Arivudai Nambi Pari, CHENNAI V. ITO, CHENNAI

CO 75/CHNY/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8666 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 27-05-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 25-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TN BETGERIJCIT
• Assessee Lawyers: GOPALAKRISHNANC A
• Keywords: Source of fund; Fair market value
• Section: 143(3); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH CHENN AI BEFORE DR.O.K.NARAYANAN, VICE PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER .. ITA NO.387/MDS./2013 ASSESSMENT YEAR:2009-10 & C.O. NO.75/MDS./2013 INCOME TAX OFFICER, BUSINESS WARD XIV(3), ROOM NO.617, 6 TH FLOOR, NEW BLOCK, 121, NUNGAMBAKKAM HIGH ROAD, CHENNAI 600 034. VS. SHRI ARIVUDAI NAMBI PARI, 19,COSMOS CLUB ROAD, BALAJI NAGAR,NEAR RATHNAM NAGAR, THENI 625 531. PAN AFOPP 2744 P (APPELLANT) (RESPONDENT/ CROSS OBJECTOR ) DEPARTMENT BY : SHRI T.N.BETGERI,JCIT ASSESSEE BY : SHRI GOPALAKRISHNAN,C.A. DATE OF HEARING : 27.05.13 DATE OF PRONOUNCEMENT : 12 .06.13 O R D E R PER VIKAS AWASTHY JUDICIAL MEMBER : THE APPEAL HAS BEEN FILED BY THE REVENUE ASSAILI NG THE ORDER OF THE CIT(A)-XII, CHENNAI DATED 09.11.2012. THE ASSESSEE HAS FILED CROSS OBJECTIONS IN SUPPORT OF T HE IMPUGNED ORDER OF CIT(A). ITA. 387 /MDS/13 2 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 ON 30.09.2009 ADMITTING AN INCOME OF ` 14,35,710/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143( 2) WAS ISSUED TO THE ASSESSEE ON 24.08.2010. THE ASSESSEE ALONG WITH HIS MOTHER AND BROTHER HAD INHERITED ONE RESIDENTIAL HO USE FROM HIS FATHER. THE SAID HOUSE WAS SOLD BY THE CO-OWNERS ON 03.06.08 FOR CONSIDERATION OF ` 2,30,00,000/- ( LAND VALUE ` 83,69,400/- AND BUILDING VALUE ` 1,46,30,600/-). ALL THE CO-OWNERS HAD ONE THIRD SHARE IN THE PROPERTY. SUBSEQUENTLY, A NEW RESIDENTIAL HOUSE WAS PURCHASED IN THE NAME OF MRS.LALITA ARIVU DAINAMBI, MOTHER OF THE ASSESSEE AND THE ASSESSEE CLAIMED EXE MPTION UNDER SECTION 54 TO THE EXTENT OF ` 26,77,727/- I.E. PROPORTIONATE SHARE IN THE INHERITED PROPERTY. THE ASSESSING OFF ICER DISALLOWED THE CLAIM OF ASSESSEE ON THE GROUND THAT THE PROPER TY PURCHASED IS NOT IN THE NAME OF ASSESSEE. APART FROM THE ABO VE, THE ASSESSING OFFICER MADE CERTAIN OTHER ADDITIONS IN T HE RETURN FILED BY THE ASSESSEE VIDE ASSESSMENT ORDER DATED 22.12.2 011. AGGRIEVED AGAINST THE ASSESSMENT ORDER PASSED UND ER SECTION 143(3) OF THE ACT, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) ASSAILING ASSESSMENT ORDER ON THR EE COUNTS (I) DETERMINATION OF FAIR MARKET VALUE (FMV) OF INHERITED ITA. 387 /MDS/13 3 RESIDENTIAL HOUSE AS ON 01.04.1981; (II) CLAIM OF DEDUCTION UNDER SECTION 54 OF THE AC T; AND (III) UNACCOUNTED COMMISSION RECEIPTS 3. THE CIT(A) DISMISSED THE FIRST GROUND OF APPEAL OF ASSESSEE. AS REGARDS THE SECOND GROUND RELATING TO DEDUCTIO N UNDER SECTION 54 OF THE ACT, THE CIT(A) HELD AS UNDER:- THE PROVISIONS OF SECTION 54 DO NOT SPECIFY THAT T HE NEW HOUSE SHOULD BE IN THE NAME OF THE ASSESSEE ONLY. IT ONLY STIPULATES THAT THE SALE PROCEEDS/CAPITAL GAINS SHO ULD BE UTILIZED IN PURCHASE / CONSTRUCTION OF A NEW RESIDE NTIAL HOUSE. IN THE INSTANT CASE, IT IS CLEAR THAT THE S ALE PROCEEDS OF THE OLD PROPERTY ARE UTILIZED IN PURCHASE/CONSTR UCTION OF A NEW RESIDENTIAL HOUSE. HENCE, THE REQUISITE CONDITI ON UNDER SECTION 54 IS FULFILLED. THE CIT(A) FURTHER OBSERVED THAT NO DOUBT, THE NEW PROPERTY IS ACQUIRED IN THE NAME OF THE ASSESSEES MOTHER. HOW EVER, AS EXPLAINED BY THE ASSESSEE, THE SOURCES OF FUNDS FOR THE PURCHASE/CONSTRUCTION OF A NEW HOUSE CAME FROM THE SALE PROCEEDS OF THE OLD (ORIGINAL) HOUSE. THE SOURCE O F FUNDS FOR PURCHASE/CONSTRUCTION OF A NEW HOUSE CAN CLEARLY BE TRACED TO THE SALE PROCEEDS OF THE OLD PROPERTY. ITA. 387 /MDS/13 4 THE THIRD GROUND RAISED BY THE ASSESSEE RELATED T O THE COMMISSION EARNED BY THE ASSESSEE TO THE TUNE OF ` 5,87,453/-, BUT OMITTED TO DECLARE THE SAME IN HIS RETURN OF IN COME. THE ASSESSING OFFICER BROUGHT THE SAME TO TAX AS UNACCO UNTED COMMISSION INCOME. THE CONTENTION OF THE ASSESSEE WAS THAT BY OVERSIGHT THE SAME WAS NOT DECLARED IN THE RETURN O F INCOME. EVEN THE EXPENSES INCURRED ( ` 4 LAKHS) WERE NOT CLAIMED BY THE ASSESSEE. THE ASSESSEE CONTENDED THAT THE NET ASS ESSABLE INCOME FROM THE COMMISSION BROKERAGE WAS ` 1,87,483/- ONLY. THE CIT(A) WAS OF THE VIEW THAT SINCE THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE THE DOCUMENTS IN SUPPORT OF TH E EXPENDITURE INCURRED FOR EARNING THE COMMISSION IN COME. THE CLAIM OF ASSESSEE RELATING TO THE EXPENSES IS NOT T ENABLE. HOWEVER, THE CIT(A) RESTRICTED THE EXPENDITURE TO 5 0% OF THE GROSS COMMISSION RECEIVED. THUS, THE TAXABLE NET CO MMISSION INCOME DETERMINED BY THE CIT(A) WAS ` 2,93,472/-. AGGRIEVED AGAINST THE ORDER OF CIT(A), THE REVENUE HAS COME IN SECOND APPEAL BEFORE THE TRIBUNAL. THE ASS ESSEE HAS ALSO FILED CROSS OBJECTION SUPPORTING THE ORDER OF CIT(A). 4. SHRI T.N.BETGERI, JCIT APPEARING ON BEHALF OF T HE DEPARTMENT, SUBMITTED THAT THE CIT(A) HAS ERRED IN DIRECTING THE ITA. 387 /MDS/13 5 ASSESSING OFFICER TO ALLOW THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 54 OF THE ACT WHEN THE NEW PROPERTY P URCHASED WAS IN THE NAME OF ASSESSEES MOTHER AND NOT IN THE NAME OF THE ASSESSEE. LD. D.R CONTENDED THAT SINCE THE PROPERT Y PURCHASED IS NOT IN THE NAME OF ASSESSEE, THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION UNDER SECTION 54 OF THE ACT. THE S ECOND GROUND RAISED BY THE D.R WAS WITH RESPECT TO RESTRICTING T HE EXPENDITURE TO 50% OF THE TOTAL COMMISSION EARNED BY THE ASSESS EE. LD. D.R SUBMITTED THAT THE ASSESSEE HAD NOT DISCLOSED THE C OMMISSION RECEIPTS TO THE TUNE OF ` 5,87,483/- AND THE EXPENDITURE INCURRED ON EARNING OF THE COMMISSION IS A FARCE. THE ENTIRE AMOUNT OF UN-ACCOUNTED COMMISSION SHOULD HAVE BEEN TAXED. 5. ON THE OTHER HAND, SHRI A.GOPALAKRISHNAN, C.A ., APPEARING ON BEHALF OF THE ASSESSEE STRONGLY SUPPOR TED THE ORDER OF THE CIT(A). THE A.R SUBMITTED THAT IT HA S COME ON RECORD THAT THE SOURCE OF FUNDS FOR PURCHASE OF A N EW HOUSE WERE RAISED FROM THE SALE PROCEEDS OF THE INHERITED PROP ERTY. LD. A.R FURTHER SUBMITTED THAT ALTHOUGH THE SOLD PROPERTY W AS INHERITED BY THE ASSESSEE, HIS BROTHER AND MOTHER, BUT THE ASSES SEE AND HIS BROTHER CHOSE TO PURCHASE NEW PROPERTY IN THE NAME OF THEIR MOTHER AND THUS, ARE ENTITLED TO CLAIM DEDUCTION UN DER THE ITA. 387 /MDS/13 6 PROVISIONS OF SEC.54 OF THE ACT. IN ORDER TO SUPPOR T HIS SUBMISSIONS, THE A.R RELIED ON THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. V.NATARAJA N REPORTED AS [2006] 287 ITR 271 (MAD.). AS REGARDS THE SECOND GROUND OF APPEAL, THE A.R SUBMITTED THAT THE ORDER OF THE CIT (A) IN RESTRICTING THE EXPENDITURE INCURRED IN EARNING THE COMMISSION TO 50% OF THE COMMISSION IS JUST AND REASONABLE, THERE FORE, THE ORDER OF THE CIT(A) SHOULD BE SUSTAINED. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE PARTIES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELO W. IT IS AN UNDISPUTED FACT THAT THE SALE CONSIDERATION OF THE OLD HOUSE HAS BEEN UTILIZED BY THE ASSESSEE AND OTHER CO-OWNERS I N PURCHASE OF NEW RESIDENTIAL HOUSE IN THE NAME OF MRS.LALITA ARIVUDAINAMBI, WHO WAS ONE OF THE CO-OWNERS OF THE OLD PROPERTY. A PERUSAL OF SEC.54 WOULD SHOW THAT THE CONDITION LAID DOWN IN S ECTION 54 IS THAT NEW RESIDENTIAL PROPERTY SHOULD HAVE BEEN ACQU IRED WITHIN THE TIME SPECIFIED IN SUB-SECTION(1). THE SECTION DOES NOT MANDATE THAT NEW RESIDENTIAL PROPERTY SHOULD BE PUR CHASED IN THE NAME OF ASSESSEE. THE A.R HAS RELIED ON THE DEC ISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF V.NATARAJA N(SUPRA). IN THE SAID CASE, ASSESSEE/HUSBAND SOLD HOUSE PROPERTY IN HIS ITA. 387 /MDS/13 7 NAME AT BANGALORE AND PURCHASED A PROPERTY AT MADRA S IN THE NAME OF HIS WIFE. THE ASSESSEE CLAIMED EXEMPTION U NDER SECTION 54 OF THE ACT. THE HONBLE HIGH COURT UPHE LD THE FINDINGS OF THE TRIBUNAL AND HELD THAT THE ASSESSEE IS ENTITLED TO CLAIM EXEMPTION UNDER SECTION 54 OF THE ACT. 7. WE FIND THAT THE CASE OF THE ASSESSEE IS SQUAREL Y COVERED BY THE AFOREMENTIONED DECISION OF THE HONBLE JURIS DICTIONAL HIGH COURT. WE ARE ALSO IN CONSONANCE WITH THE FINDINGS AND REASONING OF THE CIT(A), WHICH ARE REPRODUCED IN PA RA-3 HEREIN ABOVE. SINCE THE FINDINGS OF CIT(A) ARE WELL REASO NED AND JUSTIFIED, WE NEED NOT REPEAT THE SAME, IN VIEW OF THE JUDGEMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE O F CIT V. K.Y.PILLIAH AND SONS REPORTED AS [1967] 63 ITR 411 (SC) AND THEREAFTER FOLLOWED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. GLOBAL VANTEDGE P. LTD. REPORTED AS [2013] 354 ITR 21(DEL.). ACCORDINGLY, THIS GROUND OF APPEAL OF RE VENUE IS DISMISSED BEING DEVOID OF MERIT. THE SECOND GROUND OF APPEAL OF REVENUE IS WITH REG ARD TO RESTRICTING THE EXPENDITURE INCURRED ON EARNING UNA CCOUNTED COMMISSION. WE DO NOT FIND ANY INFIRMITY IN THE O RDER OF THE CIT(A). THE CIT(A) HAS TAKEN A REASONABLE VIEW THA T SOME ITA. 387 /MDS/13 8 EXPENDITURE MUST HAVE BEEN INCURRED IN EARNING THE COMMISSION INCOME AND HAS DETERMINED THE EXPENDITURE AS 50% OF THE GROSS COMMISSION RECEIPTS I.E ` 5,87,483/-. THUS, THE NET TAXABLE COMMISSION INCOME EARNED BY THE ASSESSEE IS ` 2,93,742/-. THE ORDER OF THE CIT(A) IS JUSTIFIED. THERE IS NO GROUN D TO INTERFERE WITH THE SAME. ACCORDINGLY, THIS GROUND OF APPEAL O F REVENUE STANDS DISMISSED. 8. TO CONCLUDE, THE APPEAL OF REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON WEDNESDAY , THE 12 TH JUNE, 2013 AT CHENNAI. SD/- SD/- (DR.O.K.NARAYANAN) (VIKAS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 12 TH JUNE, 2013. K S SUNDARAM COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE ITA. 387 /MDS/13 9