PRABHAKAR T. BHANDARY, MUMBAI V. ACIT 10(1), MUMBAI

ITA 2203/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56320 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 19-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PA RTHASARATHY NAIK
• Keywords: Capital asset; Cost of acquisition
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 2203/MUM/2010 ASSESSMENT YEAR: 2006-07 PRABHAKAR T. BHANDARY, APPELLANT 10-B, MARK, L.D. RUPAREL MARG, MALABAR HILL, MUMBAI 400 006. (PAN AABPB9427F) VS. ASSTT. COMMISSIONER OF INCOME-TAX-10(1), RESPOND ENT MUMBAI. APPELLANT BY : MR. SUBHASH S. SHETTY RESPONDENT BY : MR. PARTHASARATHY NAIK DATE OF HEARING : 28/12/2011 DATE OF PRONOUNCEMENT : 30/12/2011 ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-21, MUMBAI, PASSED ON 14/01/2010 FOR THE ASSESSMENT YEAR 2006-07, WHEREIN THE ASSESSEE HAS RAISED THE F OLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED CIT(A) COMMITTED A GROSS ERROR OF LA W AND FACT IN DISMISSING THE APPEAL FILED BY THE APPELLANT. 2. THE LEARNED CIT(A) GROSSLY ERRED IN REJECTING TH E APPELLANTS CLAIM FOR DEDUCTION OF RS. 1,42,80,000/- UNDER SECT ION 54F OF THE ACT, FROM THE ONG TERM CAPITAL GAINS ARISING FR OM THE TRANSFER OF LAND. 3. THE LEARNED CIT(A) COMMITTED A GROSS ERROR OF LA W AND FACT IN COMING TO THE CONCLUSION THAT THE APPELLANT PURC HASED TWO BUNGALOWS INSTEAD OF MAKING INVESTMENT IN ONE RESID ENTIAL HOUSE AS REQUIRED BY SECTION 54F OF THE ACT. 4. THE LEARNED CIT(A) GROSSLY ERRED IN NOT APPRECIA TING THAT THE APPELLANT IN FACT PURCHASED ONE BUNGALOW HAVING COM MON AMENITIES BUILT ON TWO ADJOURNING PLOTS OF LAND, WH ICH FACT WAS ALSO SUPPORTED BY THE CERTIFICATE ISSUED BY THE ARCHITECT ALONG WITH THE PHOTOGRAPH'S. 5. WITHOUT PREJUDICE TO HIS SUBMISSION & CONTENTION THAT THE APPELLANT HAD PURCHASED ONLY ONE RESIDENTIAL UNIT A ND SHOULD HAVE BEEN GRANTED THE DEDUCTION CLAIMED U/S 54F AND ONLY IN THE ALTERNATIVE IT IS CONTENDED THAT THE APPELLANT SHOULD HAVE ITA NO. 2203/MUM/10 PRABHAKAR T. BHANDARY 2 BEEN GRANTED DEDUCTION U/S 54F AT LEAST TO THE EXTE NT OF THE INVESTMENT IN ONE BUNGALOW ALLEGED TO HAVE BEEN PUR CHASED. 6. THE LEARNED CIT(A)COMMITTED A GROSS ERROR OF LAW AND FACT INN COMPUTING THE LONG TERM CAPITAL GAINS WITH OUT DEDUCTING THE COST OF ACQUISITION OF THE IMPUGNED P ROPERTY INHERITED BY THE APPELLANT. 7. THE LEARNED CIT(A) COMMITTED A GROSS ERROR OF LA W AND FACT IN CONFIRMING THE DISALLOWANCE MADE BY THE AO OF RS. 2,16,155/- BEING THE AMOUNT OF INTEREST PAID AND CL AIMED BY THE APPELLANT OUT OF THE INTEREST INCOME OF RS. 11, 09,844/- RECEIVED BY HIM AND SHOWN AS INCOME FROM OTHER SOUR CES DURING THE YEAR. 2. GROUND NO. 6 RAISED IN THE ABOVE GROUNDS OF APPE AL IS IN FACT HAS NOT ARISEN OUT OF THE ORDERS OF AO AND CIT(A) A ND THE LEARNED COUNSEL FOR THE ASESSSEE MADE A REQUEST THAT THE GR OUND SHOULD BE TREATED AS ADDITIONAL GROUND RAISED ON A LEGAL ISSU E. THE OTHER GROUNDS ARE ARISEN FROM THE ORDERS OF AO AND CIT(A) . 3. GROUND NO. 1 TO 5 PERTAIN TO THE ISSUE OF REJECT ING THE ASSESSEES CLAIM OF DEDUCTION OF RS. 1,42,80,000/- UNDER 54F OF THE ACT, ON THE REASON THAT THE ASSESSEE PURCHASED TWO BUNGALOWS. IT IS THE ASSESSEES CONTENTION THAT AFTER SALE OF PRO PERTY, THE ASSESSEE EARNED CAPITAL GAIN. AGAINST THE SAID CAPI TAL GAIN, CLAIM OF EXEMPTION U/S 54F HAD BEEN IN RESPECT OF INVESTMENT OF RS. 1,42,80,000/- MADE IN A RESIDENTIAL PROPERTY AT GOA , DONA PAULA AND THAT THE BUNGALOW IS ONE SINGLE BUNGALOW WITH O NE CAR PARKING AND KITCHEN. IT WAS SUBMITTED THAT BUNGALOW WAS EXI STING ON TWO PLOTS AND BECAUSE OF HUSBAND AND WIFE HAVING 50% SH ARE IN THE SAID BUNGALOW AND THE SAME WAS CONSTRUCTED ON TWO S EPARATE PLOTS ADJOINING EACH OTHER. THE PROPERTY WAS REGISTERED B Y TWO AGREEMENTS BY THEM. IN SPITE OF THE CONTENTION THAT BUNGALOW IS ONE AND ASSESSEE ALSO FILED RELEVANT PHOTOGRAPHS AN D CERTIFICATE FROM THE ARCHITECT ONE MR. FAKIR BARDOLIWALLA, THES E CONTENTIONS OF THE ASSESSEE WERE NOT ACCEPTED BY THE AO AND DISALL OWED THE ASSESSEES CLAIM FOR DEDUCTION OF RS. 1,42,80,000/- . AGGRIEVED THE ASSESSEE, CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). ITA NO. 2203/MUM/10 PRABHAKAR T. BHANDARY 3 4. IT WAS CONTENDED BEFORE THE CIT(A) THAT NOT ONLY ON THE FACTUAL BASIS BUT ALSO ON LEGAL BASIS AND ON THE ST RENGTH OF THE DECISION OF ITAT IN THE CASE OF ITO VS. SUSHILA M. JHAVERI, 107 ITD 327, THE ASSESSEES CLAIM WAS ALLOWABLE. IT WAS FUR THER RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ANAND BASAPPA, 309 ITR 329 TO SUBMIT THAT THE ASSES SEES CLAIM IS ALLOWABLE EVEN MORE THAN ONE UNIT IS PURCHASED AND MADE INTO ONE FOR THE RESIDENCE. THE CIT(A) DID NOT AGREE WITH TH E ABOVE CONTENTIONS AND REJECTED THE SAME. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE PROPERTY IS ONE BUNGALOW, EVEN THOUGH, IT WAS CONST RUCTED ON TWO PLOTS AND WAS PURCHASED BY VIRTUE OF TWO SALE DEEDS . IT IS FURTHER SUBMITTED THAT THE PROPERTY WAS SOLD BY WIFE AND HU SBAND, GOANS AND USED AS ONE SINGLE RESIDENCE AND COMMON BALCONI ES, COMMON ENTRANCE, ONE KITCHEN AND ONE CAR PARKING, EVEN THO UGH, THE NUMBERS ARE GIVEN AS TWO BUNGALOWS. THE FURTHER SUB MISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT APART FROM THE LEGAL PROPOSITION RELIED UPON ON FACTUAL MATTER, THE MATT ER MAY BE VERIFIED WHETHER IT IS ONE BUNGALOW OR TWO BUNGALOW S. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO HAS NOT EVEN CONSIDERED ALLOW ING TO THE EXTENT OF INVESTMENT AT LEAST IN ONE BUNGALOW, WHI CH HE CONSIDERED AS TWO, AND THE ENTIRE CLAIM OF THE ASSE SSEE IS DISALLOWED WITHOUT APPRECIATING THE FACTS ON RECORD . THE LEARNED COUNSEL SUBMITTED THAT THE ISSUE CAN BE EXAMINED BY THE AO AFRESH AND THERE IS NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE AO AS THE CONTENTIONS OF THE ASSESSEE WERE NOT EXAM INED IN THE CORRECT PERSPECTIVE. 6. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF THE REVENUE AUTHORITIES IN SUPPORT OF REVENUE'S CAS E. ITA NO. 2203/MUM/10 PRABHAKAR T. BHANDARY 4 6. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE MA TTER. IT IS THE FACT THAT THE ASSESSEE MADE INVESTMENT IN RESID ENTIAL PROPERTY AT GOA FOR CLAIMING DEDUCTION U/S 54F OF THE ACT. A S PER THE PHOTOGRAPHS PLACED ON RECORD AND THE CERTIFICATES I SSUED BY THE ARCHITECT, THERE SEEMS TO BE ONE BUNGALOW BUT APART FROM THE PHOTOGRAPH AND CERTIFICATE, THERE IS NO OTHER EVIDE NCES LIKE PAYMENT OF MUNICIPAL TAXES, BUILDING PLANS OR ANY R EPORT OF THE IT AUTHORITIES OR ANY OTHER AUTHORITY THAT THE PROPERT Y IS ONE. AS FAR AS THE LEGAL PRINCIPLES ARE CONCERNED, THESE ISSUES ARE CONSIDERED BY THE ITAT IN THE CASE OF ITO VS. SUSHILA M. JHAV ERI (SUPRA) WHEREIN IT WAS HELD THAT IF MORE THAN ONE UNIT ARE PURCHASED AND MADE INTO ONE UNIT FOR THE PURPOSE OF RESIDENCE, IT IS CONSIDERED AS ONE HOUSE FOR CLAIMING EXEMPTION U/S 54 OR 54F. THE SAID PRINCIPLE WAS AFFIRMED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. D. ANAND BASAPPA (SUPRA). THEREFORE, WE ARE OF THE VIEW THAT EVEN THE ASSESSEE HAS PURCHASED BY VIRTUE OF T WO AGREEMENTS, THE PROPERTY IN GOA HAS TO BE VERIFIED WHETHER IT I S ONE RESIDENTIAL UNIT OR NOT. PRIMA-FACIE, THERE SEEMS TO BE ONLY ON E BUNGALOW EVEN THOUGH IN THE LEGAL AGREEMENTS, IN FACT, IT IS SHOW N AS TWO SEPARATE UNITS. SINCE THIS REQUIRES PHYSICAL EXAMINATION OF THE BUNGALOW AS SUCH, WE RESTORE THE MATTER TO THE FILE OF THE AO T O EXAMINE THE ASSESSEES CONTENTIONS AFRESH AND GET THE PROPERTY EXAMINED WHETHER IT IS ONE SINGLE RESIDENTIAL UNIT OR TWO SE PARATE RESIDENTIAL UNITS. WITHOUT PREJUDICE TO THE ABOVE FINDINGS, IN CASE IT IS FOUND THAT IT IS ONE BUNGALOW, THE ENTIRE CLAIM HAS TO BE ALLOWED, OTHERWISE, THE AO IS FREE TO DETERMINE THE CLAIM TO THE EXTENT OF ONE BUNGALOW, WHICH THE ASSESSEE MAY CHOOSE. WITH THESE DIRECTIONS, THE ISSUE IS COVERED BY THE GROUND NOS. 2 TO 5 ARE RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 7. GROUND NO. 7 PERTAINS TO DISALLOWANCE MADE OF IN TEREST PAID OUT OF INTEREST INCOME OFFERED AS INCOME FROM OTHER SOURCES. ITA NO. 2203/MUM/10 PRABHAKAR T. BHANDARY 5 8. IT IS THE CONTENTION OF THE ASSESSEE THAT THE AM OUNTS BORROWED ON WHICH INTEREST WAS PAID FOR EARNING DIV IDEND INCOME OFFERED TO TAX. IN SPITE OF EXPLAINING THE FACTUAL UTILIZATION OF BORROWED FUNDS BOTH THE AO AND CIT(A) REJECTED THE CONTENTIONS AND CLAIM OF INTEREST AMOUNT. SINCE THE ISSUE REGAR DING ASSESSEES CLAIM FOR DEDUCTION U/S 54F RAISED IN GROUND NOS. 2 TO 5 ARE RESTORED TO THE FILE OF THE AO FOR EXAMINATION, IN THE INTEREST OF JUSTICE, WE RESTORE THIS GROUND ALSO TO THE FILE OF THE AO TO EXAMINE THE NEXUS IN INVESTING THE BORROWED FUNDS FOR EARNI NG INTEREST INCOME. THE ASSESSEE IS DIRECTED TO FURNISH NECESSA RY DETAILS BEFORE THE AO IN RESPECT OF HIS CLAIM. 9. GROUND NO. 6, WHICH IS A LEGAL GROUND, RAISED BY THE ASSESSEE AS ADDITIONAL GROUND. SINCE THE ASSESSEE HAS NOT CL AIMED ANY COST OF ACQUISITION OF THE IMPUGNED PROPERTY SOLD BY THE ASSESSEE DURING THE YEAR ON WHICH CAPITAL GAINS WAS CLAIMED AND THE REASONS FOR NOT CLAIMING THE COST OF ACQUISITION WERE NOT EXPLA INED. SINCE THE ISSUE IS OF LEGAL NATURE, WE WILL ADMIT THE ADDITIO NAL GROUND AND RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIR ECTION TO ADJUDICATE WHETHER THERE IS ANY COST OF ACQUISITION OF THE IMP UGNED PROPERTY, WHICH IS STATED TO HAVE BEEN INHERITED BY THE ASSES SEE AND SOLD DURING THE YEAR. THE ASSESSEE IS DIRECTED TO FURNIS H NECESSARY DETAILS IN RESPECT OF HIS CLAIM. WITH THESE DIRECT IONS, THIS GROUND IS ALSO RESTORED TO THE FILE OF THE AO FOR CONSIDER ATION. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF DECEMBER, 2011. SD/- SD/- (B. RAMAKOTAIAH) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 30 TH DECEMBER, 2011. KV ITA NO. 2203/MUM/10 PRABHAKAR T. BHANDARY 6 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, C BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.