ACIT 20(3), MUMBAI V. SHRADHA SUDHIR VALIA, MUMBAI

ITA 192/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5490 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 09-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B B RAJENDRA PRASAD LD
• Assessee Lawyers: VIJAY MEHTALD
• Keywords: Capital asset; Additional evidence; Corroborative evidences; Reason to believe
• Section: 143(3); 54F; 133(6); 54

Judgement Text

ITA NO.192/MUM/2017 SHRADHA SUDHIR VALIA ASSESSMENT YEAR :2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.192/MUM/2017 ( / ASSESSMENT YEAR: 2013-14) ASST. COMMISSIONER OF INCOME TAX -20(3) ROOM NO.612, PIRAMAL CHAMBERS, LALBAUG, PAREL,MUMBAI-400 012 / VS. MS. SHRADHA SUDHIR VALIA 301, MANEK BHUVAN 1 ST LANE, HINDU COLONY DADAR (EAST) MUMBAI-400 014 ! ./ ./PAN/GIR NO. AABPV-2201-P ( !# /APPELLANT ) : ( $!# / RESPONDENT ) ASSESSEE BY : VIJAY MEHTA- LD. AR REVENUE BY : B.B. RAJENDRA PRASAD - LD.CIT-DR / DATE OF HEARING : 10/12/2018 / DATE OF PRONOUNCEMENT : 05/02/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2013-14 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-32, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-32/IT-617/ACIT-20(3)/15-16 DATED 26/10/2016 ON FOLLOWING EFFECTIVE GROUNDS OF APPEAL : - 1. ON THE FACT AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE ID. CIT(A) HAS ERRED IN RELYING UPON THE CBDT CIRCULAR NOS. 471 & 672 WITHOUT APPRECIATING THE FACT THAT THESE CIRCULARS APPLY IN THE CASES OF INVESTMENT IN FLATS UNDER ITA NO.192/MUM/2017 SHRADHA SUDHIR VALIA ASSESSMENT YEAR :2013-14 2 SELF FINANCE SCHEME OF DDA / COOP.SOCIETIES / INSTI TUTIONS, WITH SIMILAR SCHEME, WHEREAS IN THE CASE OF ASSESSEE ALLOTMENT H AS BEEN MADE BY A PRIVATE ENTITY AND IF ADDITIONAL EVIDENCE WAS PRODU CED BEFORE THE LD.CIT(A) IN RESPECT OF THE SIMILARITY OF SCHEMES, SAME SHOULD H AVE BEEN REMANDED TO THE A.O. FOR HIS EXAMINATION AND COMMENTS. ' 2. ON THE FACT AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN ACCEPTING THE VIEW OF ASSESSEE THAT SECTION 2(47)(V ) IS WITH REFERENCE TO TRANSFER FOR THE PURPOSE OF CAPITAL GAIN IN THE HAN DS OF THE TRANSFEROR AND IS NOT TO DECIDE THE DATE OF PURCHASE WHEREAS THE PROV ISIONS OF THE I.T.ACT DO NOT SUGGEST THAT SECTION 2(47)(V) WILL NOT BE CONSI DERED FOR DETERMINING THE DATE OF ACQUISITION OF CAPITAL ASSET 3. ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION U/S 54F OF THE I.T.ACT, 1961 AS THE ASSESSEE PURCHASED TWO RESIDENTIAL HOUSES INSTEAD OF A RESIDENTIAL HOU SE. ' 4. ON THE FACT AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN RELYING ON THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF DEVDAS NAIK WHICH IS DIFFERENT FROM THIS CASE IN RESPECT OF SIN GLE KITCHEN IN TWO FLATS WHEREAS IN ASSESSEE CASE TWO RESIDENTIAL HOUSES HAD TWO KITCHEN. 5. ON THE FACT AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) IS NOT JUSTIFIED IN ALLOWING DEDUCTION U/S 54F OF THE I.T. ACT, 1961 INSPITE OF THE FACT THAT ASSESSEE HAS ILLEGALLY ADJOINED TWO RESIDENTIA L HOUSES WITHOUT PRIOR PERMISSION OF BMC, WHICH IS A RESPONSIBLE AUTHORITY FOR IMPLEMENTATION OF SAFETY NORMS OF RESIDENCES AND ONLY BMC CAN ALLOW A LTERNATION IN RESIDENTIAL FLATS. FURTHER, IT IS EVIDENT BY THE SOCIETY'S LETT ER THAT ASSESSEE IS USING SINGLE ENTRY FOR BOTH RESIDENCES AND IT IS NOT POSSIBLE TO USE BOTH RESIDENCES WITH SINGLE ENTRY WITHOUT BREAKING WALLS SEPARATING TWO FLATS ILLEGALLY.' 6. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTO RED. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-20(3), MUMBAI [A O] IN SCRUTINY ASSESSMENT U/S 143(3) ON 23/03/2016 WHEREIN THE INC OME OF THE ASSESSEE WAS DETERMINED AT RS.2098.67 LACS AFTER CE RTAIN ADJUSTMENTS AS AGAINST RETURNED INCOME OF RS.63.67 LACS E-FILED BY THE ASSESSEE ON 26/07/2013. THE ASSESSEE WAS SADDLED WITH IMPUGNED ADDITIONS IN VIEW OF THE FACT THAT CERTAIN LONG-TERM CAPITAL GAIN [LTCG] WAS TREATED AS SHORT TERM CAPITAL GAIN [STCG] AND CONSEQUENTLY, THE DEDUCTION U/S 54F AS CLAIMED BY THE ASSESSEE WAS DENIED TO HER. 2.1 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE SOLD HER RIGHT IN A RESIDENTIAL PROPERTY FOR SALE C ONSIDERATION OF RS.23.75 ITA NO.192/MUM/2017 SHRADHA SUDHIR VALIA ASSESSMENT YEAR :2013-14 3 CRORES ON 25/05/2012. THOSE RIGHTS WERE STATED TO B E ACQUIRED ON 22/10/2008 FOR A SUM OF RS.3.40 CRORES, THE INDEXED COST OF WHICH WORKED OUT TO RS.4.97 CRORES. ACCORDINGLY, THE GAIN S OF RS.18.77 CRORES WERE REFLECTED AS LONG-TERM CAPITAL GAIN [LTCG] AGAINST WHICH DEDUCTION U/S 54F WAS CLAIMED ON ACCOUNT OF PURCHAS E OF TWO NEW FLATS. SINCE THE NEW INVESTMENTS EXCEEDED THE LTCG EARNED BY THE ASSESSEE, THE RESULTANT GAINS AS OFFERED TO TAX BECAME NIL. 2.2 THE ASSESSEE WAS REQUIRED TO JUSTIFY HER CLAIM U/S 54F. UPON PERUSAL OF PURCHASE DOCUMENTS RELATED TO PROPERTY S OLD BY THE ASSESSEE, IT WAS NOTED THAT PURCHASE AGREEMENT WAS ENTERED ON 15/12/2011 BETWEEN THE ASSESSEE AND SANJAY KANUBHAI PATEL AND VIJAY MOHANLAL PAREKH ON BEHALF OF AREAL VIEW CHS LTD . FOR A CONSIDERATION OF RS.3.40 CRORES. THE SAID AGREEMENT WAS REGISTERED ON 13/04/ 2012. THE SAME LED THE LD.AO TO FORM A BELIEF THAT THE FLAT UNDER QUESTION WAS ACQUIRED BY THE ASSESSEE ONLY ON 15/12/2011 AND THEREFORE, T HE RESULTANT GAINS WERE MERELY SHORT-TERM CAPITAL GAINS IN NATURE SINCE THE CAPITAL ASSET WHICH WAS SOLD BY THE ASSESSEE WAS ACTUALLY A FLAT AND NOT A MERE RIGHT IN THE FLAT. APPLYING THE SAME LOGIC, INDEXATION BE NEFIT WAS DENIED TO THE ASSESSEE AND STCG WAS WORKED OUT AT RS.20.35 CRORES AGAINST WHICH THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION U/ S 54F SINCE THE BENEFIT OF THAT SECTION WAS AVAILABLE ONLY AGAINST LTCG. 2.3 THE LD. AO, IN THE ALTERNATIVE, ALSO NOTED THAT THE ASSESSEE MADE INVESTMENT IN TWO FLATS I.E. FLAT NOS. 1701 & 1702 FOR A CONSIDERATION OF RS.11.60 CRORES AND RS.11.30 CRORES RESPECTIVELY. I N TERMS OF THE AGREEMENT, THE PURCHASER ASSESSEE INTENDED TO MERGE BOTH THE FLATS INTO ONE RESIDENTIAL HOUSE AFTER OBTAINING NECESSARY APP ROVAL FROM CONCERNED ITA NO.192/MUM/2017 SHRADHA SUDHIR VALIA ASSESSMENT YEAR :2013-14 4 AUTHORITIES. IT ALSO TRANSPIRED THAT BOTH THE FLATS HAD SEPARATE KITCHENS. THE ASSESSEE DEFENDED THE SAME VIDE SUBMISSIONS DAT ED 16/03/2016 AND CONTENDED THAT THE TWO FLATS WERE NOT ONLY ADJA CENT FLATS BUT WERE BEING USED AS A SINGLE RESIDENTIAL HOUSE. TO SUPPOR T THE SAME, A CERTIFICATE DATED 29/02/2016 ISSUED BY THE CONCERNE D SOCIETY WAS PLACED ON RECORD. HOWEVER, NOT CONVINCED, LD. AO NOTED THA T THE ASSESSEE HAD LEASED OUT THESE FLATS VIDE LEASE AGREEMENT DATED 1 9/03/2013 ACCORDING TO WHICH TWO FLATS WERE LEASED OUT AND THEIR AREA W AS MENTIONED SEPARATELY IN THE LEASE AGREEMENTS WHICH SHOW THAT BOTH FLATS WERE INDEPENDENT FLATS EVEN ON THE DATE OF LEASING OUT T O AN ENTITY NAMELY TPG CAPITAL INDIA PRIVATE LIMITED. THESE FACTS, IN THE OPINION OF LD. AO, NEGATED ASSESSEES CLAIM THAT BOTH THE FLATS WERE J OINED TOGETHER. THE REPLY RECEIVED FROM EXECUTIVE ENGINEER, BMC, BYCULLA, MUMBAI IN RESPONSE TO NOTICE U/S 133(6) REVEALED THAT NO PROP OSAL WAS RECEIVED BY THE AUTHORITIES REGARDING AMALGAMATION OF TWO FLATS . THE AFORESAID FACTS LED THE LD. AO TO CONCLUDE THAT THE ASSESSEE VIOLAT ED CONDITIONS OF SECTION 54F AND THEREFORE, NOT ENTITLED FOR THE SAI D DEDUCTION. 2.4 FINALLY, THE RESULTANT GAIN OF RS.20.35 CRORES WERE TREATED AS STCG AND ADDED TO THE INCOME OF THE ASSESSEE AND THE BE NEFIT OF DEDUCTION U/S 54F WAS DENIED TO THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH SUCCESS BEFORE CIT(A) VIDE IMPUGNED ORDER DATED 26/10/2016 WHEREIN AFTER DUE CONSIDERATION OF QUANTUM ASSESSMENT ORDER AND ASSES SEES SUBMISSION, THE MATTER WAS CONCLUDED IN ASSESSEES FAVOR IN THE FOLLOWING MANNER: - 5.7 I HAVE CAREFULLY PERUSED THE ASSESS MENT ORDER AND THE SUBMISSION OF THE APPELLANT. THE DEFINITION OF TRANSFER IS RE AD AS UNDER: - S. 2(47) 'TRANSFER', IN RELATION TO A CAPITAL ASSET , INCLUDES, ITA NO.192/MUM/2017 SHRADHA SUDHIR VALIA ASSESSMENT YEAR :2013-14 5 (I) THE SALE, EXCHANGE OR RELIN QUISHMENT OF THE ASSET; OR___ EXPLANATION 2. FOR THE REMOVAL OF DOUBTS, IT IS HE REBY CLARIFIED THAT 'TRANSFER' INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDE D DISPOSING OF OR PARTING WITH AN ASSET OR ANY INTEREST THEREIN, OR CREATING ANY I NTEREST IN ANY ASSET IN ANY MANNER WHATSOEVER, DIRECTLY OR INDIRECTLY, ABSOLUTELY OR C ONDITIONALLY, VOLUNTARILY OR INVOLUNTARILY, BY WAY OF AN AGREEMENT (WHETHER ENTE RED INTO IN INDIA OR OUTSIDE INDIA) OR OTHERWISE, NOTWITHSTANDING THAT SUCH TRANSFER OF RIGHTS HAS BEEN CHARACTERIZED AS BEING EFFECTED OR DEPENDENT UPON OR FLOWING FROM TH E TRANSFER OF A SHARE OR SHARES OF A COMPANY REGISTERED OR INCORPORATED OUTSIDE IND IA; CONSIDERING THE DEFINITION AS PER S. 2(47), TRANSFE R OF INTEREST IN PROPERTY CAN BE CONSTRUED AS TRANSFER OF CAPITAL ASSET. THE APPELLA NT HAD SUBMITTED THE LETTER OF ALLOTMENT DATED 22.10.2008 WHEREIN SHE WAS ENTITLED TO THE RIGHT IN SPECIFIC PROPERTY OF THE PROPOSED BUILDING 'VASTU PALI HILL'. ALSO EN TIRE CONSIDERATION OF RS. 3.4 CRORES WAS PAID BEFORE DATE OF ALLOTMENT. SINCE THE APPELL ANT IS ONE OF THE MEMBERS OF THE PROPOSED SOCIETY, AS PER THE CIRCULAR DATED 15/10/1 986, THE ALLOTTEE GETS TITLE TO THE PROPERTY ON THE ISSUANCE OF THE ALLOTMENT LETTER. I N THE AGREEMENT FOR PURCHASE THAT WAS REGISTERED THE ALLOTMENT LETTER IS A PART OF TH E REGISTERED AGREEMENT THUS, IT CAN BE SAID THAT THE APPELLANT GOT TITLE TO THE PROPERT Y WHEN ALLOTMENT LETTER WAS ISSUED TO HER I.E. ON 22.10.2008. FURTHER IT HAS BEEN CLEARLY STATED IN THE AGREEMENT TO SALE THAT SOCIETY HAS HANDED OVER THE POSSESSION OF THE FLAT TO THE TRANSFEREE AS ABSOLUTE OWNER THEREOF. IN CASE OF CIT VS TATA SERVICES LTD(1980) 122 ITR 0 594(BOM) IT HAS BEEN HELD THAT - THE WORD 'PROPERTY', USED IN S. 2(14), IS A WORD OF THE WIDEST AMPLITUDE AND THE DEFINITION HAS RE-EMPHASISED THIS BY USE OF THE WOR DS 'OF ANY KIND'. THUS, ANY RIGHT WHICH CAN HE CALLED PROPERTY WILL BE INCLUDED IN TH E DEFINITION OF 'CAPITAL ASSET'. A CONTRACT FOR SALE OF LAND IS CAPABLE OF SPECIFIC PE RFORMANCE. IT IS ALSO ASSIGNABLE. THEREFORE, A RIGHT TO OBTAIN CONVEYANCE OF IMMOVABL E PROPERTY, WAS CLEARLY 'PROPERTY' AS CONTEMPLATED BY S. 2(14). ' IN CASE OF RICHA BAGRODIA VS .DCIT-12(3), MUMBAI (I TANO.3601/M/2012) IT WAS HELD THAT THE 'DATE OF ALLOTMENT' SHOULD BE RECKONE D AS THE DATE FOR COMPUTING THE HOLDING PERIOD FOR THE PURPOSE OF CAPITAL GAINS. APPLYING THE ABOVE DECISION IN CASE OF THE APPELLAN T, PERIOD OF HOLDING WILL BE CONSIDERED FROM DATE OF ALLOTMENT LETTER I.E. 22.10 .2008 AND NOT 15.12.2011 I.E. WHEN AGREEMENT WAS ENTERED. SINCE THE APPELLANT HAS ACQUIRED THE CAPITAL ASSET ON 22.10.2008 AND SOLD THE SAME ON 25.05.2012, THE APP ELLANT IS SAID TO HAVE TRANSFERRED LONG TERM CAPITAL ASSET AND IS ENTITLE TO THE BENEFIT OF INDEXATION AND CAN ALSO CLAIM DEDUCTION U/S. 54F PROVIDED CONDITION LA ID DOWN IN SEC. 54F ARE FULFILLED. 6. GROUNDS OF APPEAL NO. 3. THIS GROUND IS RELATED TO DEDUCTION CLAIMED U/S. 54 F OF TWO FLATS PURCHASED AS AGAINST LAWFUL PERMISSION OF ONE FLAT. SINCE GROUND NO. 1 AND 2 ARE ALLOWED, THE APPELLANT IS ENTITLED TO CLAIM D EDUCTION U/S. 54F. 6.1 DURING THE YEAR UNDER CONSIDERATION, THE APPELL ANT HAS CLAIMED DEDUCTION U/S. 54F FOR PURCHASE OF RESIDENTIAL FLATS NO. 1701 & 17 02 IN C-WING, BEAUMONDE, PRABHADEVI, MUMBAI FROM M/S. SHETH DEVELOPERS PVT L TD AMOUNTING TO RS.24,56,57,700/- ON 10.09.2012. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE AO ISSUED SHOW CAUSE NOTICE ON 04.03.2016 ASKING TH E APPELLANT TO EXPLAIN WHY DEDUCTION U/S. 54F SHOULD NOT BE DENIED AS THERE AR E PURCHASE OF MORE THAN ONE FLAT. IN RESPONSE, THE APPELLANT SUBMITTED LETTER D ATED 16.03.2016 AND STATED THAT ITA NO.192/MUM/2017 SHRADHA SUDHIR VALIA ASSESSMENT YEAR :2013-14 6 THOUGH AGREEMENT SHOWS PURCHASE OF TWO FLATS THEY A RE NOT ONLY ADJACENT FLATS BUT ARE BEING USED AS SINGLE RESIDENTIAL HOUSE AND IN A DDITION THE APPELLANT HAD SUBMITTED AGREEMENT FOR PURCHASE OF FLATS, CD WHERE IN PHOTOGRAPHS OF THE SAID RESIDENTIAL HOUSE ARE THERE WHICH SHOWS THAT IT IS A SINGLE HOUSE AND SOCIETY CERTIFICATE CERTIFYING THAT BOTH THE FLATS STANDS M ERGED INTO ONE RESIDENTIAL UNIT HAVING SINGLE ENTRANCE SINCE ITS PURCHASE BY THE OWNERS. F URTHER NOTICE U/S. 133(6) WAS ISSUED BY LAO TO THE EXECUTIVE ENGINEER, BMC, BYCUL LA, MUMBAI ON 04.03.2016 TO ENQUIRE WHETHER APPROVAL WAS TAKEN FROM IT BEFORE M ERGING OF TWO FLATS. IN RESPONSE TO THE SAME THE EXECUTIVE ENGINEER FILED ITS REPLY VIDE LETTER DATED 11.3.2016 AND STATED THAT NO PROPOSAL IS RECEIVED REGARDING AMALG AMATION OF FLAT NO. 1701 AND 1702 ON 17 FLOOR, C-WING, BEAU MONDE. VARIOUS OBSER VATIONS WERE LAID DOWN BY AO IN HIS ASSESSMENT ORDER TO SUPPORT HIS CONTENTION T HAT THE APPELLANT HAS VIOLATED THE CONDITION PRESCRIBED IN S. 54F IN AS MUCH AS SHE HA S ACQUIRED TWO FLATS AS AGAINST LAWFUL PERMISSION OF ONE FLAT. THESE OBSERVATIONS O F THE AO ARE AS UNDER:- I) CONSIDERATION PAID FOR TWO FLATS PURCHASED BY TH E APPELLANT IS MENTIONED SEPARATELY IN THE AGREEMENT AND AS PER VARIOUS CLAU SES OF THE AGREEMENT IT IS REVEALED THAT ALL THE THREE PARTIES TO THE AGREEMEN T BEING APPELLANT, OWNER AND DEVELOPER ADMIT THE EXISTENCE OF TWO SEPARATE FLATS BEARING FLAT NO. 1701 AND FLAT NO. 1702. II) IT HAS BEEN POINTED OUT BY AO THAT AS PER CLAUS E 57(P) ON PAGE 40 OF AGREEMENT IT IS CLEAR THAT THE MERGER OF FLAT IS NOT AT A CHOICE OF THE BUYER BUT SUBJECT TO THE APPROVAL FROM THE CONCERNED AUTHORITIES. III) REFERENCE HAS BEEN MADE OF THE ANNEXURE 'F-I' AND 'F-II' OF THE AGREEMENTS WHEREIN BOTH THE FLATS HAVE BEEN SHOWN WITH DIFFERE NT KITCHEN. AS PER AO, WHEN THE FLATS ERE PURCHASED FROM THE DEVELOPERS THEY WERE I NDEPENDENT FLATS AS PER THE PLAN AND IF AT ALL THEY HAVE TO BE JOINED IT WAS THE RES PONSIBILITY OF BUYER TO BEAR THE COST AS WELL AS TO SEEK THE PERMISSION OF THE LOCAL AUTH ORITY. IV) AS PER AO, MERGER OF TWO FLATS WAS AFTER TAKING POSSESSION OF FLATS AND FORMATION OF SOCIETY. FURTHER, THE SOCIETY'S CERTIFICATE DOES NOT SPELL OUT THE DATE ON WHICH THE MERGER OF TWO FLATS WAS DONE. THEREFORE, THERE IS A REASON TO BELIEVE THAT THE TWO FLATS WERE JOINT TOGETHER AFTER SOCIETY CAME INTO E XISTENCE, TILL THEN BOTH THESE FLATS WERE HAVING DEFINITE EXISTENCE. V) THE AO REFERRED TO LEASE AGREEMENT DATED 19.03.2 013 WHICH SHOWS THAT THE TWO FLATS WERE LEASED OUT AND THEIR AREA WAS MENTIONED SEPARATELY WHICH SHOWS THAT BOTH FLATS WERE INDEPENDENT FLATS EVEN ON THE DATE OF LEASING OF THE FLATS TO TPG CAPITAL INDIA P. LTD. VI) LETTER RECEIVED FROM MUNICIPAL AUTHORITY MAKES IT ABUNDANTLY CLEAR THAT TILL THE DATE OF LETTER THERE WAS NO APPLICATION FROM THE AP PELLANT SEEKING PERMISSION FOR MERGING TWO FLATS. THE APPELLANT IN HER SUBMISSION HAS REBUTTED THE AB OVE OBSERVATION OF THE AO BY STATING THAT:- I) IT NEEDS TO BE APPRECIATED THAT THE DOCUMENT ENT ERED INTO IS ONLY ONE AND IN THE SAID AGREEMENT IT IS WRITTEN THAT '..ARE JOINTLY HE REIN AFTER REFERRED AS THE SAID PREMISES'. THUS BOTH ARE REFERRED IN COMMON. II) WHEN A PERSON IS BUYING TWO ADJACENT FLATS THE PURPOSE IS TO USE THEM AS ONE FLAT ONLY AND TO USE AS ONE FLAT THERE IS NO NEED FOR AN Y APPROVAL. ITA NO.192/MUM/2017 SHRADHA SUDHIR VALIA ASSESSMENT YEAR :2013-14 7 III) IT IS THE BUYER WHO WANTS TO USE A LARGER FLAT . WHEN SUCH A LARGER SIZE IS NOT AVAILABLE SHE HAS TO ENTER INTO PURCHASE OF TWO ADJ ACENT FLATS SO THAT SHE CAN USED THEM AS ONE. IV) IT IS NOT TO ASCERTAIN WHEN THE PERMISSION WAS OBTAINED OR WHETHER SOCIETY GIVES THE PERMISSION LATE. IT IS TO UNDERSTAND THAT FROM THE BEGINNING THE PURPOSE WAS TO HAVE ONE BIGGER FLAT AND USE THE SAME AS ONE FLAT. THAT IS WHY THE PURCHASER IS THE SAME AND THE AGREEMENT IS ONLY ONE AND REGISTERED A LSO AS ONE AGREEMENT. V) AGAIN AO IGNORES THAT THE AGREEMENT OF LEASE IS ONE AND THE RENT DECIDED IS ONE ONLY. THERE IS NO BIFURCATION OF RENT BETWEEN TWO F LATS AN IN AGREEMENT, IT IS REFERRED AS 'THE SAID FLAT'. VI) IT IS USER AS ONE FLAT THAT IS IMPORTANT. ABOVE SUBMISSIONS PROVE BEYOND ANY DOUBT THAT THE PURCHASE OF LARGER FLAT W AS REQUIRED AND HENCE TWO FLATS ADJACENT WERE PURCHASED. 6.2 FURTHER THE APPELLANT HAD RELIED ON VARIOUS FOL LOWING DECISIONS TO SUPPORT HER CONTENTION THAT DEDUCTION U/S. 54F CAN BE ALLOWED F OR TWO FLATS PURCHASED ADJACENT TO EACH OTHER AND USED AS SINGLE UNIT: I) COMMISSIONER OF INCOME TAX VS. DEVDAS NAIK (2014 ) 366 ITR 0012 (BOM) II) SHRI SATIDHNIKAM V. ITO HONORABLE MUMBAI TRIBUN AL III) ITO VS. MS SUSHILA M. JHAVERI, (2007) 107 ITD 327 (MUM)(SB), IV) CIT VS D ANANDA BASAPPA 309 ITR 329 (KAR.), V) COMMISSIONER OF INCOME-TAX V. GITA DUGGAL [2013] 30 TAXMANN.COM 230 (DELHI HC) VI) ACIT V MRS. LEELA P. NANDA 286 ITR (AT) 113 (MU M) (2006) VII) CIT VS. K. G. RUKMINIAMMA (SMT.) (2010) 48 DTR 377 (KAR.) VIII) IT V. SYED ALI ADIL (AP)(HC).(2013) 215 TAXMA N 283 6.2 I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER A ND SUBMISSION MADE BY THE APPELLANT. THE APPELLANT HAS PURCHASED TWO FLATS WH ICH ARE ADJACENT TO EACH OTHER AND CLAIMED DEDUCTION U/S. 54F FOR THE SAID FLATS. AS PER S. 54F, DEDUCTION IS ALLOWED FOR 'A' RESIDENTIAL HOUSE PURCHASED. FURTHER S. 54F WAS AMENDED W.E.F. 01.04.2015 BY SUBSTITUTING THE WORD 'A' WITH 'ONE'.THUS, IT SH OWS THAT PRIOR TO THE AMENDMENT THE EXEMPTION PROVIDED UNDER SECTION 54(1) WAS NOT RESTRICTED TO INVESTMENT MADE IN ONE RESIDENTIAL HOUSE. 6.3 IN VARIOUS DECISIONS GIVEN BY HON'BLE HIGH COUR T AND HON'BLE TRIBUNAL, INTERPRETATION OF THE WORD 'A' PRECEDING THE EXPRES SION 'RESIDENTIAL HOUSE' HAS BEEN GIVEN. IN CASE OF CIT VS. DEVDAS NAIK (SUPRA), IT W AS HELD THAT DEDUCTION U/S 54 CAN BE ALLOWED IF FLATS ARE A SINGLE UNIT AND A HOU SE FOR PURPOSE OF RESIDENCE EVEN IF ACQUISITION OF FLATS WERE DONE INDEPENDENTLY. IN CA SE OF CIT & ANR. VS. D. ANANDA BASAPPA IT WAS HELD THAT EXPRESSION 'A RESIDENTIAL HOUSE' SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NUMBER; ASSESSEE HAVING PURC HASED TWO RESIDENTIAL FLATS, EXEMPTION UNDER S. 54 WAS AVAILABLE, MORE SO AS THE SE FLATS ARE SITUATED SIDE BY SIDE AND THE BUILDER HAS EFFECTED MODIFICATION OF T HE FLATS TO MAKE IT AS ONE UNIT. 6.4 FROM THE ABOVE JUDICIAL PRONOUNCEMENTS, IT IS C LEAR THAT DEDUCTION CAN BE CLAIMED U/S. 54F FOR TWO RESIDENTIAL FLATS IF THEY ARE BEING USED AS A SINGLE UNIT ALTHOUGH THE FLATS ARE ACQUIRED INDEPENDENTLY. OBJE CTION OF THE AO IS THAT THEY ARE TWO FLATS. HE HAS NOT SAID THAT THEY ARE NOT ADJACE NT. IN THE APPELLANT'S CASE, THE APPELLANT HAS PURCHASED TWO FLATS WHICH ARE ADJACEN T TO EACH OTHER. THE APPELLANT HAD ENTERED INTO ONE AGREEMENT FOR PURCHASE OF TWO FLATS. FURTHER, THE APPELLANT HAD LEASED OUT BOTH THE FLATS TO SINGLE PARTY I.E. TPG CAPITAL INDIA P. LTD, ENTERED INTO SINGLE LEASE AGREEMENT AND ALSO WAS RECEIVING RENT FOR BOTH THE FLATS TOGETHER. FURTHER THE APPELLANT HAD SUBMITTED SOCIETY'S CERTI FICATE WHICH CERTIFIED THAT BOTH THE FLATS STANDS MERGED INTO ONE RESIDENTIAL UNIT HAVIN G SINGLE ENTRANCE SINCE ITS ITA NO.192/MUM/2017 SHRADHA SUDHIR VALIA ASSESSMENT YEAR :2013-14 8 PURCHASE BY THE OWNERS. THUS, THIS FURTHER STRENGTH ENS THE APPELLANT'S CONTENTION THAT SHE WAS ENTITLED TO TAKE DEDUCTION U/S. 54F. 6.5 CONSIDERING THE FACTS OF THE APPELLANT'S CASE A ND FOLLOWING THE DECISION OF JURISDICTIONAL BOMBAY HIGH COURT IN CASE OF DEVDAS NAIK, THE APPELLANT IS ENTITLED TO TAKE DEDUCTION U/S. 54F. AGGRIEVED AS AFORESAID, THE REVENUE IS IN FURTHER A PPEAL BEFORE US. 4. THE LD. CIT-DR SUBMITTED THAT THE ASSESSEE HAD S OLD FLAT DURING IMPUGNED AY WHICH WAS HELD FOR A PRESCRIBED PERIOD OF LESS THAN 3 YEARS AND THEREFORE, THE RESULTANT GAINS WERE STCG IN NATURE. IT HAS FURTHER BEEN SUBMITTED THAT DEDUCTION U/S 54F COULD NOT ALL OWED AGAINST TWO FLATS SINCE IT WAS NEVER THE INTENTION OF THE STATU TE TO PROVIDE DEDUCTION FOR MORE THAN ONE HOUSE PROPERTY. PER CONTRA, LD. AR SUPPORTED THE OBSERVATIONS MADE BY FIRST APPELLATE AUTHORITY AND SUBMITTED THAT THE ASSESSEE HAD TRANSFERRED MERE INTEREST IN THE PROPE RTY WHICH WAS HELD FOR A PERIOD OF MORE THAN 3 YEARS AND THEREFORE, TH E GAINS WERE LTCG IN NATURE. IT WAS FURTHER SUBMITTED THAT THE NEW FLATS WERE ADJACENT UNITS AND WERE BEING USED ONLY AS A SINGLE UNIT AND THERE FORE DEDUCTION U/S 54F WAS AVAILABLE TO THE ASSESSEE. 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLACED IN TH E PAPER-BOOK AND JUDICIAL PRONOUNCEMENTS CITED BEFORE US. UPON DUE C ONSIDERATION, WE FIND THAT THIS IS UNDISPUTED FACT THAT THE ASSESSEE ACQUIRED THE RIGHT IN SPECIFIC FLAT NO. 702, 7 TH FLOOR, AERIAL VIEW CHS LTD . BY WAY OF ALLOTMENT LETTER DATED 22/10/2008, AS PLACED ON RECORD. THE S ALE CONSIDERATION WAS FIXED AT RS.3.40 CRORES WHICH WAS ALREADY PAID BY T HE ASSESSEE ON 29/09/2008 I.E. MUCH BEFORE ISSUANCE OF ALLOTMENT L ETTER. THE AGREEMENT FOR ALLOCATION OF FLAT WAS EXECUTED VIDE AGREEMENT DATED 15/12/2011 WHICH WAS REGISTERED ON 13/04/2012. THIS AGREEMENT IS IN RESPECT OF THE ITA NO.192/MUM/2017 SHRADHA SUDHIR VALIA ASSESSMENT YEAR :2013-14 9 SAME FLAT WHICH WAS ALLOTTED TO THE ASSESSEE VIDE A LLOTMENT LETTER DATED 22/10/2008 AND THE AGREEMENT ALSO CONTAINS REFERENC E OF THE ALLOTMENT LETTER. THE PERUSAL OF THESE FACTS REVEAL THAT THE PROPERTY PROPOSED TO BE ACQUIRED BY THE ASSESSEE WAS SPECIFIC & A UNIQUE PR OPERTY WHICH WAS CLEARLY IDENTIFIED IN THE ALLOTMENT LETTER DATED 22 /10/2008 FOR WHICH THE AGREEMENT WAS EXECUTED ON 15/12/2011 WHICH WAS IN F URTHERANCE OF THE STATED ALLOTMENT ONLY. THE LD. AO, IN OUR OPINION, GOT MISLED BY THE FACT THAT RIGHT IN THE FLAT GOT VESTED IN THE ASSESSEE U PON ALLOTMENT AND THE SAME GOT EXCHANGED WITH ACTUAL FLAT UPON EXECUTION OF THE AGREEMENT AND THEREFORE, THE HOLDING PERIOD SHOULD HAVE BEEN COUNTED FROM THE DATE OF THE AGREEMENT. HOWEVER, WE HAVE NOTED THAT ALLOTMENT AS WELL AS EXECUTION OF THE AGREEMENT DID NOT VEST TWO DIFFERE NT CAPITAL ASSETS IN THE HANDS OF THE ASSESSEE WHICH GOT EXCHANGED WITH EACH OTHER UPON EXECUTION OF THE AGREEMENT RATHER THE EVENT OF ALLO TMENT AS WELL AS EXECUTION OF AGREEMENT WAS PART & PARCEL OF THE SAM E TRANSACTION AND ONLY AN IMPROVEMENT IN OWNERSHIP RIGHTS HELD BY THE ASSESSEE IN THE FLAT. THIS BEING THE CASE, NO INFIRMITY COULD BE FOUND IN THE IMPUGNED ORDER AND THEREFORE, THIS GROUND STANDS DISMISSED. HAVING SAID SO, THE RESULTANT GAINS EARNED BY THE ASSESSEE WOULD BE LTCG ONLY AND THEREFORE, WE PROCEED TO DELVE INTO THE ISSUE OF AS SESSEES ELIGIBILITY TO CLAIM DEDUCTION U/S 54F. 6. IT IS NOTED THAT THE ASSESSEE HAS MADE NEW INVES TMENT IN TWO FLAT NOS. 1701 & 1702 IN C-WING, BEAUMONDE, PRABHADEVI, MUMBAI STATED TO BE PURCHASED FROM M/S. SHETH DEVELOPERS PVT LTD FOR A CONSIDERATION OF RS.24.56 CRORES DURING SEPTEMBER, 2012. IT IS UN DISPUTED FACT THAT THE FLATS WERE ADJACENT FLATS. THE PERUSAL OF THE PURCH ASE AGREEMENT REVEAL ITA NO.192/MUM/2017 SHRADHA SUDHIR VALIA ASSESSMENT YEAR :2013-14 10 THAT THE TWO FLATS WERE BEING INTENDED TO BE USED B Y THE ASSESSEE AS A SINGLE UNIT. THE FLATS WERE, SUBSEQUENTLY, STATED T O BE MERGED INTO ONE UNIT WHICH IS EVIDENCED BY CERTIFICATE ISSUED BY TH E CONCERNED SOCIETY CERTIFYING THE SAID FACT. THIS IS FURTHER FORTIFIED BY THE FACT THAT THESE FLATS WERE LEASED OUT AS SINGLE UNIT UNDER SINGLE LEASE A GREEMENT AND A COMPOSITE RENT WAS FIXED AGAINST THE SAME. ALL THES E FACTORS BOLSTER THE ASSESSEES CLAIM THAT THE FLATS WERE USED AS A SING LE UNIT AND THEREFORE, THE ASSESSEE, IN OUR OPINION, WAS ELIGIBLE TO CLAIM THE IMPUGNED DEDUCTION U/S 54F. FOR THIS PROPOSITION, WE DRAW ST RENGTH FROM THE FOLLOWING JUDICIAL PRONOUNCEMENTS: - 1. CIT VS GITA DUGGAL (HONBLE DELHI HIGH COURT 357 IT R 153] AS CONFIRMED BY HONBLE APEX COURT BY WAY OF DISMISSAL OF SLP [22 T AXMANN.COM 246] 2. CIT VS SYED ALI ADIL [HONBLE AP HIGH COURT 352 ITR 418] 3. CIT VS. SMT K.G.RUKMINIAMMA [HONBLE KARNATAKA H IGH COURT 331 ITR 211] 4. DCIT VS JAI TRILOKCHAND RAO (ITAT, MUMBAI 149 IT D 112] THIS IS FURTHER FORTIFIED BY THE OBSERVATION OF FIR ST APPELLATE AUTHORITY THAT AMENDMENT TO SECTION 54F WAS APPLICABLE ONLY WITH E FFECT FROM 01/04/2015 WHEREIN THE WORD 'A' WAS SUBSTITUTED WIT H THE WORD 'ONE' WHICH SHOWS THAT PRIOR TO THE AMENDMENT, THE EXEMPT ION WAS NOT RESTRICTED TO INVESTMENT MADE IN ONE RESIDENTIAL HO USE. LASTLY, THE AFORESAID DEDUCTION, MERELY ON THE BASIS OF STATED CERTIFICATE OF BMC, IN OUR OPINION, COULD NOT BE DENIED TO THE ASSESSEE PA RTICULARLY WHEN THE CORROBORATIVE EVIDENCES STOOD IN ASSESSEES FAVOR. RESULTANTLY, THE OVERALL FACTUAL MATRIX LEADS US TO CONCUR WITH THE STAND OF FIRST APPELLATE AUTHORITY. WE ORDER SO. 7. THE APPEAL STANDS DISMISSED IN TERMS OF OUR ABOV E ORDER. ITA NO.192/MUM/2017 SHRADHA SUDHIR VALIA ASSESSMENT YEAR :2013-14 11 ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH FEBRUARY, 2019. SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 05.02.2019 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ,- & . , . , / DR, ITAT, MUMBAI 6. -/01 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.