Sh. Pravinder Vir Hans, Jalandhar V. The Asstt. Commissioner of Income-tax, Jalandhar

ITA 19/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0629 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 06-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A N MISRA
• Assessee Lawyers: J S BHASIN
• Section: 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO.19(ASR)/2015 ASSESSMENT YEAR: 2009-10 SH. PARVINDER VIR HANS, C/O ZOLOTO INDUSTRIES, 11 TH MILESTONE, NAKODAR ROAD, LAMBRA, JALANDHAR. PAN:AAEPH8552Q VS. ASST. CIT. CIRCLE, IV, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. J.S. BHASIN (AD.) RESPONDENT BY: SH. A.N. MISRA (DR.) DATE OF HEARING: 24.05.2016 DATE OF PRONO UNCEMENT: 12.07.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LEARNED CIT(A), JALANDHAR, DATED 28.10.2014 FOR ASST. YEAR: 2009-10. 2. THE ONLY GRIEVANCE RAISED IN THIS APPEAL IS WITH THE ACTION OF LEARNED CIT(A), BY WHICH HE HAD CONFIRMED THE ACTIO N OF ASSESSING OFFICER BY WHICH HE HAD RESTRICTED THE ENTITLEMENT OF EXEMP TION U/S 54F IN RESPECT OF INVESTMENT MADE IN ONLY ONE FLAT INSTEAD OF TWO FLATS, AS CLAIMED BY ASSESSEE. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ASSE SSMENT ORDER ARE THAT THE ASSESSEE SOLD A PLOT FOR CONSIDERATION OF RS.50 LACS AND WORKED OUT CAPITAL GAIN TO THE TUNE OF RS.43,85,508/-. THE ASSESSEE CLAIMED EXEMPTION U/S 54F BY PARTLY REINVESTING THE ABOVE S ALE CONSIDERATION BY ITA NO.19 (ASR)/2015 ASST. YEAR : 2009-10 2 PURCHASING TWO INDEPENDENT FLATS. THE ASSESSING OFF ICER, HOWEVER FOR THE PURPOSES OF ALLOWING EXEMPTION U/S 54F CONSIDERED I NVESTMENT FOR ONLY ONE FLAT AND DISALLOWED THE SAME FOR THE OTHER FLAT . THE FINDINGS OF THE ASSESSING OFFICER AS CONTAINED IN PARA 3.3 ARE REPR ODUCED BELOW. 3.3 I HAVE CAREFULLY CONSIDERED THE ABOVE REPLY BU T THE SAME IS NOT ACCEPTABLE. THE CASE LAW QUOTED ABOVE IS NOT APPLIC ABLE TO THE FACTS OF THE PRESENT CASE AS IN THAT CASE THE ASSESSEE HAD PURCH ASED ONLY ONE RESIDENTIAL HOUSE AND AS SUCH THERE IS NO BAR IN SE CTION 54F REGARDING SUBSEQUENT USE OF PROPERTY. BUT IN THE PRESENT CASE THE QUESTION IS THAT WHETHER THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 5 4F WHEN HE HAS PURCHASED TWO INDEPENDENT FLATS VIDE TWO SEPARATE S ALE DEEDS AND CLAIMED EXEMPTION BY TAKING THE PLEA THAT HE PURCHA SED THESE TWO FLATS WITH THE INTENTION TO CONVERT THEM INTO ONE WITH LI TTLE INTERNAL MODIFICATIONS AND USING IT FOR RESIDENCE OF HIS JOINT FAMILY. IN ORDER TO VERIFY THIS CLAIM OF ASSESSEE, INSPECTOR OF THIS OFFICE WAS DEPUTED TO P ERSONALLY INSPECT THE SAID FLATS ON 29.08.201 I. AS PER HIS REPORT, THE S AID TWO FLATS ARE NOT ADJACENT BUT OPPOSITE TO EACH OTHER AND IT WOULD NO T BE POSSIBLE TO CONVERT THESE INTO ONE DWELLING UNIT WITH ANY SORT OF MODIF ICATIONS. THIS FACT WAS DULY CONVEYED TO THE ASSESSEES COUNSEL VIDE ORDER SHEET NOTING DATED 09.09.2011, TO THIS THEY PLACED RELIANCE ON THEIR E ARLIER REPLY DATED 12.08.2011. ON THE BASIS OF PHYSICAL EXAMINATION OF FLATS CONDUCTED BY THIS OFFICE, IT CAN BE CONCLUDED THAT THE CLAIM OF ASSESSEE THAT THE INTENTION IS TO CONVERT THEM INTO ONE WITH LITTLE INTERNAL MO DIFICATIONS IS WRONG. THEREFORE, EXEMPTION U/S 54F IS RESTRICTED TO ONE R ESIDENTIAL FLAT ONLY AND LONG TERM CAPITAL GAIN (LTCG) IS CALCULATED AS BELO W'. SALE C ONSIDERATION OF PLOT (43.08 MARLA) RS. 50,00,000/- LESS: INDEXED COST OF PURCHASE RS. 6,14,492/- CAPITAL GAIN RS. 43,85,508/- LESS: EXEMPTION U/S 54F 43,85,508 X 11 LAC/50 LAC RS. 9,64,812/- LTCG AS ASSESSED RS. 34,20,696/- LTCG AS PER RETURN OF INCOME RS.24,55,884/- ADDITION UNDER THE HEAD LONG TERM CAPITAL GAIN RS. 9,64,812/- LONG TERM CAPITAL GAIN IS ASSESSED AT RS.34,20,696/ - BY RESTRICTING EXEMPTION U/S 54F TO ONE FLAT AMOUNTING TO RS.9,64, 812/-. PENALTY PROCEEDINGS U/S 271(1) (C0 OF THE INCOME-TAX ACT, 1 961 FOR FURNISHING INACCURATE PARTICULARS OF INCOME IN THIS REGARD ARE SEPARATELY INITIATED. ITA NO.19 (ASR)/2015 ASST. YEAR : 2009-10 3 4. AGGRIEVED THE ASSESSEE FIELD APPEAL BEFORE LEARN ED CIT(A) AND RELIED UPON A NUMBER OF CASE LAWS BUT LEARNED CIT(A) UPHEL D THE ASSESSMENT ORDER BY HOLDING AS UNDER: 6.2. ON CAREFUL CONSIDERATION OF THE OBSERVATIONS OF THE ASSESSING OFFICER AS MADE BY HER IN THE ASSESSMENT ORDER AS WELL AS T HE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE VIDE LETTER DATED 28.10.2014. I HAVE ALSO CONSIDERED THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE AS WELL AS BY THE ASSESSING OFFICER IN CONNECTION W ITH THE ISSUE UNDER REFERENCE. ON CAREFUL CONSIDERATION OF THE RIVAL CO NTENTIONS, I AM ALSO OF THE OPINION THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 54F OF THE ACT ONLY IN RESPECT OF INVESTMENT MADE IN ONE FLAT AND NOT IN TWO FLATS AS CLAIMED BY THE ASSESSEE. I ALSO FIND THAT THE ASSES SING OFFICER HAS GIVEN DETAILED REASONS WHILE MAKING PART DISALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 54F OF THE ACT. THE JUDI CIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE ARE CLEARLY DISTINGUISH ABLE ON FACTS. MOREOVER, TWO FLATS PURCHASED BY THE ASSESSEE ARE ON OPPOSITE SIDES TO EACH OTHER AND CANNOT BE CONVERTED INTO A SINGLE RESIDENTIAL U NIT. THE ENQUIRIES MADE BY THE ASSESSING OFFICER REVEALED THAT THE TWO FLAT S HAVE BEEN GIVEN ON RENT TO TWO DIFFERENT TENANTS. IN OTHER WORDS, THE ASSESSEE HIMSELF IS TREATING TWO FLATS AS INDEPENDENT RESIDENTIAL HOUSE S. IN MY OPINION, THE AMENDMENT IN THE ACT BY FINANCE ACT, 2014 WILL NOT ALTER THE POSITION. THE WORD A RESIDENTIAL HOUSE USED IN SECTION 54/54F O F THE ACT MEANS ONE RESIDENTIAL HOUSE WHICH INFACT HAS BEEN CLARIFIED B Y THE LEGISLATURE BY AMENDING THE ACT. 6.3 IN VIEW OF THE ABOVE STATED FACTS AND IN THE CI RCUMSTANCES OF THE CASE, I DO NOT FIND ANY REASON TO INTERFERE WITH PART DIS ALLOWANCE MADE BY THE ASSESSING OFFICER OUT OD DEDUCTION CLAIMED BY THE A SSESSEE UNDER SECTION 54F OF THE ACT. THE ADDITION OF RS.9,64,812/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF HALF OF THE D EDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 54F OF THE ACT IS, THEREFORE , UPHELD. IN THE RESULT, GROUND NO. 2 OF APPEAL TAKEN BY THE ASSESSEE IS DIS MISSED. 5. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 6. AT THE OUTSET, THE LEARNED AR INVITED OUR ATTENT ION TO VARIOUS SUBMISSIONS FILED BEFORE LEARNED CIT(A) AND ALSO IN VITED OUR ATTENTION TO NUMBER OF JUDICIAL PRONOUNCEMENTS WHICH THE ASSESSE E HAD RELIED UPON BEFORE THE CIT(A). THE LEARNED AR SUBMITTED THAT LE ARNED CIT(A) WITHOUT ITA NO.19 (ASR)/2015 ASST. YEAR : 2009-10 4 DISCUSSING THE CASE LAWS SIMPLY DISTINGUISHED THE F ACTS AND DISMISSED THE APPEAL OF ASSESSEE. 7. THE LEARNED AR FURTHER SUBMITTED THAT LEARNED CI T(A) WAS ALSO APPRISED OF THE FACT THAT BY AMENDMENT IN SEC.54F W .E.F. 1 ST APRIL, 2015, THE LEGISLATURE HAD SUBSTITUTED THE WORD A RESIDEN TIAL HOUSE BY ONE RESIDENTIAL HOUSE AND THIS AMENDMENT HAS BEEN MADE W.E.F 1 ST APRIL 2015. THE AMENDMENT ITSELF CLARIFIES THAT REINVESTM ENT IF MADE IN MORE THAN ONE HOUSE PRIOR TO 1.4.2015 WAS PERMISSIBLE U/ S 54F AND LEARNED CIT(A) WAS ALSO TAKEN TO THE HONBLE MADRAS HIGH CO URT DECISION IN THE CASE OF CIT VS. V.R. KARPAGAM REPORTED IN 373 ITR 0 127 (MADRAS) WHEREIN EXEMPTION U/S 54F FOR ACQUISITION OF FIVE F LATS IN A MULTI STORIED BUILDING WAS HELD TO BE ALLOWABLE U/S 54F AND THE C ONTENTION OF REINVESTMENT IN ONE RESIDENTIAL HOUSE WAS HELD TO B E APPLICABLE TO POST AMENDMENT SITUATION AND NOT PRIOR TO THAT. 8. THE LEARNED DR, ON THE OTHER HAND, HEAVILY RELIE D UPON THE ORDER OF AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSE E INVESTED THE SALE PROCEEDS IN TWO FLATS AND CLAIMED EXEMPTION U/S 54F FOR INVESTMENT IN TWO FLATS WHEREAS ASSESSING OFFICER AND LEARNED CIT (A) RESTRICTED THE EXEMPTION TO ONLY ONE FLAT. THE PROVISIONS OF SEC. 54F HAS BEEN AMENDED W.E.F. 1 ST APRIL,2015 WHEREIN WORDS A RESIDENTIAL HOUSE HAS BEEN SUBSTITUTED BY ONE RESIDENTIAL HOUSE AND THIS AME NDMENT HAS BEEN ITA NO.19 (ASR)/2015 ASST. YEAR : 2009-10 5 MADE EFFECTIVE FROM 1 ST APRIL, 2015 WHICH MEANS THAT PRIOR TO 1 ST APRIL, 2015, THE ASSESSEE WAS ELIGIBLE TO CLAIM EXEMPTION FOR INVESTMENT IN MORE THAN ONE RESIDENTIAL UNITS. THIS VIEW HAS BEEN TAKEN BY HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. V.R. KARPA GAM (SUPRA). THE RELEVANT FINDINGS OF THE HONBLE COURT ARE REPRODUC ED BELOW. HELD: AN AMENDMENT WAS MADE TO SECTION 54F WITH RE GARD TO THE WORD 'A' BY THE FINANCE (NO.2) ACT, 2014. THE SAID AMENDMENT TO SECTION 54F OF THE INCOME TAX ACT, WHICH WILL COME INTO EFFECT ONLY FR OM 01.04.2015, MAKES IT VERY CLEAR THAT THE BENEFIT OF SECTION 54F OF THE I NCOME TAX ACT WILL BE APPLICABLE TO CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA AND THAT CLARIFIES THE SITUATION IN THE PRESENT CASE, I.E, POST AMENDM ENT, VIZ., FROM 01.04.2015, THE BENEFIT OF SECTION 54F WILL BE APPL ICABLE TO ONE RESIDENTIAL HOUSE IN INDIA. PRIOR TO THE SAID AMENDMENT, IT IS DEAR THAT A RESIDENTIAL HOUSE WOULD INCLUDE MULTIPLE FLATS/RESIDENTIAL UNIT S AS IN THE PRESENT CASE WHERE THE ASSESSEE HAS GOT FIVE RESIDENTIAL FLATS. THE AUTHORITIES BELOW HAVE CLEARLY UNDERSTOOD THAT THE AGREEMENT SIGNED B Y THE ASSESSEE WITH M/S. MOUNT HOUSING INFRASTRUCTURE LTD., IS THAT THE ASSESSEE WILL RECEIVE 43.75% OF THE BUILT- UP AREA AFTER DEVELOPMENT, WHI CH IS CONSTRUED AS ONE BLOCK, WHICH MAY BE ONE OR MORE FLATS. IN THAT VIEW OF THE MATTER WHAT WAS BEFORE THE AO IS ONLY EQUIVALENT OF 56.25% OF LAND TRANSFERRED, EQUIVALENT TO 43.75% OF BUILT UP AREA RECEIVED BY THE ASSESSEE . THIS BUILT UP AREA GOT TRANSLATED INTO FIVE FLATS. HENCE, THE TRANSACTION IN THIS CASE WAS NOT WITH REGARD TO THE NUMBER OF FLATS BUT WITH REGARD TO TH E PERCENTAGE OF THE BUILT UP AREA, VIS-A-VIS, THE UNDIVIDED SHARE OF LAND. (PARA 9-10) THUS THE PROPERTY SHOULD BE ASSESSED AS ONE UNIT, E VEN THOUGH DIFFERENT FLATS ARE AVAILABLE. HERE ALSO, AS PER THE ASSESSME NT ORDER, ALL THE FLATS HAVE ONE DOOR NUMBER, NAMELY, DOOR NO.29F, RACE COU RSE, COIMBATORE. THUS THE TRIBUNAL WAS RIGHT IN INTERPRETING THE PHR ASE 'A RESIDENTIAL HOUSE' IN PLURAL CONNOTATION FOR THE PURPOSE OF REINVESTME NT OF CAPITAL GAIN FOR CLAIMING EXEMPTION UNDER SECTION 54F AND TREATING F IVE INDEPENDENT FLATS IN A MULTISTOREY CONSTRUCTION AS A SINGLE RESIDE/ I TIA 1 UNIT UNDER SECTION 54F. ORDER DATED 04.01.2012 IN T.C.(A) NO.656 OF 20 05; CITV. SMT. K. G. RUKMINIAMMA, 331 ITR 211, RELIED ON. (PARA 13) CONCLUSION : PRIOR TO AMENDMENT OF SECTION 54F BY FINANCE (NO.2) ACT, 2014 W.E.F FROM 01.04.2015, WITH REGARD TO WORD 'A', A RESIDENTIAL HOUSE WOULD INCLUDE MULTIPLE FLATS/RESIDENTIAL UNITS, THUS WHERE UNDER THE DEVELOPMENT AGREEMENT ASSESSEE WAS ENTITLED TO RECEIVE CERTAIN BUILT-UP AREA, WHICH GOT TRANSLATED INTO FIVE FLATS, EXEMPTION U/S 54F IN RE SPECT OF ALL FIVE FIATS IN A MULTI-STOREY CONSTRUCTION WOULD BE AVAILABLE. ITA NO.19 (ASR)/2015 ASST. YEAR : 2009-10 6 FROM THE ABOVE JUDGMENT OF HONBLE MADRAS HIGH COUR T, WE FIND THAT THE AMENDMENT IN SEC.54F IS APPLICABLE FROM 1 ST APRIL, 2015 AND PRIOR TO THAT THE ASSESSEE IS ELIGIBLE FOR INVESTMENT IN MOR E ONE RESIDENTIAL UNITS, THEREFORE, KEEPING IN VIEW THE ABOVE JUDICIAL PRECE DENT, WE ALLOW THE APPEAL OF THE ASSESSEE. 10. IN NUTSHELL, THE APPEAL FILED BY ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12. 07.2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 12.07.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER