Dr.Vontela Raja Reddy, Karimnagar V. ACIT, Circle-1, Karimnagar

ITA 128/HYD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6290 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 04-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: S RAMA RAO
• Section: 54F

Judgement Text

ITA NO 128 OF 2013 DR VONTELA RAJA REDDY KARIMNAGAR PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.128/HYD/2013 (ASSESSMENT YEAR: 2008-09) DR. VONTELA RAJA REDDY KARIMNAGAR PAN: AANPV 0359 A VS ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 1 KARIMNAGAR FOR ASSESSEE SHRI S. RAMA RAO FOR REVENUE SMT. U. MINICHANDRAN, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2008-09. IN THIS APPEAL THE ASSESSEE IS AGGRIEVED BY THE ORDER OF TH E CIT (A) IN CONFIRMING THE DISALLOWANCES OF THE CLAIM OF EXEMPT ION U/S 54F OF THE ACT MADE BY THE AO. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A N INDIVIDUAL, A MEDICAL PROFESSIONAL, FILED HIS RETUR N OF INCOME FOR THE A.Y 2008-09 ON 30.07.2009 DECLARING AN INCOME OF RS.49,20,540. THE RETURN WAS INITIALLY PROCESSED U/ S 143(1) OF THE I.T. ACT ON 29.03.2010. THEREAFTER, THE CASE WAS SE LECTED FOR DATE OF HEARING: 24.08.2016 DATE OF PRONOUNCEMENT: 02.09.2016 ITA NO 128 OF 2013 DR VONTELA RAJA REDDY KARIMNAGAR PAGE 2 OF 7 SCRUTINY UNDER CASS AND NOTICE U/S 143(2) OF THE AC T WAS ISSUED ON 24.08.2010. 2.1. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE A PPEARED AND PRODUCED THE BOOKS OF ACCOUNT AND ALSO FILED DE TAILS CALLED FOR FROM TIME TO TIME. AFTER CONSIDERING THE ASSESSEES CONTENTIONS, THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED A SUM OF RS.1,78,88,424 AS EXEMPT U/S 54F OF THE ACT AGAINST THE LONG TERM CAPITAL GAIN (LTCG) OF RS.2,26,45,167 RECEIVED FROM THE SALE OF PLOT NO.419, JUBILEE HILLS, HYDERABAD ON 31 .01.2008. HE OBSERVED THAT THE ASSESSEE HAS CLAIMED RS.1,78,88,4 24 TOWARDS PURCHASE OF A NEW ASSET. THEREFORE, THE AO ASKED TH E ASSESSEE TO PRODUCE THE COPY OF THE AGREEMENT FOR PURCHASE OF T HE SAID PROPERTY. ASSESSEE PRODUCED THE SALE DEED ON 19.08. 2008 AND ON GOING THROUGH THE SAME, AO NOTICED THAT THE ASSESSE E VIDE DOCUMENT NO.1925/2008 DATED 19.08.2008 HAS PURCHASE D A PROPERTY AND THE SCHEDULE-II THERETO GIVES THE DESC RIPTION OF THE PROPERTY AS BEARING DISTINCT NO.2 ON THIRD FLOOR IN ANAND CAPITAL IN SURVEY NO.77 COVERED BY MCH NO.7-1-79, 7-1-79/5, 7- 179/6, 7-1-79/7, 7-1-80, ADMEASURING 7222 SQ. FT IN CLUDING COMMON AREAS WITH 7 CAR PARKING LOTS IN THE CELLAR/ SUB-CELLAR, ALONG WITH UNDIVIDED SHARE OF LAND OF 75 SQ. YARDS OUT OF ITA NO 128 OF 2013 DR VONTELA RAJA REDDY KARIMNAGAR PAGE 3 OF 7 SCHEDULE-1 PROPERTY SITUATED AT AMEERPET, HYDERABAD . HE OBSERVED THAT THE SALE CONSIDERATION WAS SHOWN AT R S.1,10,00,000 AND A FURTHER INVESTMENT OF RS.80,81,500 TOWARDS TH E COST OF IMPROVEMENT OF THE SAID PROPERTY ALONG WITH STAMP D UTY OF RS.8,25,100. THUS, HE OBSERVED THAT THE ASSESSEE HA S OFFERED CAPITAL GAIN OF RS.47,56,743 TO TAX. DURING THE COU RSE OF THE ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE AS SESSEE HAS LEASED OUT THE PROPERTY TO M/S ISPACE GLOBAL SERVIC ES (INDIA) PVT. LTD, A PRIVATE LIMITED COMPANY, FOR A PERIOD OF 7 Y EARS AND 11 MONTHS W.E.F. 01.09.2008. OBSERVING THAT THE PROPER TY HAS BEEN GIVEN OUT FOR COMMERCIAL USE AND THAT THE EXEMPTION U/S 54F IS AVAILABLE ONLY IN THE CASE OF INVESTMENT IN A RESID ENTIAL BUILDING, THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE CLAIM OF INVESTMENT OF THE ASSESSEE IN THE NEW ASSET SHOULD NOT BE DISALLOWED. THE ASSESSEE REPLIED THAT MERE NON-RESI DENTIAL USE OF A PROPERTY WOULD NOT RENDER THE PROPERTY INELIGIBL E FOR EXEMPTION U/S 54F OF THE ACT AND IN SUPPORT OF THE SAME, THE A SSESSEE PLACED RELIANCE UPON THE DECISION OF THE TRIBUNAL A T DELHI IN THE CASE OF MAHAVIR PRASAD GUPTA VS. JT. COMMISSIONER O F INCOME TAX (2006) 100 TTJ (DEL) 1078. HOWEVER, THE AO WAS NOT CONVINCED WITH THE CONTENTIONS OF THE ASSESSEE. HE OBSERVED T HAT THE ITA NO 128 OF 2013 DR VONTELA RAJA REDDY KARIMNAGAR PAGE 4 OF 7 ASSESSEE HAD ACQUIRED A PART OF THE FLAT IN A COMMER CIAL COMPLEX INSTEAD OF RESIDENTIAL HOUSE PROPERTY AND THEREFORE , HELD THAT THE ASSESSEE HAS NOT FULFILLED THE BASIC CONDITION FOR CLAIMING EXEMPTION U/S 54F OF THE ACT. HE ACCORDINGLY BROUGHT THE ENTIRE AMOUNT OF CAPITAL GAIN TO TAX. AGGRIEVED, THE ASSES SEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO CONFIRMED THE ORDER O F THE AO AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE, WHILE REIT ERATING THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUT HORITIES BELOW, SUBMITTED THAT THE ASSESSEE HAD PURCHASED TH E ENTIRE FLOOR OF A COMPLEX WHICH IS MEANT FOR BOTH COMMERCIAL AND RESIDENTIAL USE AND MERELY BECAUSE THE ASSESSEE HAS GIVEN THE P ROPERTY ON RENT/LEASE FOR COMMERCIAL USE, THE ASSESSEE DOES NO T LOSE THE EXEMPTION U/S 54F OF THE ACT. IN SUPPORT OF HIS CONT ENTION, HE PLACED RELIANCE UPON THE DECISION OF THE TRIBUNAL A T HYDERABAD IN THE CASE OF N. REVATHI VS. INCOME TAX OFFICER, TO W HICH, ONE OF US, I.E., THE ACCOUNTANT MEMBER, IS THE SIGNATORY. 4. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND HAS DRAWN OUR A TTENTION TO THE MUNICIPAL PERMISSION REQUIRED FOR THE CONSTRUCTION OF THE ANAND ITA NO 128 OF 2013 DR VONTELA RAJA REDDY KARIMNAGAR PAGE 5 OF 7 CAPITAL COMPLEX AND SUBMITTED THAT THE PERMISSION ITSELF HAS BEEN GRANTED BY THE MUNICIPAL AUTHORITIES FOR CONST RUCTION OF A COMMERCIAL-CUM-RESIDENTIAL COMPLEX. THEREFORE, ACCO RDING TO HER, THE ASSESSEE HAS NOT INVESTED FOR PURCHASE OF A RES IDENTIAL HOUSE AND HENCE IS NOT ELIGIBLE FOR CLAIMING EXEMPTION FR OM CAPITAL GAIN U/S 54F OF THE ACT. 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS CLAIMED TH E EXEMPTION U/S 54F OF THE ACT, IN RESPECT OF THE INVESTMENT IN THE ENTIRE 3 RD FLOOR OF COMMERCIAL-CUM- RESIDENTIAL COMPLEX AT AMEE RPET. THE REQUIREMENT OF SECTION 54F OF THE ACT IS THAT THE AS SESSEE SHOULD INVEST IN PURCHASE OR CONSTRUCTION OF A RESIDENTIAL HOUSE PROPERTY. UNDISPUTEDLY, THE PROPERTY PURCHASED IS A COMMERCIA L-CUM- RESIDENTIAL PROPERTY. IT IS ALSO SEEN FROM THE MUNI CIPAL PERMISSION GRANTED FOR CONSTRUCTION OF THE PROPERTY THAT THE P ROPERTY PURCHASED BY THE ASSESSEE IS NOT EARMARKED FOR RESI DENTIAL USE. THEREFORE, THE DECISION ON WHICH THE ASSESSEE HAS P LACED RELIANCE UPON I.E. IN THE CASE OF N. REVATHI VS. INCOME TAX OFFICER (SUPRA) IS NOT APPLICABLE TO THE CASE BEFORE US AS IN THE S AID CASE, THE BUILDING WAS CONSTRUCTED FOR RESIDENTIAL USE WITH A LL AMENITIES LIKE KITCHEN, BATHROOM ETC., WHICH ARE NECESSARY FOR RES IDENTIAL ITA NO 128 OF 2013 DR VONTELA RAJA REDDY KARIMNAGAR PAGE 6 OF 7 ACCOMMODATION AND IN THESE CIRCUMSTANCES, IT WAS HE LD THAT EVEN IF IT IS USED AS A SCHOOL OR FOR ANY OTHER COMMERCI AL PURPOSE, IT CANNOT LOSE ITS CHARACTER AS THE RESIDENTIAL BUILDI NG SO AS TO CLAIM DEDUCTION U/S 54F OF THE ACT. IN THE CASE BEFORE US , AS SEEN FROM THE FLOOR PLAN ANNEXED TO THE SALE DEED, WE DO NOT FIND ANY BEDROOMS, KITCHEN, BATHROOMS ETC., IN THE AREA PURC HASED BY THE ASSESSEE. IT IS A MERE BARE STRUCTURE PURCHASED BY THE ASSESSEE AND THEREAFTER THE ASSESSEE HAS DIVIDED THE SAME IN TO SMALL UNITS TO GIVE IT ON LEASE FOR COMMERCIAL USE. THEREFORE, NEITHER HAS THE ASSESSEE PURCHASED A RESIDENTIAL ACCOMMODATION, NOR HAS HE CONVERTED A RESIDENTIAL PROPERTY INTO A RESIDENTIAL -CUM- COMMERCIAL COMPLEX. IN VIEW OF THE SAME WE ARE SATI SFIED THAT THE ASSESSEE HAS NOT PURCHASED A RESIDENTIAL ACCOMMODAT ION AND IS THEREFORE, NOT ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT FROM THE CAPITAL GAIN TAX ON SALE OF A PROPERTY AT JUBILEE H ILLS, HYDERABAD. 5. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND SEPTEMBER, 2016. SD/- SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 02 ND SEPTEMBER, 2016. VINODAN/SPS ITA NO 128 OF 2013 DR VONTELA RAJA REDDY KARIMNAGAR PAGE 7 OF 7 COPY TO: 1 SRI S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS E LEGANCE, 3-6- 643, STREET NO.9 HIMAYATNAGAR, HYDERABAD 500029 2 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 1, AAYA KAR BHAVAN, NEAR NATRAJ THEATRE, KARIMNAGAR 3 CIT (A)-III HYDERABAD 4 CIT II HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE