SMT. NIRMALA DEVI LALWANI, BILASPUR(CG) V. THE ACIT, CIRCLE- 1(1), BILASPUR(CG)

ITA 148/BIL/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4823 (ITAT-RAIPUR)
• Duration Of Justice: 4 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 25-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K JAIN
• Assessee Lawyers: S R RAO
• Keywords: Salary income; Question of law; Cost of acquisition; Capital expenditure
• Section: 54F

Judgement Text

1 ITA NOS. 18 & 148/RPR/2014 IN THE INCOME TAX APPE LLATE TRIBUNAL RAIPUR BENCH: RAIPUR BEFORE SHRI R. K. PANDA, ACCOUNTANT ME MBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 18/RPR/201 4 (A.Y 2009-10) SHRI KALYANDAS LALWANI PROP. M/S LALWANI & SAONS RAJENDRA NAGAR, BILASPUR (C.G) (APPELLANT) VS ASSTT. COMMISSIONER OF INCOME TAX [CIRCLE-1(1)] AAYKAR BHAWAN, VYAPAR VIHAR, BILASPUR (C.G) (RESPONDENT) I.T.A .NO. 148/RPR/20 14 (A.Y 2009-10) SMT. NIRMALA DEVI LALWANI NEHRU NAGAR, NEAR HANUMAN MANDIR BILASPUR (C.G) (APPELLANT) VS ASSTT. COMMISSIONER OF INCOME TAX [CIRCLE-1(1)] AAYKAR BHAWAN, VYAPAR VIHAR, BILASPUR (C.G) (RESPONDENT) APPELLANT BY SHRI S. R. RAO, ADV RESPONDENT BY SH. D. K. JAIN, DR ORDER PER SUCHITRA KAMBLE, JM THESE TWO APPEALS ARE FILED BY THE RESPECTIVE ASSES SEES AGAINST THE ORDERS DATED 23/1/2012 FOR ASSESSMENT YEAR 2009-10. 2. THE GROUNDS OF APPEAL ARE AS UNDER: I.T.A .NO. 18/RPR/2014 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, ORDER I S BAD IN LAW DATE OF HEARING 09.08.2018 DATE OF PRONOUNCEMENT 23.10.2018 2 ITA NOS. 18 & 148/RPR/2014 AS WELL AS ON FACTS. 2. THAT EXCLUDING THE COST INCURRED OR MAKING THE HOU SE HABITABLE FROM THE COST OF IMPROVEMENT IN THE RESIDENTIAL HO USE WITHOUT PIN- POINTING ANY AMOUNT INVESTED FOR LUXURY/COMFORTABLE ITEMS THEREBY MAKING THE ADDITIONS OF RS.20,97,988.00 AND CONFIRM ED BY THE LEARNED CIT(APPEAL) IS HIGHLY UNJUSTIFIED. I.T.A .NO. 148/RPR/2014 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, ORDER I S BAD IN LAW AS WELL AS ON FACTS. 2. THAT EXCLUDING THE COST INCURRED OR MAKING THE HOU SE HABITABLE FROM THE COST OF IMPROVEMENT IN THE RESIDENTIAL HO USE WITHOUT PIN- POINTING ANY AMOUNT INVESTED FOR LUXURY/COMFORTABLE ITEMS THEREBY MAKING THE ADDITIONS OF RS.24,67,342.00 AND CONFIRM ED BY THE LEARNED CIT(APPEAL) IS HIGHLY UNJUSTIFIED. 3. THESE TWO APPEALS ARE IDENTICAL IN NATURE THOUGH THE ASSESSEES ARE DIFFERENT. THEREFORE, WE ARE TAKING UP THE FACTS O F ITA NO. 18/RPR/2014 AS A LEAD MATTER. 4. THE ASSESSEE, IN THE YEAR UNDER CONSIDERATION, DERIVED SALARY INCOME OF RS. 1,00,000/- FROM M/S. RUCHAND HOTEL PVT. LTD., I NCOME FROM BUSINESS OR PROFESSION OF RS. 2,95,739/- FROM HIS PROPRIETORSHI P CONCERN M/S. LALWANI AND SONS DEALING IN WHOLE SALE TRADING OF COAL. BESIDES , THE APPELLANT HAS SHOWN LONG TERM CAPITAL GAIN OF RS. 12,83,810/-. THE PROP ERTY JOINTLY OWNED BY THE ASSESSEE AND OTHER FIVE CO-OWNERS WAS SOLD TO M/S. SHIVRAM VENTURES PVT. LTD. ON 10-04-2008 FOR TOTAL SALE CONSIDERATION OF RS.5, 03,00,000/-, RS. 3,84,20,000/- FOR LAND AND RS. 1,18,80,000/- FOR SU PER STRUCTURE ON THE LAND. THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN AT RS . 85,94,408/- ON HIS SHARE OF SALE CONSIDERATION AND CLAIMED DEDUCTION U /S 54F OF THE ACT OF RS. 3 ITA NOS. 18 & 148/RPR/2014 53,03,650/- ON ACCOUNT OF PURCHASE OF A READY BUILT HOUSE AT NEHRU NAGAR, BILASPUR ON 04-07-2008 ALONG WITH FURTHER DEDUCTION OF RS. 20,06,948/- EXPENDED OUT OF THE SALE PROCEEDS FOR MAKING THE HO USE HABITABLE. THE AO ACCEPTED THE SHARE OF SALE CONSIDERATION TAKEN AT R S. 93,00,000/-, INDEXED COST OF ACQUISITION AT RS. 7,05,592/-, COMMISSION OF RS. 56,000/- PAID TO SMT. MEENA DEVI MANGESHKAR AND RS. 25,000/- PAID TO SHRI MAHESH CHANDRA GUPTA AS TRANSFER EXPENSES, OTHERWISE WRONGLY DEBIT ED TO THE EXPENDITURE/ OF THE HOUSE. THE AO ALSO ACCEPTED THE CLAIM OF DEDUCT ION OF RS. 53,03,650/- PURCHASE OF READY BUILT HOUSE U/S 54F OF THE ACT. H OWEVER, RELATING TO CLAIM OF DEDUCTION OF RS. 20,26,948/-, HE MADE FURTHER ENQUI RIES IN ORDER TO ASCERTAIN WHETHER THE HOUSE WAS HABITABLE AT THE TIME OF PURC HASE OR IT GENUINELY REQUIRED REPAIRING OR REMODELING TO MAKE IT HABITAB LE. HE EXAMINED THE ISSUE IN THE LIGHT OF THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF SALEM FAZELBHOY VS. DCIT (2006) 9 SOT 601 AND MADE ADDITI ON OF RS.20,97,988/- AS INCOME FROM LONG TERM CAPITAL GAIN. 5. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT (A). THE CIT (A) DISMISSED THE APPEAL OF TH E ASSESSEE. 6. THE LD. AR SUBMITTED THAT AS REGARDS GROUND NO.1 , THE ASSESSEE MAINTAINED REGULAR BOOKS OF ACCOUNTS WHICH WERE PRO DUCED AND VERIFIED BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS . THE LD. AR SUBMITTED THAT THE HOUSE FOR WHICH EXEMPTION U/S 54F WAS CLAI MED WAS CONSTRUCTED BY STATE HOUSING BOARD WITH OPEN FOUNDATION/PILES 30 Y EARS AGO AND ITS TOTAL SERVICEABLE LIFE WAS 40 YEARS. WITH EFFLUX OF TIME AND FOR WANT OF MAINTENANCE IT GOT DILAPIDATED. THE LD. AR FURTHER SUBMITTED T HAT DOORS, WINDOWS, CUPBOARDS, FLOOR TILES, ELECTRIC FITTINGS, SANITARY FITTINGS, PLASTERING, ETC. WERE ERODED AND TATTERED AND THE STRUCTURE REQUIRED SUBS TANTIAL CAPITAL EXPENDITURE TO MAKE IT HABITABLE AT THAT PARTICULAR TIME. THE H OUSE BEING VERY OLD, FURTHER SUM OF RS.24,76,231/- WAS INCURRED TO MAKE IT HABIT ABLE. THE LD. AR FURTHER SUBMITTED THAT SEPARATE ACCOUNT WAS OPENED AND ALL EXPENSES WERE PAID PARTLY 4 ITA NOS. 18 & 148/RPR/2014 THROUGH CHEQUES AND PARTLY THROUGH CASH. THE LD. A R POINTED OUT THE ASSESSMENT ORDER DOES NOT GIVE ANY FINDING THAT THE ASSESSEE DID NOT INCUR THESE EXPENSES. THE LD. AR SUBMITTED THAT SIMPLY R ELYING ON CBDT CIRCULAR /GUIDELINES BY THE ASSESSING OFFICER WHICH WAS NEVE R CONFRONTED WITH THE ASSESSEE IS NOT JUST AND PROPER. THE LD. AR FURTHE R SUBMITTED THAT THE ASSESSING OFFICER IN FACT ADMITTED GENUINE NEED OF CAPITAL REPAIRS BUT ESTIMATED THE SAME AT RS.100/- PER SQ. FT. WITHOUT ANY BASIS. AS PER THE ASSESSING OFFICER, THE EXPENSES WERE HELD TO BE MADE TO MAKE THE HOUSE LUXURIOUS AND COMFORTABLE HENCE THE EXPENDITURE DID NOT COME IN THE AMBIT OF SECTION 54F AS PER THE ASSESSING OFFICERS DECISION. THE LD. A R SUBMITTED THAT THESE FINDINGS WERE ONLY OBSERVATIONS AND NO REASONS WERE GIVEN IN THE ASSESSMENT ORDER REGARDING DENIAL OF SECTION 54F BENEFIT. THE LD. AR SUBMITTED THAT THE ASSESSEE IS A REGULAR INCOME TAX ASSESSEE, AND THE EXPENSES INCURRED BY THE ASSESSEE HOUSES ARE MEANT FOR COMFORTABLE LIVING. THE LD. AR RELIED UPON VARIOUS DECISIONS. 4. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSIN G OFFICER AND THE CIT (A). 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT THERE IS AN O BSERVATION OF THE ASSESSING OFFICER THAT THE HOUSE WAS HABITABLE AND GIVEN FOR RENT FOR 7 MONTHS. BUT THE ASSESSING OFFICER HAS ONLY GONE THROUGH THE SPOT VE RIFICATION CONDUCTED BY SUB-REGISTRAR THAT THE PROPERTY WAS HABITABLE. WE F IND THAT AN IDENTICAL ISSUE COME UP BEFORE THE HONBLE KARNATAKA HIGH COURT IN CASE OF RAHANA SIRAJ VS. CIT (2015) 232 TAXMAN 0327 WHICH WAS RELIED BY THE LD. AR. THE HONBLE HIGH COURT HELD AS UNDER: 8. INSOFAR AS THE SECOND SUBSTANTIAL QUESTION OF LAW IS CONCERNED, IT IS NOT IN DISPUTE THAT THE PROPERTY PURCHASED BY THE A SSESSEE WAS HABITABLE BUT HAD LACKED CERTAIN AMENITIES. THE ASSESSEE HAS SPEN T NEARLY ABOUT RS.18 LAKHS TOWARDS REMOVAL OF MOSAIC FLOORING AND LAYING OF MARBLE FLOORING, ALTERATION OF THE KITCHEN, PUTTING UP COMPOUND WALL , PROTECTING THE PROPERTY WITH GRILL WORK AND ATTENDING TO OTHER REPAIRS. SEC TION 54F OF THE ACT PROVIDES 5 ITA NOS. 18 & 148/RPR/2014 THAT IF THE COST OF THE NEW ASSET, WHICH IS TO BE T AKEN INTO CONSIDERATION WHILE DETERMINING THE CAPITAL GAIN, THE WORDS USED IS CO ST OF NEW ASSET AND NOT THE CONSIDERATION FOR ACQUISITION OF THE NEW ASSET . IN LAW, IT IS PERMISSIBLE FOR AN ASSESSEE TO ACQUIRE A VACANT SITE AND PUT UP A CONSTRUCTION THEREON AND THE COST OF THE NEW ASSET WOULD BE COST OF LAND PLUS(+) COST OF CONSTRUCTION. ON THE SAME ANALOGY, EVEN THOUGH HE P URCHASED A NEW ASSET, WHICH IS HABITABLE BUT WHICH REQUIRES ADDITIONS, AL TERNATIONS, MODIFICATIONS AND IMPROVEMENTS AND IF MONEY IS SPENT ON THOSE ASP ECTS, IT BECOMES THE COST OF THE NEW ASSET AND THEREFORE, HE WOULD BE EN TITLED TO THE BENEFIT OF DEDUCTION IN DETERMINING THE CAPITAL GAINS. THE APP ROACH OF THE AUTHORITIES THAT ONCE A HABITABLE ASSET IS ACQUIRED, ANY ADDITI ONS OR IMPROVEMENTS MADE ON THAT HABITABLE ASSET IS NOT ELIGIBLE FOR DEDUCTI ON, IS CONTRARY TO THE STATUTORY PROVISIONS. THE SAID REASONING IS UNSUSTA INABLE. TO THAT EXTENT, THE IMPUGNED ORDER PASSED BY THE TRIBUNAL AS WELL AS TH E LOWER AUTHORITIES REQUIRE TO BE SET-ASIDE AND IT IS TO BE HELD THAT I N ARRIVING AT COST OF THE NEW ASSET, RS. 18 LAKHS SPENT BY THE ASSESSEE FOR MODIF ICATION, ALTERATIONS AND IMPROVEMENTS OF THE ASSET ACQUIRED IS TO BE TAKEN N OT OF. THUS, THE SECOND SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR O F THE ASSESSEE AND AGAINST THE REVENUE. . IN LIGHT OF THE ABOVE DECISION OF THE HONBLE KARNA TAKA HIGH COURT, THE CLAIM OF THE ASSESSEE UNDER SECTION 54F OF THE ACT IS JUST AND PROPER. THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE IN ITA NO. 18/RPR/2014. 5. AS REGARDS ITA NO. 148/RPR/2014, THE FACTUAL ASP ECTS ARE SIMILAR TO THE EARLIER CASE WHICH WAS NOT CONTRADICTED BY THE LD. DR. THEREFORE, ITA NO. 148/RPR/2014 IS ALSO ALLOWED. 6. IN RESULT, BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD OCTOBER, 2018 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 23/10/2018 *R.N 6 ITA NOS. 18 & 148/RPR/2014 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT PRIVATE SECRETARY.. RAIPUR BENCH, RAIPUR. DATE OF DICTATION 22.10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22.10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS .10.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT .10.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .10.2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER