ACIT, Circle-13(1), Hyderabad V. Sri B. Surendra Choudary, Hyderabad

ITA 1263/HYD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6240 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 27-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment; Capital Gains
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 54F; 251; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1263/HYD/2014 ASSESSMENT YEAR: 2007-08 ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 13(1), HYDERABAD. VS. SRI B. SURENDRA CHOUDARY, HYDERABAD. PAN AEDPB 1557 L () (RESPONDENT) REVENUE BY : SHRI A. SITARAMA RAO ASSESSEE BY : SHRI A. SRINIVAS DATE OF HEARING : 03-01-2017 DATE OF PRONOUNCEMENT : 18-01-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)- V, HYDERABAD, DATED 31/01/2014 FOR AY 2007- 08 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD.CIT(A) ERRED IN ALLOWING THE EXEMPTION U /S 54 OF THE ACT PLACING RELIANCE ON JURISDICTIONAL HIGH COURT D ECISION IN THE CASE OF CIT VS. LATE MIRGULAM KHAN165 ITR 228(AP) W ITHOUT CONSIDERING THE FACT THAT THE SAME IS NOT APPLICABL E TO THE PRESENT CASE. 2. THE LD.CIT(A) ERRED IN ALLOWING THE EXEMPTION U/ S 54 OF THE ACT BY PLACING RELIANCE ON JURISDICTION ITAT DECISI ON IN THE CASE OF ACIT VS.N.RAM KUMAR 138 ITD 317 HYD WITHOUT CONS IDERING THE FACT THAT THE ITAT RELIED UPON THE DECISION OF CIT VS. LATE MIR GULAM ALI KHAN WHILE DISPOSING THE CASE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A FILM PRODUCER WHO FILED HIS RETURN OF INCOME FOR THE ASS T. YEAR 2007-08 ON 25-03-09 DECLARING A TOTAL INCOME OF RS.14,12,860/- . SURVEY 2 ITA NO. 1263/H/2014 SRI B. SURENDRA CHOUDARY OPERATIONS WERE CONDUCTED IN THE PREMISES OF THE AS SESSEE ON 29-09- 2010. IN THE INCRIMINATING MATERIAL IMPOUNDED IT HA D BEEN DETECTED THAT THE ASSESSEE HAD INCOME FROM CAPITAL GAINS, BU T FAILED TO DISCLOSE THE SAME IN THE RETURN FILED BY HIM. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.R. STATED THAT HE FIL ED THE RETURN OF INCOME IN RESPONSE TO NOTICE U/S 148 ON 23-12-2010 DECLARING INCOME OF RS. 45,01,230. THE ASSESSMENT WAS COMPLETED ON 2 8/12/2010 DETERMINING THE TOTAL INCOME AT RS. 8,04,64,114/- B Y MAKING THE FOLLOWING ADDITIONS: I) DISALLOWANCE OF EXPENDITURE RS. 20,91,192/- II) LONG TERM CAPITAL GAINS RS. 1,87,54,873/- III) UNEXPLAINED INVESTMENT U/S 69 RS. 5,51,16,81 9/-. 3. ON APPEAL BEFORE THE CIT(A), THE CIT(A) SUSTAINE D THE I) DISALLOWANCE OF EXPENDITURE TO THE EXTENT OF RS. 13 ,85,015/- AND DELETED THE ADDITIONS MADE UNDER THE HEADS II) LONG TERM CAPITAL GAINS AND III) UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. 4. THE REVENUE IS IN APPEAL BEFORE US AGAINST THE D ELETION OF ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAINS OF R S. 1,87,54,873/-. 5. BRIEFLY THE FACTS RELATING TO THE GROUND RAISED BY THE REVENUE ARE THAT WHILE CALCULATING THE CAPITAL GAINS ON THE SAL E OF THE PROPERTY, THE ASSESSEE HAD ADOPTED THE SALE VALUE OF RS. 2,36,70, 000 AS PER THE SUB REGISTRAR'S VALUE, BY APPLYING THE PROVISIONS O F SECTION 5OC OF THE ACT AND ARRIVED AT THE CAPITAL GAINS AT RS 1,82 ,76,379. BUT THE A.O. HAS ADOPTED THE SALE VALUE OF THE PROPERTY AT RS. 2,30,17,000 AS PER THE AMOUNT MENTIONED ON THE REVERSE OF PAGE 2 O F THE SALE DEED DATED 10-11-2006 AND ARRIVED AT THE CAPITAL GAINS O F RS. L,87,54,873. 5.1 SUBSEQUENTLY, THE ASSESSEE PURCHASED A PLOT AT JUBILEE HILLS ON 20-06-2007 IN THE NAME OF HIS WIFE MS.B. PADMAVA THI FOR A TOTAL CONSIDERATION OF RS. 2,74,79,025 WITHIN ONE YEAR FR OM THE DATE OF SALE 3 ITA NO. 1263/H/2014 SRI B. SURENDRA CHOUDARY OF PROPERTY ON 10-11-2006 AND CLAIMED DEDUCTION U/S 54F OF THE ACT. AS THE COST OF THE NEW PROPERTY IS MORE THAN THE CA PITAL GAINS ACCRUED TO THE ASSESSEE AMOUNTING TO RS. 1,82,76,239, THE A SSESSEE WAS OF THE VIEW THAT THERE WOULD NOT BE ANY CAPITAL GAINS AS PER THE PROVISIONS OF SECTION 54F OF THE ACT. HOWEVER, THE AO OBSERVED THAT THE QUESTION ARISES IS WHETHER THE EXEMPTION U/S 54 F IS APPLICABLE FOR THE PROPERTY PURCHASED IN THE NAME OF ASSESSEES WI FE INSTEAD IN THE NAME OF THE ASSESSEE. THE AO HELD THAT EXEMPTION U/ S 54F WAS ALLOWABLE ONLY IF THE PROPERTY WAS PURCHASED IN THE NAME OF THE ASSESSEE AND NOT IN THE NAME OF THE ASSESSEES WIFE , AND HENCE, DISALLOWED THE EXEMPTION U/S 54F. 6. BEFORE THE CIT(A) IT WAS CONTENDED THAT THE EXEM PTION U/S 54F IS AVAILABLE EVEN IF THE CAPITAL GAINS/SALE PROCEED S OF A PROPERTY ARE INVESTED IN PURCHASE OF ANOTHER PROPERTY IN THE NAM E OF FAMILY MEMBERS. FOR THIS PROPOSITION, HE RELIED ON THE FOL LOWING DECISIONS: 1. CIT VS. GURNAM SINGH, 327 ITR 278 (P&H) 2. CIT VS. NATARAJAN, 287 ITR 271 (MAD.) 3. CIT VS. LATE MIR GULAM ALI KHAN VS. CIT, 165 IT R 228 (A) 4. CIT VS. KAMAL WAHAL, 258 CTR 251 5. ACIT VS. N. RAM KUMAR, 138 ITD 317 (HYD.) 7. THE CIT(A) AFTER TAKING INTO CONSIDERATION RATIO S LAID DOWN IN THE AFORESAID CASES, HELD THAT THE ASSESSEE IS ELIG IBLE FOR EXEMPTION U/S 54F BY OBSERVING AS UNDER: 7.6 AS HELD BY VARIOUS HIGH COURTS, JURISDICTIONAL A.P. HIGH COURT AND JURISDICTIONAL ITAT, HYDERABAD, CITED ABO VE, SECTION 54F DOES NOT SPECIFICALLY STATE THAT THE SALE PROCE EDS OF A PROPERTY HAS TO BE RE-INVESTED IN THE NAME OF THE A SSESSEE ONLY. IT ONLY STIPULATES THAT THE ASSESSEE MUST HAVE RE-I NVESTED THE CAPITAL GAINS IN PURCHASE OF A NEW PROPERTY FOR CLA IMING DEDUCTION U/S 54F. THE DECISIONS OF CIT VS NATARAJA N, MADRAS HIGH COURT, CIT VS GULAM ALI (AP HIGH COURT), CIT V S KAMAL WAHAL, DELHI HIGH COURT ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE SINCE IN THE CASE OF CIT VS NATARAJAN AND CIT VS KAMAL WAHAL, THE HIGH COURTS HAVE CATEGORICALLY HELD THAT EXEMPTION U/S 54F HAS TO BE ALLOWED EVEN IF THE ASSESSEE PURC HASES THE 4 ITA NO. 1263/H/2014 SRI B. SURENDRA CHOUDARY PROPERTY IN THE NAME OF HIS WIFE. THE AP HIGH COURT IN THE CASE OF GULAM ALI HAS HELD THAT THE WORD 'ASSESSEE' MUST BE GIVEN A WIDE AND LIBERAL INTERPRETATION SO AS TO INCLUDE HI S LEGAL HEIRS ALSO. THEREFORE, RESPECTFULLY FOLLOWING THE DECISIO NS OF THE ABOVE HIGH COURTS, AS MENTIONED ABOVE, I HOLD THAT THE AP PELLANT IS ELIGIBLE FOR EXEMPTION U/S 54F AND DIRECT THE AO AC CORDINGLY. 8. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US. 9. LD. DR SUBMITTED THAT THE ASSESSEE HAS PURCHASED THE NEW ASSET IN THE NAME OF HIS WIFE AND PARTICULARLY WHEN THE WIFE IS HAVING INDEPENDENT INCOME AND HERSELF A FILM PRODUCER, IT IS NOT PROPER TO EXTEND THE BENEFIT U/S 54F TO HER. HE FURTHER SUBMI TTED THAT THE CASE LAWS RELIED ON BY THE CIT(A) ARE DISTINGUISHABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. HE RELIED ON THE ORDER OF AO. 10. LD. AR SUBMITTED THAT THE CASES RELIED UPON BY THE CIT(A) ARE RELEVANT TO THE ASSESSEES CASE AND COURTS HAVE HEL D THAT ASSESSEE IS JUSTIFIED TO INVEST IN THE NAME OF THE FAMILY ME MBER AND HE FURTHER RELIED ON THE DECISION IN THE CASE OF CIT VS. RAVIN DER KUMAR ARORA 342 ITR 38 [2012] (DELHI). 11. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE ASSESSEE HAS BROUGHT A PLOT IN THE N AME OF HIS WIFE. THE LD. CIT(A) HAS ALLOWED THE DEDUCTION U/S 54F RE LYING ON THE VARIOUS CASE LAWS WHEREIN THE DEFINITION OF THE TER M ASSESSEE IS EXTENDED TO THE FAMILY MEMBERS OF THE ASSESSEE AS S ECTION 54/54F ARE BENEFICIAL PROVISIONS. BUT, IN THE PRESENT CASE , THE LD. DR RAISED AN ISSUE, WHETHER THE WIFE WHO IS HAVING INDEPENDEN T INCOME CAN AVAIL THE BENEFIT U/S 54F. AFTER CAREFUL ANALYSIS O F THE CASE LAWS CITED BY BOTH THE COUNSELS, WE ARE OF THE VIEW THAT THE T ERM ASSESSEE WAS ALREADY DEFINED BY VARIOUS COURTS TO INCLUDE WIFE A ND OTHER DEPENDENT FAMILY MEMBERS. WHETHER TO EXCLUDE THOSE MEMBERS WH O ARE ALSO HAVING INDEPENDENT INCOME IS, IN OUR VIEW, MISPLACE D. WHAT IS RELEVANT IS WHETHER THE NET CONSIDERATION DERIVED F ROM THE PROPERTY IS 5 ITA NO. 1263/H/2014 SRI B. SURENDRA CHOUDARY INVESTED IN THE NEW ASSET. IN THE GIVEN CASE, THE A SSESSEE HAS INVESTED WHOLE OF THE NET CONSIDERATION IN THE NEW ASSET, HENCE, THE ASSESSEE IS ALLOWED TO GET THE BENEFIT U/S 54F. HER E THE BENEFIT IS EXTENDED TO THE ASSESSEE NOT TO THE WIFE OF THE ASS ESSEE. IT IS ABSOLUTELY IRRELEVANT TO QUALIFY THE STATUS OF THE WIFE OF THE ASSESSEE TO EXTEND THE BENEFIT U/S 54F. AS DISCUSSED, THE NE T CONSIDERATION FROM THE ORIGINAL ASSET IS INVESTED IN THE NEW ASSE T IS RELEVANT, WHETHER IN HIS OWN NAME OR IN THE NAME OF HIS FAMIL Y MEMBER WILL QUALIFY FOR THE DEDUCTION U/S 54F. IN OUR VIEW, THE NEW PROPERTY REGISTERED IN THE NAME OF ASSESSEES WIFE IS ELIGIB LE TO GET DEDUCTION U/S 54F BY RELYING ON THE DECISIONS OF CIT VS. NATA RAJAN AND CIT VS. KAMAL WAHAL (SUPRA). 11.1 WE FIND THAT THE ASSESSEE HAS BOUGHT A PLOT IN THE NAME OF HIS WIFE. THE DETAILS OF THE PLOT AND SUBSEQUENT EVENTS ARE NOT IN THE FILE OR NOT SUBSTANTIATED BY THE ASSESSEE. IT IS RELEVAN T WHETHER THE ASSESSEE HAS STARTED THE CONSTRUCTION ON THE PLOT O R SOLD AS IT IS, IS RELEVANT IN THIS CASE. THE BENEFIT U/S 54F IS AVAIL ABLE TO THE RESIDENTIAL PROPERTY. THE RESIDENTIAL PROPERTY INCL UDES BUILDING AND LAND APPURTENANT THERETO. THE ASSESSEE HAS BOUGHT O NLY THE PLOT, THE RESIDENTIAL PROPERTY WILL COMPLETE ONLY WHEN CONSTR UCTIONS COMPLETES IN THE PLOT SUBSEQUENTLY, WITHOUT WHICH, THE BENEFI T U/S 54F CANNOT BE GRANTED TO THE ASSESSEE. ON QUERY, THE LD. AR HAS S UBMITTED A LETTER CONFIRMING THE CONSTRUCTION OF RESIDENCE AND SUBMIT TED THE PROOF OF CONSTRUCTION AS BELOW: A) PERMISSION FROM MUNICIPAL CORPORATION B) NOC FOR BUILDING PLAN ISSUED BY JUBILEE HILLS CO OPERATIVE SOCIETY C) WATER CONNECTION PERMISSION D) PROPERTY ASSESSMENT RECEIPT E) ELECTRICITY BILL THE ABOVE DETAILS WERE FORWARDED TO THE LD. DR, WHO HAD VERIFIED THE DETAILS AND CONFIRMED THE SAME. CONSIDERING THE ABO VE DETAILS, WE ARE INCLINED TO TREAT THE ABOVE NEW ASSETS AS PART OF RESIDENTIAL 6 ITA NO. 1263/H/2014 SRI B. SURENDRA CHOUDARY PROPERTY AND ACCORDINGLY, IN OUR VIEW, THE ASSESSEE IS ELIGIBLE TO GET THE BENEFIT U/S 54F OF THE ACT. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 18 TH JANUARY, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAH MAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 18 TH JANUARY 2017 KV COPY TO:- 1) ACIT, CIRCLE 13(1), 2 ND FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2) SRI B. SURENDRA CHOUDARY, PROP: SRI SAI GANESH P RODUCTIONS, PLOT NO. 16B, ROAD NO. 7, FILM NAGAR, JUBILEE H ILLS, HYDERABAD. 3) CIT(A) - V, HYDERABAD 4 CIT 1, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE