Vijaya Raman, Rep by POA Mr. T.R.Balasubramanian, CHENNAI V. DDIT, CHENNAI

ITA 147/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8735 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 25-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: V S JAYAKUMAR
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.147/MDS/2016 ( )( / ASSESSMENT YEAR : 2011-12 SMT. VIJAYA RAMAN, 14/2015, 1 ST FLOOR, H' BLOCK, 5 TH STREET, 12 TH MAIN ROAD, ANNA NAGAR, CHENNAI - 600 040. PAN : ASUPR 6227 J V. THE DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) 2(1), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI V.S. JAYAKUMAR, ADVOCATE -.+, / 0 / RESPONDENT BY : SHRI SHIVA SRINIVAS, JCIT 1 / 2% / DATE OF HEARING : 02.06.2016 3') / 2% / DATE OF PRONOUNCEMENT : 11.08.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 16, CHEN NAI, DATED 03.11.2015 AND PERTAINS TO ASSESSMENT YEAR 2011-12. 2. SHRI V.S. JAYAKUMAR, THE LD.COUNSEL FOR THE ASSE SSEE, SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERA TION IS WITH REGARD 2 I.T.A. NO.147/MDS/16 TO DISALLOWANCE OF ` 30,00,000/- PAID TO SHRI RAJARAMAN, THE HUSBAND OF THE ASSESSEE, TOWARDS COMPENSATION FOR D EMOLITION OF THE BUILDING. ACCORDING TO THE LD. COUNSEL, THE AS SESSEE IS A NON- RESIDENT AND OWNER OF A PIECE OF LAND AT MADIPAKKAM . ACCORDING TO THE LD. COUNSEL, THE ASSESSEE IN FACT RECEIVED THE LAND BY WAY OF SETTLEMENT FROM HER MOTHER. THE ASSESSEES HUSBAND SHRI RAJARAMAN BUILT A HOUSE ON THE ABOVE SAID PIECE OF LAND FROM HIS OWN BORROWED FUNDS. THE ASSESSEE SOLD THE LAND AND THE BUILDING WAS DEMOLISHED. IN PURSUANCE TO AGREEMENT DATED 10 .09.2010 WITH SHRI RAJARAMAN, THE HUSBAND OF THE ASSESSEE, A SUM OF ` 30,00,000/- WAS PAID TO HANDOVER THE VACANT POSSESS ION OF THE HOUSE TO THE DEVELOPER SO THAT THE BUILDING CAN BE DEMOLISHED. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE HAS CLAI MED IN THE ASSESSMENT PROCEEDING A DEDUCTION OF ` 30,00,000/- BEING THE COMPENSATION PAID TO ACQUIRE THE HOUSE FROM HER HUS BAND. UNLESS THE HOUSE WAS DEMOLISHED, ACCORDING TO THE LD. COUN SEL, THE ASSESSEE CANNOT SELL THE LANDED PROPERTY. THEREFOR E, THE COMPENSATION PAID TO HER HUSBAND HAS TO BE ALLOWED WHILE COMPUTING THE TOTAL INCOME. 3 I.T.A. NO.147/MDS/16 3. REFERRING TO THE ASSESSMENT ORDER, THE LD.COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER OBSER VED THAT THE AGREEMENT ENTERED BETWEEN THE ASSESSEE AND HER HUSB AND SHRI RAJARAMAN ON 10.09.2010 WAS AN AFTERTHOUGHT. ACCOR DING TO THE LD. COUNSEL, THE FACT THAT THE ASSESSEES HUSBAND C ONSTRUCTED THE BUILDING OUT OF HIS OWN BORROWED FUNDS IS NOT IN DI SPUTE. THEREFORE, THE ASSESSEE HAS TO NECESSARILY COMPENSATE HER HUSB AND IN DEMOLISHING THE BUILDING. HENCE, ACCORDING TO THE LD. COUNSEL, BOTH THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN DISALLOW ING THE CLAIM OF THE ASSESSEE. THE LD.COUNSEL PLACED HIS RELIANCE ON TH E JUDGMENT OF MADRAS HIGH COURT IN CIT V. C.V. SOUNDARARAJAN & AN OTHER (1984) 150 ITR 80 AND SUBMITTED THAT WHEN THE ASSESSEES H USBAND OWNED THE BUILDING, THE ASSESSEE HAS TO NECESSARILY PAY COMPENSATION TO HER HUSBAND FOR RELINQUISHING HIS R IGHT OVER THE BUILDING. 4. ON THE CONTRARY, SHRI SHIVA SRINIVAS, THE LD. DE PARTMENTAL REPRESENTATIVE, SUBMITTED THAT THERE WAS NO AGREEME NT BETWEEN THE ASSESSEE AND HER HUSBAND AT THE TIME OF CONSTRU CTION OF BUILDING, ABOUT THE PAYMENT OF COMPENSATION. THE A SSESSEE ADMITTEDLY HAS NOT RECEIVED ANY RENT FROM HER HUSBA ND FOR ALLOWING 4 I.T.A. NO.147/MDS/16 HER HUSBAND TO CONSTRUCT THE BUILDING. ACCORDING T O THE LD. D.R., THE ASSESSEE ALSO RESIDED IN THE VERY SAME HOUSE AL ONG WITH HER HUSBAND, THEREFORE, IN THE EYE OF LAW, BOTH THE ASS ESSEE AND HER HUSBAND HAVE TO BE TREATED ONE AND THE SAME. THE A SSESSEE CLAIMS THAT THE LAND BELONGS TO HER AND HER HUSBAND CONSTRUCTED THE BUILDING BY INVESTING HIS OWN FUNDS. IF THAT IS TH E CASE, THE ASSESSEE AND HER HUSBAND HAVE TO BE CONSIDERED AS S INGLE UNIT / ENTITY SINCE BOTH THE ASSESSEE AND HER HUSBAND SHAR ED THE INVESTMENT IN BOTH THE LAND AND BUILDING. ACCORDIN G TO THE LD. D.R., THE LAND BELONGS TO THE ASSESSEE AND THE BUILDING C ONSTRUCTED THERETO BELONGS TO HER HUSBAND. THEREFORE, ACCORDI NG TO THE LD. D.R., IT IS FOR THE ASSESSEE TO ESTABLISH HOW HER H USBAND WAS ALLOWED TO CONSTRUCT THE BUILDING WITHOUT PAYMENT O F ANY RENT. WHEN THE ASSESSEE HAS NOT RECEIVED ANY COMPENSATION / RENT FOR THE LAND FROM HER HUSBAND, ACCORDING TO THE LD. D.R ., THERE IS NO JUSTIFICATION FOR PAYING COMPENSATION WHEN THE LAND WAS SOLD ALONG WITH THE BUILDING. IF THE ASSESSEE TREATS HERSELF AS INDEPENDENT UNIT/ ENTITY, THEN THE ASSESSEE HAS TO NECESSARILY RECEIV E COMPENSATION/ RENT FOR LETTING OUT LANDED PROPERTY IN WHICH THE B UILDING WAS CONSTRUCTED BY HER HUSBAND. UNFORTUNATELY, THE ASS ESSEE HAS NOT RECEIVED ANY COMPENSATION FROM HER HUSBAND. THE LD . D.R. FURTHER 5 I.T.A. NO.147/MDS/16 SUBMITTED THAT WHEN THE ASSESSEE ALLOWED HER HUSBAN D TO CONSTRUCT THE BUILDING WITHOUT ANY PAYMENT FOR USING THE LAND SINCE THE ASSESSEE DECIDED TO SELL THE PROPERTY, IT HAS TO BE TREATED THAT THE BUILDING ALSO OWNED BY THE ASSESSEE. IN OTHER WORD S, ACCORDING TO THE LD. D.R., BOTH THE ASSESSEE AND HER HUSBAND SHR I RAJARAMAN ARE SINGLE ENTITY AS FOUND BY THE ASSESSING OFFICER . 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LD. D.R., THERE WAS NO AGREEMENT B ETWEEN THE ASSESSEE AND HER HUSBAND AT THE TIME OF CONSTRUCTIO N OF THE BUILDING IN THE SAID LAND. IT IS ALSO NOT IN DISPU TE THAT THE ASSESSEE HAS NOT RECEIVED ANY COMPENSATION / RENT FOR ALLOWI NG HER HUSBAND TO CONSTRUCT THE BUILDING IN THE LAND OWNED BY HER. ADMITTEDLY, THE LAND WAS ACQUIRED BY THE ASSESSEE BY WAY OF SETTLEM ENT BY HER MOTHER. EVEN THOUGH THE ASSESSEE AND HER HUSBAND A RE CONSIDERED TO BE ONE AND THE SAME IN THE EYE OF LAW , THE INCOME- TAX ACT TREATS THEM SEPARATELY AS INDEPENDENT ASSES SABLE UNIT. THEREFORE, THE ASSESSEE OUGHT NOT TO HAVE ALLOWED H ER HUSBAND TO CONSTRUCT THE BUILDING WITHOUT RECEIVING ANY COMPEN SATION. UNFORTUNATELY, IT IS NOT THE CASE OF THE ASSESSEE T HAT SUCH 6 I.T.A. NO.147/MDS/16 COMPENSATION WAS RECEIVED BY HER FROM HER HUSBAND F OR ALLOWING HIM TO CONSTRUCT THE BUILDING. IT IS ALSO A FACT T HAT THE ASSESSEE AND HER HUSBAND WERE LIVING TOGETHER IN THE VERY SAME B UILDING AS HUSBAND AND WIFE. IN THOSE CIRCUMSTANCES, THIS TRI BUNAL IS OF THE CONSIDERED OPINION THAT THE CLAIM OF PAYMENT OF COM PENSATION FOR DEMOLITION OF BUILDING TO HER HUSBAND IS NOT JUSTIF IED. 6. AS RIGHTLY OBSERVED BY THE ASSESSING OFFICER, TH E SO-CALLED AGREEMENT DATED 10.09.2010 IS AFTERTHOUGHT FOR THE PURPOSE OF DEDUCTION IN RESPECT OF ` 30,00,000/- SAID TO BE PAID BY THE ASSESSEE TO HER HUSBAND, WHEN THE ASSESSEE HERSELF ALLOWED H ER HUSBAND TO CONSTRUCT THE BUILDING ON THE LAND WITHOUT ANY COMP ENSATION. IF THE ASSESSEE PAID ` 30,00,000/- TO HER HUSBAND AS CLAIMED IN THE SO- CALLED AGREEMENT DATED 10.09.2010, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE PAYMENT CANNOT GO TO RE DUCE THE VALUE OF LAND WHICH WAS TRANSFERRED. THE ASSESSEE BEING THE LEGAL OWNER OF THE LAND IN PURSUANCE OF SETTLEMENT DEED EXECUTE D BY HER MOTHER AND THE ASSESSEES HUSBAND CONSTRUCTED THE BUILDING AND THE ASSESSEE AND HER HUSBAND LIVED TOGETHER IN THE BUIL DING AS WIFE AND HUSBAND, THEREFORE, THE PAYMENT OF ` 30,00,000/- TO THE ASSESSEES HUSBAND AS COMPENSATION CANNOT GO TO REDUCE THE COS T OF THE LAND 7 I.T.A. NO.147/MDS/16 FOR THE PURPOSE OF COMPUTING CAPITAL GAINS. THEREF ORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 6. SHRI V.S. JAYAKUMAR, THE LD.COUNSEL FOR THE ASSE SSEE, ALTERNATIVELY CLAIMED EXEMPTION UNDER SECTION 54 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). ACCORDING TO THE L D. COUNSEL, THE ASSESSING OFFICER DENIED EXEMPTION UNDER SECTION 54 OF THE ACT ON THE GROUND THAT THE ASSESSEE SOLD ONLY THE VACANT L AND. ACCORDING TO THE LD. COUNSEL, BOTH THE BUILDING AND LAND APPU RTENANT THERETO HAVE TO BE TREATED AS RESIDENTIAL HOUSE. SINCE THE SUBJECT MATTER RELATES TO BOTH LAND AND BUILDING, ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER CANNOT DENY EXEMPTION UNDER SECTI ON 54 OF THE ACT. 7. ON THE CONTRARY, SHRI SHIVA SRINIVAS, THE LD. DE PARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE BUILDING WAS DEM OLISHED AND WHAT WAS TRANSFERRED TO THE DEVELOPER IS ONLY A VAC ANT LAND, THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTI ON UNDER SECTION 54 OF THE ACT. HOWEVER, THE ASSESSING OFFICER GRAN TED DEDUCTION UNDER SECTION 54F OF THE ACT, THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSEE CANNOT HAVE ANY GRIEVANCE AT ALL. 8 I.T.A. NO.147/MDS/16 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS DISCUSSED IN THE EARLIER PART OF THIS ORDER, THE LAND WAS INHERI TED / ACQUIRED BY THE ASSESSEE BY WAY OF SETTLEMENT FROM HER MOTHER AND T HE ASSESSEES HUSBAND SAID TO HAVE CONSTRUCTED THE BUILDING BY IN VESTING HIS OWN FUNDS. THIS TRIBUNAL HAS FOUND THAT BOTH THE ASSES SEE AND HER HUSBAND LIVED TOGETHER IN THE VERY SAME BUILDING AN D THE ASSESSEE HAS NOT RECEIVED ANY COMPENSATION FROM HER HUSBAND FOR ALLOWING HIM TO CONSTRUCT THE BUILDING. THEREFORE, THE ASSE SSEE HAS TO BE TREATED AS OWNER OF THE BUILDING ALONG WITH HER HUS BAND FOR ALL PRACTICAL PURPOSES. HENCE WHAT WAS TRANSFERRED IS LAND AND BUILDING. THEREFORE, THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 54 OF THE ACT. THEREFORE, THE ORDER OF THE ASSESSING OFFICER IS MODIFIED AND THE ASSESSING OFFICER IS DIRECTED T O ALLOW DEDUCTION UNDER SECTION 54 OF THE ACT AS CLAIMED BY THE ASSES SEE SUBJECT TO FULFILMENT OF OTHER CONDITIONS. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 9 I.T.A. NO.147/MDS/16 ORDER PRONOUNCED ON 11 TH AUGUST, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 11 TH AUGUST, 2016. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-16, CHENNAI 4. 1 92 /CIT (INTERNATIONAL TAXATION), CHENNAI 5. 7: -2 /DR 6. ;( < /GF.