SHRI. N KRISHNAKUMAR, CHENNAI V. ACIT NON CORP CIRCLE 13(1), CHENNAI

ITA 1402/CHNY/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 4368 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 26-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: D ANAND
• Keywords: Depreciation; Capital Gains
• Section: 143(3); 54F

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH : CHENNAI , . , [BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] !' ./I.T.A. NO.1402/CHNY/2018. #$% &$ / ASSESSMENT YEAR : 2013-2014. SHRI. N. KRISHNAKUMAR, NO.70, 4 TH AVENUE, VEDAVALLI, ASHOK NAGAR, CHENNAI 600 083. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 13(1) CHENNAI [PAN AAIPK 5295R] ( / APPELLANT) ( /RESPONDENT) !' '( ) * / APPELLANT BY : SHRI. D. ANAND, ADVOCATE +,'( ) * /RESPONDENT BY : MS. R. ANITHA, IRS, JCIT. # - ) . /DATE OF HEARING : 03-10-2019 /0&% ) . /DATE OF PRONOUNCEMENT : 21-11-2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-14, CHENNAI (CIT(A) FOR SHORT) DATED 28.02.2018 FOR THE ASSE SSMENT YEAR (AY) 2013-2014. ITA NO.1402 /2018 :- 2 -: 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX ( APPEALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF THE CLAIM FOR DEDUCTION UNDER SECTI ON 54/54F FOR THE YEAR UNDER APPEAL. 2.1 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE SALE WAS ONLY OF VACANT LAND EVEN THOUGH THE AGREEM ENT TO SELL SPECIFIED LAND AND BUILDING AND THE AO HAS VERIFIED THE ELECT RICITY PAYMENT DETAILS FILED WITH HIM AS EVIDENCE OF EXISTENCE OF THE RESI DENTIAL HOUSE AT THE TIME OF TRANSFER OF IMMOVABLE PROPERTY. 2.2 THE COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE APPRECIATED THAT THE BUILDING WAS DEMOLISHED AFTER THE AGREEMEN T OF SALE WAS EXECUTED AND POSSESSION GIVEN TO THE BUYER AND THE BUILDING WAS DEMOLISHED ON THE INSTRUCTIONS OF THE BUYER BEFORE CONVEYANCE OF PROPERTY UNDER A REGISTERED SALE DEED IN THE NEXT Y EAR. AS THE CAPITAL GAINS ON TRANSFER OF PROPERTY IS BASED ON THE AGREE MENT FOR SALE UNDER WHICH BOTH LAND AND RESIDENTIAL HOUSE WAS TRANSFERR ED, THE APPELLANT WAS ELIGIBLE FOR THE DEDUCTION UNDER SECTION 54. 2.3 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DENYING THE CLAIM FOR DEDUCTION ON THE VALUE INVESTED ON ANOTHE R RESIDENTIAL PROPERTY BY ERRONEOUSLY INVOKING SEC 54F, WHILE THE APPELLAN T IS ENTITLED TO DEDUCTION U/S 54. HENCE OWNING OF MORE THAN ONE RES IDENTIAL PROPERTY CANNOT BE A REASON FOR DENYING THE DEDUCTION AGAINS T CAPITAL GAINS CLAIMED BY THE APPELLANT. 3 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING TO TAX THE ANNUAL LETTING VALUE OF RESIDENTIAL FLAT AT KOD AIKANAL. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT T O HAVE APPRECIATED THAT TAXING THE NOTIONAL RENT FROM KODAIKENNAL PROP ERTY WOULD ALSO MEAN THAT DEDUCTION TO THAT EXTENT IS TO BE GIVEN IN COM PUTATION OF BUSINESS PROFITS OF THE PROPRIETARY BUSINESS OF THE APPELLAN T AND HENCE THE NET IMPACT ON TOTAL INCOME OF THE APPELLANT WOULD BE NI L. 5 THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GRO UNDS AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS AN INDIVIDUAL, MANUFACTURING PVC PIPES AND FITTINGS IN THE NAME OF PROPRIETORSHIP CONCERN M /S. ESSORKE ITA NO.1402 /2018 :- 3 -: INDUSTRIES. THE RETURN OF INCOME FOR THE AY 2013-1 4 WAS FILED ON 28.09.2013 DISCLOSING TOTAL INCOME OF RS.1,44,55,22 0/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE-1 3 (1), CHENNAI (HEREINAFTER REFERRED AS ASSESSING OFFICER) VIDE ORDER DATED 30.03.2016 PASSED U/S. 143(3) OF THE INCOME TAX ACT , 1961 (FOR SHORT THE ACT) AT TOTAL INCOME OF RS.9,80,30,110/-. W HILE DOING SO, THE ASSESSING OFFICER DENIED EXEMPTION OF CAPITAL GAINS CLAIMED U/S.54F OF THE ACT ARISING ON SALE OF PROPERTY SITUATED AT NO .4A (NO.165), ARCOT ROAD, VALSARAVAKKAM, CHENNAI. 4. THE FACTUAL BACKGROUND OF THE CASE ARE AS UNDER :- ASSESSEE IS A OWNER OF PLOT NO.165, ARCOT ROAD, VA LSARAVAKKAM, CHENNAI AND THE SAME WAS SOLD TO M/S.SHELL INDIA MA RKETS PVT LTD FOR A CONSIDERATION OF D8,40,00,000/-. ASSESSEE CLAIMED EXEMPTION OF CAPITAL GAINS DERIVED ON SALE OF SAID PROPERTY U/S .54F OF THE ACT AS THE ASSESSEE INVESTED THE SALE CONSIDERATION IN PURCHAS E OF NEW HOUSE PROPERTY SITUATED AT NO.5/55, BLUE BEACH ROAD, NEEL ANGARAI, CHENNAI OF D5,40,00,000/- APART FROM THE COST OF IMPROVEMEN T OF D1,55,56,178/-. THE ASSESSING OFFICER DENIED CLAIM FOR EXEMPTION U/S.54F OF THE ACT ON THE GROUND THAT ON THE DATE OF SALE OF ASSET, ASSESSEE WAS OWNING MORE THAN TWO HOUSE PROPERTIES I.E ONE AT 70, ITA NO.1402 /2018 :- 4 -: 4 TH AVENUE, ASHOK NAGAR, CHENNAI AND OTHER AT KODAIKAN AL. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE AS SESSEE THAT PROPERTY AT KODAIKANAL WAS BUSINESS ASSET AFTER REFERRING TO THE DESCRIPTION OF PROPERTY GIVEN IN SCHEDULE OF PROPERTY IN THE SAL E DEED AT THE TIME OF PURCHASE OF PROPERTY WHICH DRESCRIBES THE PROPERTY AS RESIDENTIAL HOUSE. THE ASSESSING OFFICER ALSO DENIED EXEMPTION U/S.54 OF THE ACT REJECTING THE CONTENTION THAT THE PROPERTY SOLD WA S RESIDENTIAL PROPERTY. THUS, ASSESSING OFFICER DENIED EXEMPTI ONS CLAIMED U/S.54 AND 54F OF THE ACT. 5. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER HAD DISMISSED THE APPEAL C ONCURRING WITH THE VIEW OF THE ASSESSING OFFICER THAT THE PROPERTY AT KODAIKANAL WAS RESIDENTIAL PROPERTY. 6. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), TH E APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. LD. A UTHORISED REPRESENTATIVE SUBMITTED THAT ASSESSEE IS ENTITLED FOR EXEMPTION U/S.54F OF THE ACT, IN AS MUCH AS, THE PROPERTY AT KODAIKANAL IS NOT RESIDENTIAL PROPERTY AND IS USED AS GUEST HOUSE AND THE SAME FORMED PART OF FIXED ASSET SCHEDULE OF M/S. ESSORKE INDUST RIES. IN SUPPORT OF THIS, HE ALSO PLACED BEFORE US BALANCE SHEET AND PROFIT AND LOSS ITA NO.1402 /2018 :- 5 -: ACCOUNT OF SAID PROPRIETARY CONCERN DEMONSTRATING T HAT DEPRECIATION WAS CLAIMED. 7. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT PROPERTY AT KODAIKANAL IS RESIDENTI AL PROPERTY AS SHOWN IN SCHEDULE OF PROPERTY IN THE SALE DEED AT THE TIME OF PURCHASE OF PROPERTY AND THE ASSET IS DEEMED TO HAV E CONVERTED INTO PERSONAL ASSET. 8. IN REJOINDER, THE LD. AUTHORISED REPRESENTATIVE SU BMITTED THAT ASSESSEE CONTINUED TO CARRY ON BUSINESS AND TH E PROPERTY AT KODAIKANAL CONTINUES TO BE PART OF FIXED ASSET OF M /S. ESSORKE INDUSTRIES IN SUBSEQUENT YEARS. 9. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ONLY ISSUE IN THE PRESENT APPEAL REVOL VES AROUND THE ALLOWABILITY OF CLAIM FOR EXEMPTION U/S.54 OF THE ACT. DURING THE PREVIOUS YEAR UNDER CONSIDERATION, ASSESSEE SOLD P ROPERTY AT NO.4A (NO.165), ARCOT ROAD, VALSARAVAKKAM, CHENNAI FOR A CONSIDERATION OF D8,40,00,000/- TO M/S. SHELL INDIA MARKETS PVT LTD . THE SALE PROCEEDS HAS BEEN INVESTED TOWARDS PURCHASE OF NEW RESIDENT IAL HOUSE SITUATED AT NEELANGARAI, CHENNAI. ASSESSEE CLAIMED EXEMP TION OF CAPITAL GAINS U/S.54F OF THE ACT AS THE SALE PROCEEDS WHER E INVESTED IN PURCHASE OF RESIDENTIAL PROPERTY. THE ASSESSING OFF ICER DENIED THE ITA NO.1402 /2018 :- 6 -: CLAIM FOR EXEMPTION U/S.54 OF THE ACT SOLELY ON TH E GROUND THAT ASSESSEE WAS OWNING TWO RESIDENTIAL HOUSE ON THE DATE OF SALE OF ORIGINAL ASSET I.E. ONE AT ASHOK NAGAR AND ANOTHER AT KODAIKANAL. THE FINDING OF THE ASSESSING OFFICER IS BEING DISPUTED BY THE ASSESSEE ON THE GROUND THAT THE PROPERTY AT KODAIKANAL IS A BUS INESS ASSET FORMING PART OF FIXED ASSETS OF M/S. ESSORKE INDUSTRIES WHI CH IS PROPRIETORSHIP CONCERN OF THE ASSESSEE. ACCORDING TO THE ASSESSEE , THE PROPERTY SITUATED AT KODAIKANAL CANNOT SAID TO BE RESIDENTIA L PROPERTY. THIS CONTENTION WAS REJECTED BY THE ASSESSING OFFICER PL ACING RELIANCE ON THE DESCRIPTION OF THE PROPERTY GIVEN AT THE SCHEDU LE OF THE PROPERTY AT THE TIME OF PURCHASE OF THE PROPERTY BY THE ASSESSE E. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER CONTENTED BEFO RE US THAT ONCE THE ASSESSEE CEASED TO CARRY ON THE BUSINESS, THE B USINESS ASSET SHALL BECOME PERSONAL ASSET AND SINCE THE ASSESSEE HAD DISCONTINUED TO CARRY ON THE BUSINESS, SAME IS ONLY PERSONAL ASSET . THEREFORE THE CONTROVERSY IN THE PRESENT APPEAL REVOLVES AROUND W HETHER PROPERTY IN THE NAME OF M/S. ESSORKE INDUSTRIES CONTINUE TO E XIST AND IF IT CONTINUES IN THE SCHEDULES OF FIXTURES OWNED BY SA ID PROPRIETARY CONCERN. THE ASSESSING OFFICER NEVER GONE INTO TH E ISSUE WHETHER PROPRIETARY CONCERN STILL CONTINUES TO EXIST EVEN AFTER SALE OF PROPERTY AT VALSARAVAKKAM, CHENNAI AND WHETHER THE SAID PRO PERTY SITUATED AT KODAIKANAL CONTINUES TO BE PART OF FIXED ASSET EVE N IN THE YEAR POST TO ITA NO.1402 /2018 :- 7 -: 2013-2014. THEREFORE, WE ARE OF THE CONSIDERED OPI NION THAT THE MATTER SHOULD BE REMITTED BACK TO THE FILE OF THE A SSESSING OFFICER FOR LIMITED PURPOSE OF EXAMINING WHETHER OR NOT M/S. E SSORKE INDUSTRIES CONTINUES TO BE IN EXISTENCE EVEN IN THE PERIOD OF POST ASSESSMENT YEAR 2013-2014 AND THE SAID ASSET CONTINUES TO BE H ELD IN THE HANDS OF M/S. ESSORKE INDUSTRIES, IF IT IS FOUND THAT T HE SAID COMPANY CONTINUES TO EXIST AND THE PROPERTY AT KODAIKNAL IS FORMING PART OF FIXED ASSET OF SCHEDULE, THE EXEMPTION CANNOT BE DE NIED TO THE ASSESSEE. ACCORDINGLY, WE REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO ADJUDICATION IN ACCORD ANCE WITH LAW. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 21 ST DAY OF NOVEMBER, 2019, AT CHENNAI. SD/- SD/- ( . ) (DUVVURU RL REDDY) ! '# /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER 1 #- / CHENNAI 2# / DATED: 21ST NOVEMBER, 2019. KV 3 ) +.4 5' !6 5&. / COPY TO: 1 . !' '( / APPELLANT 3. 7. (!' ) / CIT(A) 5. 5 :; +.#< / DR 2. +,'( / RESPONDENT 4. 7. / CIT 6. ;$ =- / GF