOT ELIGIBLE UNDER SECTION 54 ON THE COST OF PURCHASE OF TWO FLA TS THOUGH THEY ARE LOCATED ADJACENT TO EACH OTHER. 2 2.1. FACTS IN SHORT ARE THAT THE ASSESSEE ALONG WI TH HIS WIFE SOLD ONE JOINTLY HELD BUNGALOW FOR RS. 3 CRORES AND THEY BOUGHT THREE RESIDENTIAL FLATS, ONE IN ASSESSEES NAME, ANOTHER IN THE NAME OF THE ASSESSEE IN THE JOINT NAMES OF SELF AND HIS WIFE AN D THIRD IN THE NAME OF HIS WIFE. THE ASSESSEE CLAIMED DEDUCTION UNDER S ECTION 54 ON PURCHASE OF THE TWO FLATS IN WHICH HE IS EITHER A S OLE OWNER OR THE JOINT OWNER. IT IS NOT IN DISPUTE THAT TWO INDEPENDENT RE SIDENTIAL UNITS WERE PURCHASED FROM TWO DIFFERENT SELLERS. THE CASE OF T HE ASSESSEE WAS THAT THE TWO RESIDENTIAL UNITS WERE USED AS ONE CON TIGUOUS UNIT AND HENCE IT HAS TO BE CONSIDERED AS ONE FLAT FOR THE P URPOSE OF CONSIDERING THE CLAIM OF DEDUCTION UNDER SECTION 54 OF THE ACT. ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD NO T GIVEN ANY PROOF TO SHOW THAT TWO UNITS ARE CONVERTED INTO ONE UNIT. 3. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THAT THE TWO UNITS WERE COMBINED INTO ONE WITH ONE KITCHEN A ND A COMMON ENTRY, AND USED BY WIFE AND HUSBAND, IN WHICH EVENT IT CANNOT BE CONSIDERED AS TWO INDEPENDENT FLATS. IT WAS ALSO CO NTENDED THAT SIZE OF EACH FLAT WAS AROUND 500 SFT AND HENCE THE ASSESSEE HAD TO COMBINE BOTH THE FLATS TO UTILISE IT AS ONE UNIT. EVEN AS P ER THE AGREEMENT BOTH THESE FLATS BEAR THE SAME CTS NO., SITUATED IN THE FIRST FLOOR OF THE SOCIETY, WHICH IS SUFFICIENT TO PROVE THAT TWO SMAL L ADJACENT FLATS WERE COMBINED TOGETHER WITH AN INTENTION TO USE IT AS ON E UNIT. A COPY OF THE PLAN ALONG WITH ITS LAY OUT WAS FURNISHED BEFOR E THE LEARNED CIT(A). 4. LEARNED CIT(A) ACCEPTED THE CONTENTION OF THE A SSESSEE AND IN THIS REGARD OBSERVED IN PARA 6.3 AS UNDER : I HAVE CAREFULLY CONSIDERED THE ISSUE AND PERUSED THE DECISIONS CITED BY THE LEARNED A.R. TO SUPPORT HIS POINT OF VIEW. THERE IS UNIFORMITY OF JUDICIAL OPINION TO TH E EFFECT THAT WHERE SEVERAL SELF CONTAINED DWELLING UNITS WH ICH ARE CONTIGUOUS AND SITUATE IN THE SAME COMPOUND AND WITHIN COMMON BOUNDARIES AND HAVING UNITY OF STRUCT URE COULD BE REGARDED S A ONE HOUSE. IT HAS BEEN SPECIF ICALLY 3 HELD THAT TWO CONTIGUOUS FLATS IN TO ONE SINGLE RES IDENTIAL PREMISE SHOULD BE TREATED AS A RESIDENTIAL HOUSE. U NDER THESE CIRCUMSTANCES, THE APPELLANT IS CLEARLY ELIGI BLE FOR CLAIMING DEDUCTION U/S. 54 IN RESPECT OF ENTIRE CONSIDERATION INVESTED IN THE SAID FLAT VIDE TWO AGREEMENTS. WITHOUT PREJUDICE, EVEN IF THE APPELLAN T HAD MADE AN INVESTMENT IN TWO OR MORE SEPARATE UNITS AN D COMBINED THEM TOGETHER FOR THE PURPOSE OF USING IT AS SINGLE DWELLING UNIT WITH COMMON ENTRIES, LIVING AR EA AND KITCHEN, INVESTMENT IN TWO OR MORE SUCH UNITS WOULD ALSO QUALIFY FOR CLAIMING DEDUCTION U/S. 54. 5. IT MAY ALSO BE NOTICED THAT THERE ARE CERTAIN O THER MINOR ISSUES IN THE APPEAL FILED BY THE ASSESSEE WHICH WE RE DECIDED AGAINST THE ASSESSEE ON WHICH THE ASSESSEE DID NOT PREFER A N APPEAL. 6. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) RE VENUE PREFERRED AN APPEAL CONTENDING, INTER ALIA, THAT TH E LEARNED CIT(A) WAS NOT JUSTIFIED IN ALLOWING DEDUCTION UNDER SECTION 5 4 OF THE ACT IN RESPECT OF TWO FLATS ON WHICH ASSESSEE MADE INVESTM ENT AND IN THIS REGARD IT WAS POINTED OUT THAT ASSESSEE HAD PURCHAS ED TWO DIFFERENT FLATS UNDER TWO DIFFERENT PURCHASE AGREEMENTS AND H ENCE, THEY COULD NOT BE TREATED AS ONE UNIT. 7. SINCE APPEAL FILED BY THE REVENUE WAS LISTED FO R HEARING, WE HAVE HEARD THE MATTER AT LENGTH. HAVING REGARD T O THE CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A), VIS--VIS THE CLAIM OF DEDUCTION UNDER SECT ION 54 OF THE I.T. ACT, DOES NOT CALL FOR ANY INTERFERENCE. ADMITTEDLY , ASSESSEE HAS FILED COPY OF THE GENERAL LAY OUT PLAN AS WELL AS THE INT ERNAL LAY OUT PLAN WITH REGARD TO FLAT NOS. 103 AND 104 WHEREIN IT IS INDICATED THAT THERE IS ONLY ONE COMMON KITCHEN FOR BOTH THE FLATS ADMEA SURING 1380 SQ. FEET. IT WAS ALSO SHOWN THAT ALL THE FLATS IN THE S AID BUILDING WERE CONSTRUCTED IN SUCH A WAY THAT TWO ADJACENT FLATS C AN BE COMBINED INTO ONE UNIT. ADMITTEDLY THE FLATS WERE CONVERTED INTO ONE UNIT AND USED FOR THE PURPOSE OF RESIDENCE OF THE ASSESSEE. NO EVIDENCE WHATSOEVER WAS BROUGHT ON RECORD BY THE REVENUE TO DISPROVE THE FINDINGS OF THE LEARNED CIT(A) THAT IT WAS USED AS A RESIDENTIAL HOUSE. 4 UNDER THE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE AND DISM ISS THE APPEAL FILED BY THE REVENUE. 8. AT THIS JUNCTURE, LEARNED COUNSEL, APPEARING ON BEHALF OF THE ASSESSEE, SUBMITTED THAT ASSESSEE HAS ALSO FILE D CROSS-OBJECTIONS WHICH WAS NOT CLUBBED AND POSTED ALONG WITH THE MAI N APPEAL. THEREFORE, WE HAVE CALLED FOR THE CROSS-OBJECTIONS FOLDER FROM THE REGISTRY. BY WAY OF A CROSS-OBJECTION ASSESSEE RAIS ED THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(A) HAS ERRED IN TAKING COST OF ACQUISITION @ 50% OF RS.1,50,000/- I.E. AT RS.75,000/- (BEING 50% SHARE) IN PLACE OF 50% OF VALUE AS ON 1-4-81 AS PER VALUATION REPORT OF RS.4,18,176/- (50% OF RS.8,36,352/-). SAME BE ALLOWED AS COST AND CORRESPONDING INDEX COST BE TAKEN AT RS.21,70,333/-. 2. THE LEARNED CIT(A) HAS ERRED IN ALLOWING TRANSFER FEE AS EXPENSES AT RS.12,500/- IN PLACE OF RS.1,25,000/- BEING AMOUNT PAID TO SOCIETY. SAME BE ALLOWED. 8.1. IT IS NOTICED THAT THERE WAS A DELAY IN FILIN G THE CROSS OBJECTION. AS COULD BE NOTICED FROM FORM 36-A, ASSE SSEE HAS RECEIVED THE APPEAL MEMO FILED BY THE REVENUE ON 6-3-2011 AN D HENCE LAST DATE FOR FILING CROSS-OBJECTION EXPIRES ON 5-4-2011 , WHEREAS THE ASSESSEE FILED CROSS OBJECTION ON 20-5-2011. ASSESS EE VIDE LETTER DATED 17-5-2011, EXPLAINED THE REASONS FOR THE DELAY IN F ILING THE APPEAL AND REQUESTED FOR CONDONATION OF DELAY. LEARNED COUNSEL SUBMITTED THAT THERE WAS A DELAY OF NEARLY 45 DAYS AND FOR THE REA SONS STATED IN THE PETITION THE DELAY DESERVES TO BE CONDONED. HOWEVER , HE ADMITTED THAT IN THE EVENT OF DISPOSING OF THE APPEAL IN FAVOUR O F THE ASSESSEE THERE IS NO NEED TO SERIOUSLY PRESS FOR CONSIDERING THE C ROSS-OBJECTIONS FILED BEFORE US. 5 9. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED COUNSEL, APPEARING ON BEHALF OF THE ASSESSEE AS WEL L AS THE LEARNED D.R. IN THIS REGARD. IT IS NOT IN DISPUTE THAT SUBS TANTIAL RELIEF WAS GRANTED BY THE LEARNED CIT(A) BY ACCEPTING THE CONT ENTION OF THE ASSESSEE THAT IT IS ENTITLED TO FURTHER DEDUCTION O F RS.58,11,000/- REFERABLE TO THE COST OF PURCHASE OF ANOTHER FLAT W HICH WAS JOINTLY USED AS ONE UNIT AND ALSO BY ACCEPTING THE CLAIM OF DEDU CTION UNDER SECTION 54EC AT RS. 16 LAKHS. BEARING IN MIND THAT SUBSTANTIAL RELIEF WAS GRANTED BY THE LEARNED CIT(A), CROSS-OBJECTIONS FILED BY THE ASSESSEE ARE NOT SERIOUSLY PRESSED FOR CONSIDERATIO N. AT ANY RATE, THERE WAS A DELAY IN FILING THE CROSS-OBJECTIONS. UNDER T HE CIRCUMSTANCES, THE CROSS-OBJECTIONS ARE DISMISSED AS UN-ADMITTED. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED WHEREAS THE CROSS-OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED AS UN-ADMITTED. ORDER PRONOUNCED ACCORDINGLY IN THE OPEN COURT. SD/- SD/- (T.R.SOOD) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATE 25 TH MAY, 2011 VBP/- COPY TO 1. I.T.O.WARD 21 (1) (1), MUMBAI. 2. SHRI DEVDAS NAIK, FLAT NOS. 103-104, CLASSIUQUE APTS, GULMOHAR CROSS ROAD-1, OPP. JUHU GALLI, JVPD SCHEME, MUM BAI 56 PAN AABPN0674N. 3. CIT(A)-32, MITTAL COURT, B WING, R.NOS. 13 & 1 4, 3 RD FLOOR, NARIMAN POINT, MUMBAI 400 021. 4. CIT, CITY-21, MUMBAI 5. DR D BENCH 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI.