AJIT DAYAL LALVANI, MUMBAI V. DCIT RG 7(2),

ITA 1949/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3672 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-10-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 22-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Salary income; Deemed dividend
• Section: 54F; 54; 6

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI . . , , !' #$, % , & BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.1949/MUM/2012 ( %' ( / ASSESSMENT YEAR: 2005-06) MR. AJIT DAYAL LALVANI 3, GAZDAR HOUSE, 45, BHULABHAI DESAI ROAD, MUMBAI 400026 ' / VS. DY. CIT 7(2) MUMBAI ./ ./ PAN/GIR NO. : ABBPL4560C ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 11.05.2016 !' /DATE OF PRONOUNCEMENT: 12.08.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST T HE ORDER DATED 22.09.2011 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 13, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE A.Y.2005-06. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- ASSESSEE BY: SHRI GIRISH M. BALEKUNDRI DEPARTMENT BY: MS. ARJU GARODIA ITA NO.1949/M/2012 A.Y. 2005-06 2 1. THE ASSESSING OFFICER AS WELL AS HONORABLE COMM ISSIONER APPEAL ERRED IN CONSIDERING THE VALUE OF HOUSE PROP ERTY AS RS.6,51,000/- AGAINST THE ACTUAL CONSIDERATION OF RS.32,41,046/- WHICH IS AGAINST THE FACTS AND CIRCU MSTANCES OF THE CASE AND AGAINST THE INCOME TAX ACT CIRCULAR NO.667, DATED 18.10.1993 SPECIFIES FOLLOWING I. SECTION 54 AND 54F PROVIDE FOR A DEDUCTION IN CASES WHERE AN ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER OF A CAPITAL ASSET TAKES PLACE, PURCHASES, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THE DATE O N WHICH THE TRANSFER OF A CAPITAL ASSET TAKES PLACE, PURCHASES OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE. THE QUANTUM OF DEDUCTION IS ITSELF DEPENDENT UPON THE COST OF SUCH NEW ASSET. IT HAS BEEN REPRESENTED TO THE BOARD THAT THE COST OF CONSTRUCTION OF THE RESIDENTIAL HOUSE SHOULD BE TAKEN TO INCLUDE THE CO ST OF THE PLOT AS, IN A SITUATION OF PURCHASE OF ANY HOUSE PROPERTY, THE CONSIDERATION PAID GENERALLY INCLUDES THE CONSIDERATION FOR THE PLOT ALSO. II. THE BOARD HAS EXAMINED THE ISSUE WHETHER, IN CASES WHERE THE RESIDENTIAL HOUSE IS CONSTRUCTED WITHIN THE SPECIFIED PERIOD, THE COST OF SUCH RESIDENTIAL HOUSE CAN BE TAKEN TO INCLUDE THE COST OF THE PLOT ALSO. THE BOARD ARE OF THE VIEW THAT THE COST OF T HE LAND IS AN INTEGRAL PART OF THE COST OF THE RESIDEN TIAL HOUSE, WHETHER PURCHASES OR BUILT. ACCORDINGLY, IF THE AMOUNT OF CAPITAL GAIN FOR THE PURPOSES OF SECTION .54 AND THE NET CONSIDERATION FOR THE PURPOSE OF SECTION 54F, IS APPROPRIATED TOWARDS PURCHASE OF A PLOT AND ALSO TOWARDS CONSTRUCTION OF A RESIDENTIAL HOUSE THEREON, THE AGGREGATE COST SHOULD BE CONSIDERED FOR DETERMINING THE QUANTUM OF DEDUCTION UNDER SECTION 54/54F, PROVIDED THAT THE ACQUISITION OF PLOT AND ALSO THE CONSTRUCTION THEREON, ARE COMPLETED WITHIN THE PERIOD SPECIFIED IN THESE SECTIONS. 2. SECTION 54 SPECIFIES THE HOUSE PROPERTY :- AS PE R INCOME TAX ACT HOUSE PROPERTY CONSIST OF HOUSE AND LAND ITA NO.1949/M/2012 A.Y. 2005-06 3 APPURTENANT THERE TO, AND BEING A RESIDENTIAL HOUSE , THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 3. THE ASSESSING OFFICER AS WELL AS COMMISSIONER OF APPEAL ERRED BY NOT CONSIDERING THE SECTION 27(1) OF INCOM E TAX ACT AND DISALLOWED INVESTMENT IN HOUSE PROPERTY TO THE EXTENT OF 2/3 RD OF THE AMOUNT AS PER SECTION 27(1). AS PER SECTIO N 27(1) AN INDIVIDUAL WHO TRANSFERS OTHERWISE THAN FO R ADEQUATE CONSIDERATION ANY HOUSE PROPERTY TO HIS OR HER SPOUSE, NOT BEING A TRANSFER IN CONNECTION WITH AN AGREEMENT TO LIVE APART, OR TO A MINOR CHILD NOT BE ING A MARRIED DAUGHTER, SHALL BE DEEMED TO BE THE OWNER O F THE HOUSE PROPERTY SO TRANSFERRED. THEREFORE DIVIDING THE VALUE IN 3 PART IS AGAINST THE LAW AND INCOME TAX A CT AND THEREFORE SAME SHOULD BE ALLOWED TO THE EXTENT OF 2 /3 RD OF THE AMOUNT. 4. THE ASSESSING OFFICER AS WELL AS COMMISSIONER OF APPEAL ERRED IN CONSIDERING RS.3.2 LACS AS DEEMED DIVIDEND AGAINST THE FACTS CIRCUMSTANCES AND THE PROVISIONS OF SECTION 2(22)(E) AND POINT NO.(II) ANY ADVANCE OR L OAN MADE TO A SHAREHOLDER (OR THE SAID CONCERN) BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS, WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPAN Y. THE COMPANY DERIVE ITS INCOME FROM INVESTMENTS THEREFOR E IT FALLS UNDER SECTION 2(22)(E) WHICH HAS BEEN OVER LO OKED BY THE ASSESSING OFFICER & COMMISSIONER OF INCOME TAX. 3. ARGUMENT UPON THE DELAY HEARD. THE PRESENT APPE AL HAS BEEN FILED BY THE ASSESSEE 29 DAYS DELAYED. THE AFFIDAV IT SUBMITTED BY THE ASSESSEE LIES AT PAGE 14 OF THE PAPER BOOK. IT SE EMS THAT CHARTERED ACCOUNTANTS WAS OUT OF TOWN AND COULD NOT FILE THE APPEAL WELL IN TIME. NOW THE REASONS DOES NOT SEEMS JUSTIFIABLE B UT ON SEEING THE CONTROVERSY ON RECORD, WE ARE OF THE VIEW THAT THE APPEAL SHOULD BE ITA NO.1949/M/2012 A.Y. 2005-06 4 HEARD AND DECIDED ON MERIT, THEREFORE, WE ALLOWED T HE APPLICATION FOR DELAY. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED THE RETURN OF INCOME ON 28.10.2005 DECLARING TOTAL INCOME TO T HE TUNE OF RS.6,16,602/-. THE RETURN WAS ACCOMPANIED BY COMPU TATION OF TOTAL INCOME, BALANCE-SHEET, PROFIT & LOSS ACCOUNT, AUDIT REPORT U/S.44A OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) IN F ROM NO. 3CB AND 3CD, ETC. THEREAFTER THE NOTICES U/S.143(2) AND 14 2(1) OF THE ACT ALONGWITH QUESTIONNAIRE, WERE ISSUED AND SERVED UPO N THE ASSESSEE. THE ASSESSEE WAS CARRYING ON PROFESSIONAL MARKETING ACTIVITIES AS MANAGEMENT CONSULTANTS AND COMMISSION AGENTS. THE ASSESSEE HAS SHOWN INCOME FROM SALARY, BUSINESS AND OTHER SOURCE S. THE ASSESSEE SHOWN LONG TERM CAPITAL GAINS ON SALE OF UNQUOTED S HARES OF RS.14,60,000/- AND CLAIMED THE SAME AS EXEMPTED U/ S.54F OF THE ACT. THE ASSESSING OFFICER WAS IN DOUBT IN CONNECTION WI TH THE SALE PRICES OF 500 SHARES OF F. BOCK & CO. BECAUSE THE NATURE O F THE CREDIT OF RS.17,00,000/- WAS SHOWN BY THE ASSESSEE. AS PER T HE AGREEMENT DATED 18.08.2005 THE PURCHASE PRICE RELATES TO THE PURCHASE OF OPEN LAND AND PRICING RELATING TO THE HOUSE PROPERTY IS RS.6,51,786/-. THE PURCHASES IS IN THE NAME OF THE ASSESSEE, HIS WIFE AND SON AND THE ASSESSING OFFICER DELETE THE 1/3 RD COST PRICE OF THE HOUSE PROPERTY FOR THE FOR DEDUCTION U/S. 54F OF THE ACT. FEELING AGG RIEVED THE ASSESSEE ITA NO.1949/M/2012 A.Y. 2005-06 5 HAS FILED THE APPEAL BEFORE THE CIT(A) WHO CONFIRME D THE ORDER HENCE THE PRESENT APPEAL HAS BEEN PLACED BEFORE US. 5. HOWEVER, THE ASSESSEE HAS RAISED NUMBER OF GROUN DS BUT THE BONE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSE E BOUGHT A HOUSE PROPERTY CONSIST OF HOUSE APPURTENANT THERE AMOUNTI NG TO RS.30,29,296/- AND STAMP DUTY AMOUNTING TO RS.1,81, 760/- CALCULATED @ 6% OF THE TOTAL CONSIDERATION PAID TO THE TUNE OF RS.31,48,040/- PLUS BROKERAGE AND OTHER CHARGES TOTALING TO RS.32, 41,046/-. THE ASSESSING OFFICER AS WELL AS THE CIT(A) TREATED THE CONSTRUCTION COST FOR THE PURPOSE OF SECTION 54 AND 54F OF THE ACT. IT IS NOT IN DISPUTE THAT THE ASSESSEE PURCHASED THE LAND APPURTENANT TO THE CONSTRUCTED HOUSE IN SUM OF COST OF RS.23,77,500/- AND CONSTRUC TION COST WAS OF RS.6,51,786/- AND TOTAL AMOUNT IS TO THE TUNE OF RS .30,29,296/-. THE CIT(A) HAS CONSIDERED THE 1/3 RD AMOUNT OF THE CONSTRUCTION TO THE TUNE OF RS.6,51,786/- I.E.1,81,760/- FOR THE DEDUCTION U /S.54 OF THE ACT BEING THE ASSESSEE WAS OWNER IN POSSESSION OF THE P ROPERTY IN QUESTION TO THE EXTENT OF 1/3 RD SHARE. 2/3 RD SHARE WERE HELD BY THE WIFE OF THE ASSESSEE AS WELL AS HIS SON. IT IS NOT IN DISPUTE THAT FOR THE PURPOSE OF EXEMPTION U/S.54F OF THE ACT THE ASSESSEES SHARE WOULD ONLY BE ENTITLED IN VIEW OF THE LAW SETTLED BY HIGH COURT O F BOMBAY IN CASE OF PRAKASH VS. INCOME TAX OFFICER & ORS. (2008) 220 CT R 249 : (2009) 312 ITR 40. BUT IT IS NOT IN DISPUTE THAT THE CIT( A) HAS ONLY CONSIDERED THE COST OF CONSTRUCTION FOR THE PURPOSE OF DEDUCTION ITA NO.1949/M/2012 A.Y. 2005-06 6 U/S.54F OF THE ACT TO THE EXTENT OF HIS 1/3 RD SHARES TO THE TUNE OF RS.6,59,786/- I.E. RS.1,81,760/- 6. NOW THE CIRCULAR NO. 667, DATED 18.10.1993 IS Q UITE CLEAR AND IS REPRODUCED AS UNDER:- I. SECTION 54 AND 54F PROVIDE FOR A DEDUCTION IN CASES WHERE AN ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRA NSFER OF A CAPITAL ASSET TAKES PLACE, PURCHASES, OR HAS WITH IN A PERIOD OF THREE YEARS AFTER THE DATE ON WHICH THE T RANSFER OF A CAPITAL ASSET TAKES PLACE, PURCHASES OR HAS WI THIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE. THE QUANTUM OF DEDUCTION IS ITS ELF DEPENDENT UPON THE COST OF SUCH NEW ASSET. IT HAS BEEN REPRESENTED TO THE BOARD THAT THE COST OF CONSTRUCT ION OF THE RESIDENTIAL HOUSE SHOULD BE TAKEN TO INCLUDE TH E COST OF THE PLOT AS, IN A SITUATION OF PURCHASE OF ANY H OUSE PROPERTY, THE CONSIDERATION PAID GENERALLY INCLUDES THE CONSIDERATION FOR THE PLOT ALSO. II. THE BOARD HAS EXAMINED THE ISSUE WHETHER, IN CASES WHERE THE RESIDENTIAL HOUSE IS CONSTRUCTED WITHIN T HE SPECIFIED PERIOD, THE COST OF SUCH RESIDENTIAL HOUS E CAN BE TAKEN TO INCLUDE THE COST OF THE PLOT ALSO. THE BO ARD ARE ITA NO.1949/M/2012 A.Y. 2005-06 7 OF THE VIEW THAT THE COST OF THE LAND IS AN INTEGRA L PART OF THE COST OF THE RESIDENTIAL HOUSE, WHETHER PURCHASE S OR BUILT. ACCORDINGLY, IF THE AMOUNT OF CAPITAL GAIN FOR THE PURPOSES OF SECTION .54 AND THE NET CONSIDERATION F OR THE PURPOSE OF SECTION 54F, IS APPROPRIATED TOWARDS PUR CHASE OF A PLOT AND ALSO TOWARDS CONSTRUCTION OF A RESIDE NTIAL HOUSE THEREON, THE AGGREGATE COST SHOULD BE CONSIDE RED FOR DETERMINING THE QUANTUM OF DEDUCTION UNDER SECT ION 54/54F, PROVIDED THAT THE ACQUISITION OF PLOT AND A LSO THE CONSTRUCTION THEREON, ARE COMPLETED WITHIN THE PERI OD SPECIFIED IN THESE SECTIONS 7. APPARENTLY, IN VIEW OF THE SAID CIRCUMSTANCES FO R THE PURPOSE OF DEDUCTION U/S.54 OR 54F OF THE ACT, THE LAND APPURT ENANT ON CONSTRUCTED HOUSE IS LIABLE TO BE CONSIDERED FOR E XEMPTION. THEREFORE, IN VIEW OF THE SAID CIRCUMSTANCES THE PU RCHASE VALUE OF THE HOUSE TO THE TUNE OF RS.30,29,296/- IS LIABLE TO BE CONSIDERED TO THE EXTENT OF THE SHARE OF THE ASSESSEE, THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING O FFICER TO REASSESS THE DEDUCTION U/S.54 OR 54F OF THE ACT IN VIEW OF T HE CIRCULAR NO.667 DATED 18.10.1993 IN ACCORDANCE WITH LAW. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED . ITA NO.1949/M/2012 A.Y. 2005-06 8 ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST , 2016. SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 12 TH AUGUST, 2016 MP MP MP MP * +%'#, -,(' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ' / BY ORDER, - & //TRUE COPY// ./$ ! /(DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI