SHRI MADAN LAL SABOO, Jaipur V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3, Jaipur

ITA 1220/JPR/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7594 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 24-10-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 54F; 54; 2

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH JESK LH0 KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PA L RAO, JM VK;DJ VIHY LA- @ ITA NO. 1220/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2014-15 SHRI MADAN LAL SABOO D-6, KALWAR SCHEME, GOPAL BARI, JAIPUR. CUKE VS. THE DCIT, CIRCLE-3, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ADGPS 6681 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI AMIT KOTHARI (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SMT. NEENA JEPH (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 16/07/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 23/07/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 18.09.2019 OF THE LD. CIT(A)-I, JAIPUR FOR THE ASSE SSMENT YEAR 2014-15. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ORDE R PASSED BY THE LD. A.O., WHICH IS BAD IN LAW AND BAD ON FACTS. 2. THE LD. CIT(A) HAS ERRED IN SUSTAINING DISALLOWA NCE OF DEDUCTION CLAIMED U/S 54 AMOUNTING TO RS. 21,46,014 /- ON ACCOUNT OF INVESTMENT MADE IN RESIDENTIAL HOUSE. TH E CLAIM OF ITA NO. 1220/JP/2018 SHRI MADAN LAL SABOO VS. DCIT 2 APPELLANT U/S 54 WAS ALLOWED U/S 54F WHICH WAS BAD IN LAW AND BAD ON FACTS AND DESERVED TO BE ALLOWED U/S 54. 3. THE APPELLANT PRAY FOR SUITABLE COSTS. 4.THE APPELLANT CRAVES LIBERTY TO ADD, AMEND, ALTER , AND MODIFY ANY OF THE GROUND OF APPEAL ON OR BEFORE ITS HEARIN G BEFORE YOUR HONOUR. 2. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT R EQUIRE ANY SPECIFIC ADJUDICATION AS THE ASSESSEE HAS NOT ADVAN CED ANY ARGUMENT AS TO HOW THE ORDER PASSED BY THE AO AS WELL AS THE IM PUGNED ORDER OF THE LD. CIT(A) IS BAD IN LAW. 3. GROUND NO. 2 IS REGARDING DISALLOWANCE OF DEDUCT ION CLAIMED U/S 54 OF THE I.T. ACT. THE ASSESSEE IS AN INDIVIDUAL A ND FILED HIS RETURN OF INCOME ON 18.05.2015 DECLARING TOTAL INCOME AT RS. 73,34,060/-. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO NOTED THA T THE ASSESSEE HAS SOLD TWO PROPERTIES BEING SHOPS NO. D-5 AND D-6, KA LWAR YOJANA, NEAR RAILWAY STATION, JAIPUR FOR A CONSIDERATION OF RS. 89,31,000/- EACH VIDE REGISTERED SALE DEED DATED 24.06.2013. THE ASSESSEE HAS ALSO PURCHASED A RESIDENTIAL PROPERTY I.E. FLAT NO. 704, SOMDUTT LAND MARK, HAWA SADAK, CIVIL LINES, JAIPUR ON 29.01.2014 FOR A CONSIDERATION OF RS. 1,11,51,000/-. IT WAS FURTHER OBSERVED BY THE AO TH AT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS. 1,16,63,500/- U/S 54 OF TH E ACT. THE AO ASKED ITA NO. 1220/JP/2018 SHRI MADAN LAL SABOO VS. DCIT 3 THE ASSESSEE TO EXPLAIN HIS ELIGIBILITY FOR DEDUCTI ON U/S 54 OF THE I.T. ACT. IN REPLY THE ASSESSEE SUBMITTED THAT THE SAID PROPERTY WAS ESSENTIALLY A RESIDENTIAL HOUSE HOWEVER, SOME PORTI ON OF THE SAME WAS BEING USED AS COMMERCIAL THEREFORE, THE ASSESSEE SU PPORTED HIS CLAIM OF DEDUCTION U/S 54 OF THE ACT FOR THE INVESTMENT O F THE CAPITAL GAIN IN PURCHASE OF RESIDENTIAL HOUSE. THE AO DID NOT ACCEP T THE SUBMISSION OF THE ASSESSEE AND HELD THAT WHEN THE ASSESSEE HAS SO LD A COMMERCIAL PROPERTY BEING SHOP AND THEN THE CAPITAL GAIN ARISI NG FROM THE SALE OF COMMERCIAL PROPERTY IS ELIGIBLE ONLY FOR DEDUCTION U/S 54F AND NOT U/S 54 OF THE ACT. ACCORDINGLY, THE AO ALLOWED THE DEDU CTION U/S 54F OF THE ACT AND THEREBY MADE AN ADDITION OF RS. 21,46,014/- . THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT( A) BUT COULD NOT SUCCEED. 4. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE GROUND FLOOR OF THE SAID PROPERTY IS HAVING SHOPS B EARING NO. D-5 AND D-6 WHEREAS THE MEZZANINE FLOOR AND FIRST FLOOR ARE THE RESIDENTIAL AND THEREFORE, CAPITAL GAIN ARISING FROM THE SALE OF TH E RESIDENTIAL PORTION AND LAND APPURTENANT TO THE RESIDENTIAL PORTION IS ELIGIBLE FOR DEDUCTION U/S 54 OF THE ACT APART FROM THE CAPITAL GAIN ARISI NG FROM THE SALE OF SHOP IS ELIGIBLE FOR DEDUCTION U/S 54F OF THE ACT. THE LD. AR HAS ITA NO. 1220/JP/2018 SHRI MADAN LAL SABOO VS. DCIT 4 SUBMITTED THAT THE PROPERTY WHICH WAS SOLD WAS A MI XED PROPERTY AND IT IS COMPRISING OF THE COMMERCIAL AS WELL AS RESIDENT IAL PROPERTY. THE CONDITIONS OF SECTION 54 OF THE ACT IS THAT IF THER E IS SALE OF RESIDENTIAL UNIT, AND THE NEW INVESTMENT IN RESIDENTIAL HOUSE I S BEING MADE, THE BENEFIT OF DEDUCTION U/S 54 IS ALLOWABLE TO THE ASS ESSEE. THE CONDITIONS PRESCRIBED U/S 54 OF THE ACT ARE SATISFIED IN THE P RESENT CASE THEREFORE, THE BENEFIT OF THE SAID SECTION CANNOT BE DENIED TO THE ASSESSEE. HE HAS REFERRED TO THE MAP OF THE PROPERTY IN QUESTION WHI CH ARE ALSO ANNEXED TO THE SALE DEED AND SUBMITTED THAT THE SAME CLEARL Y INDICATES THAT AT THE FIRST FLOOR THERE ARE ROOMS, KITCHEN, AND BATHR OOMS WHICH IS BEING USED AS A RESIDENTIAL UNIT. THUS, THE LD. AR HAS CO NTENDED THAT THE LD. CIT(A) HAS WRONGLY OBSERVED THAT THE SAME IS NOT A RESIDENTIAL UNIT. IN SUPPORT, HE HAS RELIED UPON THE FOLLOWING DECISIONS :- 1. ITO VS. P.C. RAMAKRISHNA (HUF) 107 TTJ (CHENNAI) 35 1. 2. ADARSH KUMAR SWARUP VS. DCIT . 3. VENKATA RAMANA UMAREDDY VS. DCIT (2013) 155 TTJ (HY D) 234. 4. C.N. ANANTHARAM VS. ACIT (2015) 275 CTR (KAR.). THUS, THE LD. AR HAS SUBMITTED THAT THE CAPITAL GA IN ARISING FROM SALE OF LAND APPURTENANT TO A RESIDENTIAL HOUSE IS ELIGIBLE TO EXEMPTION U/S 54 OF THE ACT. THE EXPRESSION BEING BUILDING OR LAND APPURTENANT THERETO ITA NO. 1220/JP/2018 SHRI MADAN LAL SABOO VS. DCIT 5 USED IN SECTION 54 OF THE ACT DOES NOT NECESSARY RE QUIRES THE WHOLE OF THE RESIDENTIAL HOUSE TO BE SOLD. THEREFORE, EVEN I F THE ASSESSEE HAS SOLD A RESIDENTIAL HOUSE AS WELL AS NON RESIDENTIAL PROPERTY AND INVESTED THE SALE CONSIDERATION FOR PURCHASE OF NEW RESIDENT IAL HOUSE THEN THE DEDUCTION U/S 54 AS WELL AS U/S 54F OF THE ACT IS ELIGIBLE PROPORTIONATELY ON THE CAPITAL GAIN ARISING FROM RE SIDENTIAL AS WELL AS NON RESIDENTIAL PROPERTY. THE LD. AR HAS FURTHER SU BMITTED THAT THE OBJECTIVE OF SECTION 54F AS WELL AS SECTION 54 OF T HE ACT IS TO PROVIDE IMPETUS TO THE HOUSING CONSTRUCTION AND SO LONG AS THE PURPOSE OF HOUSING CONSTRUCTION IS ACHIEVED SUCH HYPER TECHNIC ALITY SHOULD NOT IMPEDE BENEFIT WHICH THE LEGISLATURE HAS ALLOWED. S ECTIONS 54 AND 54F ARE THE BENEFICIAL PROVISIONS WHICH ARE INTERPRETED LIBERALLY IN FAVOUR OF THE EXEMPTION/DEDUCTION TO THE TAXPAYER AND DEDUCTI ON SHOULD NOT BE DENIED ON HYPER TECHNICAL GROUND. 5. ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT AS PER SALE DEED WHAT WAS SOLD BY THE ASSESSEE ARE TWO SHOPS BEARING NO. D-5 AND D-6 KALWAR YOJANA, NEAR RAILWAY STATION, JAIPUR. THE LD . CIT(A) HAS GIVEN A FINDING THAT THE PLOT NO. D-5 AND D-6 WERE ALLOTTED BY THE URBAN IMPROVEMENT TRUST, JAIPUR TO THE ASSESSEE FOR CONST RUCTION OF SHOPS ON WHICH CONSTRUCTION WAS MADE BY THE ASSESSEE ON THE GROUND FLOOR, ITA NO. 1220/JP/2018 SHRI MADAN LAL SABOO VS. DCIT 6 MEZZANINE AND FIRST FLOOR. ONCE, THE PLOTS WERE ALL OTTED FOR CONSTRUCTION OF SHOPS WHICH ARE NON RESIDENTIAL PLOTS THEN THE C APITAL GAIN ARISING FROM SALE OF TWO PLOTS ALONG WITH CONSTRUCTION IN T HE SHAPE OF SHOPS AND OTHER CONSTRUCTION AT FIRST FLOOR IS NOT ELIGIBLE F OR DEDUCTION U/S 54 OF THE ACT AND THE AO HAS RIGHTLY ALLOWED THE CLAIM OF DED UCTION 54F OF THE ACT. THE CONSTRUCTION MADE BY THE ASSESSEE ABOVE TH E SHOPS IS UNAUTHORIZED CONSTRUCTION AND THEREFORE, THE PLOTS IN QUESTION ARE COMMERCIAL FOR CONSTRUCTION OF SHOP CANNOT BE CONSI DERED AS APPURTENANT TO SUCH UNAUTHORIZED CONSTRUCTION. HE H AS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. AS PER SALE DEED THE ASSESSEE S TATED TO HAVE SOLD TWO SHOPS BEARING NO. D-5 AND D-6 ALONG WITH SOME O THER CONSTRUCTION AT MEZZANINE AND FIRST FLOOR. IT IS NOT IN DISPUTE THAT THE PLOTS OF LAND IN QUESTION WERE ALLOTTED TO THE ASSESSEE FOR COMMERCI AL USE AND CONSTRUCTION OF SHOPS WHICH WERE CONSTRUCTED BY THE ASSESSEE. THEREFORE, THE COMMERCIAL USE OF THE PLOTS WERE FUL LY UTILIZED BY THE ASSESSEE FOR CONSTRUCTION OF SHOPS. FURTHER, THE CO NSTRUCTION BEING MEZZANINE AND FIRST FLOOR ABOVE THE SHOPS IS NOT AS PER ALLOTMENT OF THE PLOTS IN QUESTION AND THEREFORE, SUCH UNAUTHORIZED CONSTRUCTION CANNOT ITA NO. 1220/JP/2018 SHRI MADAN LAL SABOO VS. DCIT 7 BE TREATED AS SEPARATE UNIT IGNORING THE AUTHORIZED CONSTRUCTION OF SHOPS. THE SAID CONSTRUCTION AT THE MOST WOULD PAR TAKE THE CHARACTER AND COLOUR ONLY FROM THE AUTHORIZED CONSTRUCTION BE ING SHOPS. EVEN AS PER THE MAP FILED BY THE ASSESSEE IT CAN BE SEEN TH AT THERE IS NO INDEPENDENT OR SEPARATE ACCESS TO THE MEZZANINE AND FIRST FLOOR OF THE PROPERTY BUT THE ACCESS TO MEZZANINE AND FIRS FLOOR IS ONLY FROM THE SHOPS AT GROUND FLOOR THEREFORE, THE EXTRA CONSTRUC TION MADE BY THE ASSESSEE ABOVE THE SHOP CANNOT BE TREATED AS SEPARA TE AND INDEPENDENT UNIT AS IT HAS NO ACCESS EXCEPT THROUGH THE SHOPS. HENCE THE SAID CONSTRUCTION IS PART AND PARCEL OF THE SHO P AND THEREFORE, CANNOT PART TAKE AN INDEPENDENT CHARACTER OF RESIDE NTIAL UNIT. THE LD. CIT(A) HAS CONSIDERED THIS ISSUE IN PARA (III) & (I V) AS UNDER:- (III) I HAVE DULY CONSIDERED THE SUBMISSIONS OF TH E APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IT IS NOTED THAT THE PLOT NOS. D-5 AND D-6 WERE ALLOTTED BY THE URBAN IMPROVEMENT TRUST, JAIPUR TO THE APPELLANT FOR CONS TRUCTION OF SHOPS ON WHICH CONSTRUCTION WAS MADE BY THE APPELLA NT ON THE GROUND MEZZANINE AND FIRST FLOOR. IT WAS CLAIMED BY THE APPELLANT THAT THE FIRST FLOOR WAS A RESIDENTIAL HOUSE AND TH EREFORE, IT IS ENTITLED FOR DEDUCTION U/S 54 OF THE ACT. IT MAY BE MENTIONED THAT BOTH THE ABOVE PROPERTIES WERE ADJACENT TO EACH OTH ER AND WERE SOLD BY THE APPELLANT ON THE SAME DATE AND HAVING T HE SIMILAR CONSTRUCTION. I HAVE EXAMINED THE MAPS OF THE PROPE RTIES ENCLOSED WITH THE SALE DEEDS AND IT APPEARS THAT TH E MEZZANINE FLOOR WAS A PART OF THE SHOP ONLY AND WAS NOT HAVIN G ANY ITA NO. 1220/JP/2018 SHRI MADAN LAL SABOO VS. DCIT 8 INDEPENDENT EXISTENCE. FURTHER, IT IS NOTED FROM TH ESE MAPS THAT THE ROOMS ON THE FIRST FLOOR WERE OF VERY SMALL SIZ E AND THERE WAS NO BATHROOM. IT APPEARS THAT THE FIRST FLOOR WAS NO THING BUT THE EXTENSION OF THE SHOPS ON THE GROUND FLOOR AS A PAR T OF THESE SHOPS WAS OF DOUBLE HEIGHT. IT IS FURTHER NOTED THA T THESE TWO PROPERTIES WERE SOLD BY THE APPELLANT TO M/S SUN ST ONE ENGINEERING INDUSTRIES. PVT. LTD. IN WHICH SHRI CHA NDRA SHEKHAR SABOO, THE SON OF THE APPELLANT WAS A DIRECTOR. FUR THER, THERE IS NOTHING IN THE SALE DEEDS WHICH MAY ESTABLISH THAT THE FIRST FLOOR OF THE PROPERTY WAS TREATED AS RESIDENTIAL HOUSE BY THE SUB- REGISTRAR FOR THE PURPOSES OF CHARGING STAMP DUTY. THESE FACTS ESTABLISH THAT THE PROPERTIES UNDER CONSIDERATION W ERE COMMERCIAL PROPERTIES ONLY AND WERE BOUGHT BY THE B UYER FOR COMMERCIAL PURPOSES ONLY. (IV) THEREFORE, IN VIEW OF THE ABOVE DISCUSSION AND LOOKING TO THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE AO WAS JUSTIFIED IN NOT ALLOWING DEDUCTION U/S 54 O F THE ACT AS CLAIMED BY THE APPELLANT AND HENCE, I DO NOT FIND A NY REASON TO INTERFERE WITH THE FINDINGS OF THE AO AS RECORDED I N THE ASSESSMENT ORDER. THE FACTS AS RECORDED BY THE LD. CIT(A) HAVE NOT BE EN DISPUTED BY THE ASSESSEE BUT THE ONLY CONTENTION AND GRIEVANCE OF T HE ASSESSEE IN THE PRESENT APPEAL IS THAT THE LD. CIT(A) HAS NOT APPRE CIATED THE FACTS AS WELL AS LAW ON THE POINT. WE FIND THAT THE DECISION RELIED UPON THE LD. AR OF THE ASSESSEE ARE NOT ON THE QUESTION OF THE C LASSIFICATION OF ASSET BEING RESIDENTIAL OR COMMERCIAL BUT THOSE ARE ONLY ON THE ISSUE OF TERM A RESIDENTIAL HOUSE WHETHER ONE OR MORE THAN ONE OR EVEN UNDIVIDED SHARE IN THE RESIDENTIAL HOUSE. THEREFORE, THERE WA S NO DISPUTE OR ITA NO. 1220/JP/2018 SHRI MADAN LAL SABOO VS. DCIT 9 QUESTION IN THOSE CASES REGARDING THE NATURE OF THE EXISTING ASSEST SOLD BY THE ASSESSEE. IN THE CASE IN HAND THE ASSESSEE H AS NOT DISPUTED THAT THE PLOT OF LAND WERE ALLOTTED TO THE ASSESSEE FOR COMMERCIAL PURPOSE AND THE ASSESSEE CONSTRUCTION THE SHOPS ON THESE PL OTS AS PER ALLOTMENT MADE BY THE URBAN IMPROVEMENT TRUST, JAIPUR. HENCE, IF ANY EXTRA CONSTRUCTION IS MADE BY THE ASSESSEE ABOVE THE SHOP S THE SAME WILL NOT BE REGARDED AS A DIFFERENT AND INDEPENDENT UNIT BEI NG A RESIDENTIAL HOUSE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD . CIT(A). THE DECISIONS RELIED UPON THE LD. AR OF THE ASSESSEE ARE NOT APPL ICABLE IN THE FACTS OF THE PRESENT CASE AS DISCUSSED ABOVE. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/07/2019. SD/- SD/- JESK LH0 KEKZ FOT; IKY JKO (RAMESH. C. SHARMA) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:-23/07/2019. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI MADAN LAL SABOO, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CIRCLE-3, JAIPUR. ITA NO. 1220/JP/2018 SHRI MADAN LAL SABOO VS. DCIT 10 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1220/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR