The ACIT, 4(1), Indore V. Shri Gopal Kukreja, Indore

ITA 235/IND/2011

• Counselvise Citation: 23522714 RSA 2011
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 09-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DARSHAN SINGH
• Keywords: Capital asset; Wrong claim
• Section: 54F; 147; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARMA, A.M. PAN NO. : APKPK8097A I.T.A.NO. 207/IND/2011. A.Y. : 2004 - 05 INCOME - TAX OFFICER, INDORE. VS SHRI SURESH CHAND KUKREJA, PROP. M/S. MANDEEP OIL INDUSTRIES, 34/2, KIBE COMPOUND, INDORE. APPELLANT RESPONDENT PAN NO. : AJOPK9118E I.T.A.NO. 235/IND/2011. A.Y. : 2004 - 05 INCOME - TAX OFFICER, INDORE. VS SHRI GOPAL KUKREJA, E-32, SAKET NAGAR, INDORE. APPELLANT RESPONDENT APPELLANT S BY : SHRI DARSHAN SINGH, CIT DR RESPONDENT BY : SHRI MANJEET SACHDEVA AND SHRI AVINASH GAUR, ADVOCATES -: 2: - 2 DATE OF HEARING : 29 . 10 .2012 DATE OF PRONOUNCEMENT : 2 7 . 1 1 .201 2 O R D E R PER R. C. SHARMA, A.M. THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 13 TH JUNE, 2011, FOR THE ASSESSMENT YEAR 2004-05, IN THE MATTER OF ORDER PASSED BY THE ASSE SSING OFFICER U/S 147 OF THE INCOME-TAX ACT, 1961. 2. COMMON GROUNDS HAVE BEEN TAKEN IN BOTH THE APPEALS. GROUND TAKEN IN THE CASE OF GOPAL KUKREJA READS AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A)-I, INDORE, IS CONTRARY TO THE FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION VIS 54F OF THE IT ACT BY TREATING 'SHEHNAI PALACE' AS RESIDENTIAL PROPERTY HELD BY THE AO AS COMMERCIAL PROPERTY BACKED BY -: 3: - 3 DOCUMENTARY EVIDENCES. 2.1 WHILE HOLDING SO, THE LD. CIT (A) FAILED TO APPRECIATE THE FACT THAT THE PROPERTY 'SHEHNAI PALACE' HAD COMMERCIAL ELECTRIC CONNECTION MEANT FOR PROPERTIES USED FOR OTHER THAN RESIDENTIAL PURPOSES. 2.2 WHILE HOLDING SO, THE LD. CIT(A) FAILED TO APPRECIATE THAT INITIALLY THE ASSESSEE MADE FALSE CLAIM OF 'SHEHNAI GARDEN' AS THE RESIDENTIAL PROPERTY LATER ON ADMITTED AS COMMERCIAL PROPERTY AND IN SIMILAR WAY 'SHEHNAI PALACE' WAS CLAIMED AS RESIDENTIAL PROPERTY WHEN THE REPORT OF THE VALUATION OFFICER BASED ON PHYSICAL DIMENSIONS OF THE 'SHEHNAI PALACE' SUGGESTED IT AKIN TO COMMERCIAL PROPERTY. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE AND H IS BROTHER SHRI SURESH CHAND KUKREJA ARE CO-OWNERS OF THE PROPERTY KNOWN AS SHEHNAI GARDEN SITUATED AT CHHOTI KHAJRANI, A. B. ROAD, INDORE. DURING THE YEAR, THE ASSESSEE -: 4: - 4 SOLD PROPERTY AND THEREAFTER PURCHASED NEW PROPERTY AT NIRANJANPUR, A. B. ROAD, WHICH IS NAMED AS SHEHNAI PALACE. THE NEW HOUSE PROPERTY SO PURCHASED WAS A PALATIAL BUILDING HAVING TWO INDEPENDENT RESIDENTIA L UNITS. AS THE SALE PROCEEDS RECEIVED ON SALE OF SHEHNAI GA RDEN, WAS INVESTED IN NEW HOUSE PROPERTY, BOTH THE BROTHE RS CLAIMED EXEMPTION U/S 54/54F OF THE INCOME-TAX ACT, 1961. THE ASSESSING OFFICER DECLINED THE CLAIM PRIM ARY ON THE GROUND THAT NEW PROPERTY WAS A COMMERCIAL ONE. THE ASSESSING OFFICER ALSO HELD THAT THE PROPERTY SO SO LD WAS ALSO COMMERCIAL, THEREFORE, THE ASSESSEE WAS NOT EN TITLED TO CLAIM EXEMPTION U/S 54 OF THE INCOME-TAX ACT, 1961. THE NEW PROPERTY SO PURCHASED WAS JOINTLY OWNED BY VARI OUS FAMILY MEMBERS OF THE AGRAWAL GROUPS AND TRANSFER W AS EFFECTED BY VARIOUS REGISTRATIONS WITH THEM I.E. TH REE REGISTRIES BETWEEN SHRI GOPAL KUKREJA (PURCHASER) A ND SHRI SHAMBHU DAYAL AGRAWAL, SMT. VIMLADEVI AGRAWAL & SHRI RAJKUMAR AGRAWAL (SELLERS); AND TWO REGISTRIES BETWEEN SHRI SURESH KUKREJA (PURCHASER) AND SHRI KA ILASH AGRAWAL & SMT. KIRAN AGRAWAL (SELLERS). ON THAT BAS IS -: 5: - 5 ASSESSING OFFICER HAD ALSO CONCLUDED THAT SHRI GOPA L KUKREJA HAD PURCHASED THREE PROPERTIES (HOUSES) AND IN THAT VIEW ALSO THE DEDUCTION U/S 54F WAS NOT ADMISS IBLE. THE ASSESSMENTS IN THE CASE OF THESE TWO KUKREJA BR OTHERS WERE MADE BY THE SAME ASSESSING OFFICER. THE ASSESS ING OFFICER OBSERVED THAT FOLLOWING FOOT NOTE WAS APPEN DED BELOW THE COMPUTATION OF INCOME :- THE ASSESSEE HAS SOLD HOUSE AT CHHOTI KHAJRANI ALONG WITH THE LAND SURROUNDING THE HOUSE. THE ENTIRE SALE PROCEEDS HAVE BEEN INVESTED TO PURCHASE OF RESIDENTIAL HOUSE AT GRAM NIRANJANPUR AT A.B. ROAD. THEREFORE, THE ENTIRE LONG-TERM CAPITAL HAS BEEN CLAIMED AS EXEMPT U/S 54/54F IN THE COMPUTATION OF INCOME UNDER THE HEAD' INCOME FROM LONG-TERM CAPITAL GAINS'. 2. IT IS FURTHER SUBMITTED THAT WHILE SELLING THE PLOY AT CHHOTI KHAJRANI AS PER NOTE I ABOVE, THE ASSESSEE HAS CONSTRUCTED TWO SHOPS DURING THE YEAR ON PART OF THE SAID PLOT OF -: 6: - 6 LAND. COSTS OF CONSTRUCTION OF THE SAID SHOP HAVE BEEN ADDED IN THE COST OF IMPROVEMENT IN THE COMPUTATION OF INCOME UNDER THE HEAD OF INCOME FROM LONG TERM CAPITAL GAINS'. THE SELLING PRICES OF THE SAID SHOPS HAVE BEEN INCLUDED IN THE SALE PROCEEDS OF THE HOUSE AT CHHOTI KHAJRANI, INDORE. THE ASSESSING OFFICER OBSERVED THAT FROM THE COMPUTATION OF CAPITAL GAIN IT IS NOT CLEAR WHETHER THE DEDUCTION HAD BEEN CLAIMED U/S 54 OR 54F OF THE I.T.ACT, AS THE ASSESSEE HAS MENTIONED BOTH THE SECTIONS I.E. 54/54F. FURTHER THE ASSESSING OFFICER NOTICED THAT THE PROP ERTY KNOWN AS 'SHEHNAI PALACE' WHICH HAS BEEN PURCHASED BY THE ASSESSEE, AND IN RESPECT OF WHICH DEDUCTION U/S 54/54F HAS BEEN CLAIMED IS NOT RESIDENTIAL PROPERTY BECAUSE OF THE FOLLOWING REASONS :- -: 7: - 7 1. ELECTRICAL CONNECTION PROVIDED BY MPSEB IS NOT DOMESTIC. 2. THE PROPERTY IS USED AS THE MARRIAGE GARDEN COMMERCIALLY, FOR WHICH THE ADVERTISEMENTS HAVE BEE N GIVEN BY WAY OF FULL PAGE PRINTED BROCHURES BY TH E ASSESSEE PROVIDING COMPLETE MARRIAGE SOLUTIONS FOR RS. 1,05,000/-. THIS BEING SO THE ENTIRE CLAIM OF DEDUC TION U/S 54/54F AMOUNTING TO RS. 2,01,48,877/- IS NOT ADMISSIBLE. 4. BY THE IMPUGNED ORDER, THE LD. CIT(A) ALLOWED ASSESSEES CLAIM OF DEDUCTION U/S 54F AFTER HAVING FOLLOWING OBSERVATIONS :- 4.1 ISSUE NO.(L) : THE NATURE OF PROPERTY NAMED 'SHEHNAI GARDEN' - WHETHER RESIDENTIAL OR COMMERCIAL. AS DISCUSSED IN PARA 2 ABOVE, THE PROPERTY 'SHEHNAI GARDEN' CONSIST OF RESIDENTIAL UNITS PLUS OPEN LAND PLUS SHOPS (THE TOTAL LAND AREA: 106822.20 SQ.FT.]. THUS, TOGETHER WITH THE -: 8: - 8 SHOPS WHICH ARE COMMERCIAL PROPERTY, THERE HAS BEEN A HUGE VACANT LAND AND THEREFORE THIS WOULD BE A MIXED PROPERTY. IN ANY CASE THE ENTIRE PROPERTY CANNOT BE REGARDED AS A HOUSE PROPERTY. THE AO HAS RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE TO CONSIDER THIS PROPERTY AS RESIDENTIAL ONE. 4.2 ISSUE NO.(2): THE NATURE OF PROPERTY NAMED 'SHEHNAI PALACE' - WHETHER RESIDENTIAL OR COMMERCIAL. THIS IS THE PROPERTY PURCHASED BY THE KUKREJA BROTHERS FROM SHRI SHAMBHU DAYAL AGRAWAL AND HIS FAMILY MEMBERS. THIS HAS HUGE PALATIAL BUILDING AND A BIG OPEN LAWN. THE TOTAL LAND AREA OF THE PREMISES IS 128254 SQ.FT, THE ASSESSEE CLAIMED THIS PROPERTY TO BE RESIDENTIAL ONE WHEREAS THE 'AO HAS CONSIDERED IT AS A COMMERCIAL -: 9: - 9 PROPERTY. THE AO'S VIEW IS BASED ON THE ADVERTISEMENT MADE BY KUKREJA BROTHERS IN THE NEWSPAPERS FOR USE OF OPEN SPACE AS A MARRIAGE GARDEN AND ALSO A NON- DOMESTIC CONNECTION OF ELECTRICITY. IN THIS REGARD, IT HAS BEEN SUBMITTED THAT THEY PLANNED TO USE THE OPEN SPACE OF THE SAID PREMISES OF SHEHNAI PALACE AS A MARRIAGE GARDEN BECAUSE OF THE FACT THAT HOTEL SAYAJI WAS QUITE CLOSE AND THAT MAY ENABLE THEM TO GET SOME SPILLOVER; THAT INSPITE OF THEIR BEST EFFORT THEY DID NOT GET THE RESPONSE. IT IS ALSO SUBMITTED THAT THE MARRIAGE OF THE DAUGHTER OF SHRI GOPAL KUKREJA WAS ARRANGED FROM THE OPEN SPACE ITSELF. IN SUPPORT OF THEIR CLAIM THAT THE PROPERTY INDEED HAS BEEN THE RESIDENTIAL ONE, THEY HAD ALSO SUBMITTED THE PROPERTY TAX RECEIPTS WHEREIN THE DESCRIPTION OF THE PROPERTY HAS BEEN -: 10: - 10 SHOWN AS RESIDENTIAL. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION GIVEN BY THE ASSESSEE AND TREATED THE PROPERTY AS COMMERCIAL. DURING THE APPEAL PROCEEDINGS, VIDE THIS OFFICE LETTER DATED 16.07.2009, THE AO WAS REQUESTED TO MAKE A VISIT OF THE SAID PROPERTY ALONGWITH THE VALUATION OFFICER. IN RESPONSE THEREOF, THE AO VISITED THE SAID PREMISES ALONGWITH THE VALUATION OFFICER, JR. ENGINEER, INSPECTOR AS WELL AS THE REPRESENTATIVE OF THE ASSESSEE. THE AO'S REPORT DATED 10.08.2009 TOGETHER WITH VALUATION OFFICER'S REPORT DATED 06.08.2009 IS PLACED ON RECORD. THE LETTER OF THE VALUATION OFFICER IS ADDRESSED TO THE AO, ITO, 1(2), INDORE. THE RELEVANT PARTS ARE GIVEN HERE AS UNDER: . 'THE IDENTIFIED PROPERTY BY YOUR -: 11: - 11 GOODSELF WHICH IS SITUATED OPPOSITE TO SHALIMAR TOWNSHIP AT NIRANJANPUR ON A.B. ROAD FACING EAST IS PRESENTLY LYING VACANT AND SERVANT / WATCHMAN OF NEW TRANSFEREE WERE RESIDING. THE FRONT SIDE BOUNDARY WALL OF SAID PREMISES HAS BEEN DISMANTLED DUE TO WIDENING OF A.B. ROAD. ONLY ONE MAIN ENTRANCE PATH WITH CONTINUOUS PORCHES ARE LAYING. THE CENTRAL PORTION' OF PREMISES IS A BIG HALL WITH ONE MAIN ENTRANCE FROM FRONT (EAST) AND SIDE DOORS FROM TWO IDENTICAL UNITS (NORTH AND SOUTH) ON THE EITHER SIDE OF THE HALL. THE TWO UNITS ARE DOUBLE- STOREYED CONSTRUCTION WITH' INTERNAL STAIRCASE ONLY TO UPPER FLOORS. BACKSIDE PORTION CONSIST OF INDEPENDENT UNITS OF SINGLE STOREYED RCC CONSTRUCTION AND GARAGES WITH ENTRANCE FROM BACKSIDE ROAD (SAID TO BE SERVANT QUARTERS) AND -: 12: - 12 INCOMPLETE HALL WITHOUT ROOF (SAID TO BADMINTON COURT]. SAID CONSTRUCTION IS A PALATIAL BUILDING WITH SCOPE OF MULTI- FUNCTIONAL UTILITY'. WHILE FORWARDING THIS LETTER OF THE VALUATION OFFICER, THE AO HAS GIVEN THE SIMILAR DESCRIPTION O F THE PROPERTY IN HIS OWN LETTER BUT AT LAST CONCLUDE D THAT IN A VIEW OF THE HUGE SIZES OF THE ROOMS, PRIMA-FACIE THE OBJECT BEHIND CONSTRUCTION OF THE BUILDING 'SHEHNAI PALACE' WOULD HAVE BEEN FOR MULTI-PURPOSE COMMERCIAL USE AND THAT THE PALATIAL BUILDING AND PREMISES WOULD HAVE BEEN USED FOR COMMERCIAL PURPOSES. 4.2.1 I HAVE CONSIDERED THE ISSUE. I HAVE ALSO PERU SED THE ASSESSMENT ORDER AS WELL AS THE VARIOUS DOCUMENTS FURNISHED BY THE ASSESSEE, THE PHOTOGRAPH OF THE BUILDING FILED BY THE ASSESSEE DURING THE AP PEAL PROCEEDINGS. I FIND THAT REPORT OF THE VALUATION OF FICER -: 13: - 13 SUPPORTS THE CLAIM OF THE ASSESSEE THAT THE SAID BUILDING SHEHNAI PALACE' CONSIST OF TWO RESIDENTIAL UNITS ONLY. MERELY BECAUSE THE BUILDING IS PALATIAL AND PROVIDES SPACE FOR LIVING OF THE SERVANTS / WATCHME N ON THE BACKSIDE OF THE BUILDING, THE NUMBER OF RESIDENTIAL UNITS CANNOT BE CONSIDERED MORE THAN T WO BY COUNTING THE AVAILABLE PREMISES FOR SERVANTS AND WATCHMEN. THE SERVANTS AND WATCHMAN ARE THERE ONLY TO SERVE THE PERSONS RESIDING IN THE MAIN PART OF T HE BUILDING. THE PORTION OCCUPIED BY THOSE SERVANTS AN D WATCHMEN CANNOT BE CONSIDERED AS AN INDEPENDENT RESIDENTIAL UNITS. IN VIEW OF THE ABOVE FACTS, IN MY CONSIDERED VIEW, THE BUILDING SHEHNAI PALACE IS TO BE REGARDED AS RESIDENTIAL AND NOT THE COMMERCIAL ONE. 4.3 ISSUE NO.(3): THE NUMBER OF RESIDENTIAL UNITS IN THE PROPERTY NAMED 'SHEHNAI PALACE' - WHETHER TWO UNITS OR MORE. WHILE DISCUSSING THE ISSUE NO.(2) HEREINABOVE, THE POINT HAS BEEN MADE VERY CLEAR THAT THE -: 14: - 14 BUILDING SHEHNAI PALACE IS TO BE CONSIDERED CONSISTING OF ONLY TWO RESIDENTIAL UNITS. IT IS NOTED THAT THE SAID PREMISE IS LOCATED ON THE A.B. ROAD WHICH IS HARDLY 4-5 KMS FROM THE LOCATION OF INCOME TAX OFFICE, INDORE. NO EFFORT WAS MADE BY THE ASSESSING OFFICER TO MAKE THE SPOT VISIT EITHER BY HIMSELF OR BY HIS INSPECTOR. INSTEAD, HE MADE A THEORETICAL ANALYSIS AND ON THE BASIS OF THE NUMBER OF REGISTRIES, HE CONCLUDED THAT SHRI GOPAL KUKREJA PURCHASED THREE RESIDENTIAL UNITS AND SHRI SURESH KUKREJA PURCHASED TWO RESIDENTIAL UNITS. FROM HIS POINT OF VIEW, THEN IN THAT PREMISES THERE SHOULD HAVE EXISTED FIVE RESIDENTIAL UNITS IN THE SAME PREMISES. HOWEVER, THIS IS NOT THE CASE. THE SUCCESSOR AO ALONGWITH THE VALUATION OFFICER HAVE MADE A SPOT VISIT, THEIR REPORTS CONFIRM THE ASSESSEE'S CONTENTION OF HAVING TWO RESIDENTIAL UNITS IN THE SAID SHEHNAI PALACE -: 15: - 15 BUILDING - ONE FOR SHRI GOPAL KUKREJA AND THE OTHER FOR HIS BROTHER SHRI SURESH KUKREJA. THE CENTRAL PORTION OF THE PREMISES IS A BIG HALL CONTAINING THE MAIN ENTRANCE FROM THE FRONT SIDE. THIS HALL PROVIDES ACCESS TO THE TWO UNITS (WHICH ARE DOUBLE STOREYED) EACH ON ITS EITHER SIDE. THE PREMISES CONTAIN HUGE SIZED ROOMS COMMENSURATE WITH THE PALATIAL BUILDING. MAY BE IT WAS DIFFICULT TO MAINTAIN SUCH A PALATIAL BUILDING AND THAT IS WHY THEY ( KUKREJA BROTHERS) TOO ULTIMATELY SOLD TO THIRD PARTY. IN THE FACTS OF THE CASE, IT IS HELD THAT THE SAID BUILDING CONTAINS TWO INDEPENDENT RESIDENTIAL UNITS. 4.4 ISSUE NO.(4): ADMISSIBILITY OF EXEMPTION IF ANY U/S. 54 OR 54F - THE EXEMPTION U/S.54F IS AVAILABLE ONLY WHERE RESIDENTIAL PROPERTY IS SOLD AND THE SALE CONSIDERATION THEREOF IS UTILISED IN PURCHASE/CONSTRUCTION OF A NEW -: 16: - 16 RESIDENTIAL PROPERTY. IN PARA 4.1 ABOVE, I HAVE ALREADY GIVEN MY FINDING THAT THE PROPERTY NAMED SHEHNAI GARDEN WAS NOT A RESIDENTIAL PROPERTY AND THEREFORE THE EXEMPTION OF CAPITAL GAIN IN SELLING THAT PROPERTY IS NOT AVAILABLE U/S. 54. BUT THE CLAIM VERY WELL CAN BE ENTERTAINED U/S. 54F. UNDER THAT SECTION (54F), A CAPITAL GAIN WHICH ARISES FROM SALE OF ANY CAPITAL ASSET COULD BE EXEMPTED IF THE GAIN IS INVESTED IN PURCHASE OF THE CONSTRUCTION OF ANY RESIDENTIAL PROPERTY. THIS IS THE CASE OF THE ASSESSEE THE ASSESSEE HAS SOLD ITS CAPITAL ASSET NAMED 'SHEHNAI GARDEN' AND UTILISED THE FUNDS IN THE PURCHASE OF RESIDENTIAL PROPERTY NAMED 'SHEHNAI PALACE'. THEREFORE, THE DEDUCTION U/S 54 IS AVAILABLE. ADMITTEDLY, IN THE CASE OF SHRI GOPAL KUKREJA THE CAPITAL GAIN AMOUNTS TO RS.2,O1,48,877/-. HIS SHARE OF INVESTMENT -: 17: - 17 IN PURCHASE OF RESIDENTIAL PROPERTY NAMED 'SHEHNAI PALACE' AMOUNTS TO RS.2,20,18,730/- WHICH IS MORE THAN THE CAPITAL GAIN. SIMILARLY, IN THE CASE OF SHRI SURESHCHAND KUKREJA, THE CAPITAL GAIN AMOUNTS TO RS.1,37,84,450/- WHEREAS, HIS SHARE OF INVESTMENT IN PURCHASE OF THE RESIDENTIAL PROPERTY NAMED 'SHEHNAI PALACE' AMOUNTS TO RS.2,28,36,400/-. I HAVE ALREADY HELD THAT THE HOUSE BUILDING 'SHEHNAI PALACE' CONSIST OF TWO RESIDENTIAL UNITS. THE PROPERTY WAS PURCHASED JOINTLY BY THE TWO BROTHERS FROM SHRI SHAMBHUDAYAL AGRAWAL AND HIS FAMILY MEMBERS. IN ALL, THE TRANSFER WAS EFFECTED THROUGH SEPARATE EIGHT REGISTRIES (FOUR REGISTRIES EACH). THIS WAY, ONE RESIDENTIAL UNIT PERTAINED TO SHRI GOPAL KUKREJA AND THE OTHER TO SHRI SURESHCHAND KULKREJA. IN THE FACTS OF THE CASE, THE INVESTMENT IN PURCHASE OF EACH OF THESE -: 18: - 18 UNITS BY BOTH BROTHERS HAVE BEEN MORE THAN THEIR RESPECTIVE CAPITAL GAIN. THEREFORE, IT IS HELD THAT ENTIRE CAPITAL GAIN WOULD BE EXEMPT U/S. 54F. THE AO IS DIRECTED TO DELETE THE ADDITION MADE IN THEIR HANDS ON ACCOUNT OF DISALLOWANCE OF CAPITAL GAIN. THIS WOULD RESULT IN RELIEF OF RS. 2,01,48,877/- IN THE CASE OF SHRI GOPAL KUKREJA AND RS.1,37,84,450/- IN THE CASE OF SHRI SURESHCHAND KUKREJA. 5. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS I N FURTHER APPEAL BEFORE US. 6. IT WAS CONTENDED BY THE CIT DR, SHRI DARSHAN SINGH THAT THE PROPERTY SOLD BY THE ASSESSEE WAS NOT RESI DENTIAL HOUSE IN SO FAR AS SHOPS WERE ALSO CONSTRUCTED THER E AND THE ASSESSEE HAD SOLD THE PROPERTY ALONGWITH SHOPS, THE REFORE, PROPERTY SO SOLD COMES UNDER THE MEANING OF COMMERC IAL PROPERTY AND NOT THE RESIDENTIAL HOUSE. HE FURTHER SUBMITTED THAT THE NEW PROPERTY SO PURCHASED BY THE ASSESSEE WAS ALSO -: 19: - 19 COMMERCIAL PROPERTY IN SO FAR AS ADVERTISEMENT WAS GIVEN BY THE ASSESSEE FOR USE OF THE SAID PROPERTY AS MARRIA GE GARDEN AND THE SAME WAS VERY MUCH CLOSE TO THE HOTEL SAYAJ I. HE FURTHER CONTENDED THAT THE ASSESSEE HAS TAKEN NON-D OMESTIC ELECTRICITY CONNECTION IN THE SAID PROPERTY. AS PER LD. CIT DR, THE PROPERTY SO PURCHASED WAS THROUGH VARIOUS SALE DEEDS, THEREFORE, CONSTITUTED SEPARATE HOUSE PROPERTY, EVE N THOUGH SITUATED IN THE SAME COMPOUND. IN VIEW OF THESE CON TENTIONS, THE LD. CIT DR ARGUED THAT LD. CIT(A) WAS NOT JUSTI FIED IN HOLDING THAT THE PROPERTY SO PURCHASED WAS TWO RESI DENTIAL HOUSES AND NOT COMMERCIAL PROPERTY. 7. ON THE OTHER HAND, THE LD. AUTHORIZED REPRESENTATIV E SUBMITTED THAT THE ASSESSEE HAS SOLD THE HOUSES SIT UATED AT CHHOTI KHAJRANI ALONGWITH LAND SURROUNDING TO THE H OUSE AND INVESTED ENTIRE SALE PROCEEDS IN THE PURCHASE OF NE W RESIDENTIAL HOUSES AT GRAM NIRANJANPUR AT A. B. ROA D,INDORE. HE FURTHER CONTENDED THAT NEW PROPERTY SO PURCHASED WAS RESIDENTIAL, WHICH IS CLEAR FROM THE REPORT OF DVO AS WELL AS FINDINGS RECORDED BY THE LD.CIT(A) AFTER CONSIDERIN G THE REMAND REPORT. HE FURTHER SUBMITTED THAT THIS PROPERTY WAS ALSO USED -: 20: - 20 BY THE SELLER BEFORE ITS SALE FOR THEIR RESIDENCE A ND THEY HAVE ALSO PAID PROPERTY TAX DESCRIBING THE PROPERTY AS H OUSE PROPERTY AT 285-2, 285-4, 285-5, 285-6, 285-7, 285- 8, 285-9 AND 285-1- NIRANJANPUR, A. B. ROAD, INDORE. IN THE PROPERTY TAX RECEIPT, THE DESCRIPTION OF THE PROPERTY WAS GI VEN AS RESIDENTIAL, SELF RCC. OUR ATTENTION WAS ALSO INVIT ED TO THE PERMISSION ORDER ISSUED TO SHRI RAMESH KUKREJA FOR THE CONSTRUCTION OF RESIDENTIAL HOUSE, WHICH IS IN RESP ECT OF SHEHNAI GARDEN, SHARE OF WHICH IS SOLD BY THE ASSES SEE. ATTENTION WAS ALSO INVITED TO THE COPIES OF INCOME TAX RETURNS FILED BY THE SELLER OF THE PARTY, WHEREIN THEY HAVE OFFERED THE CAPITAL GAINS FOR SALE OF RESIDENTIAL HOUSE PROPERT Y. THE LD. AUTHORIZED REPRESENTATIVE FURTHER SUPPORTED THE FI NDINGS RECORDED BY THE LD.CIT(A) ACCORDING TO WHICH THE PR OPERTY SO PURCHASED WAS RESIDENTIAL HOUSE AND NOT COMMERCIAL PROPERTY. 8. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FROM THE RECORD, WE FOUND THAT THE ASSESSE E HAS SOLD HOUSE AT CHHOTI KHAJRANI ALONGWITH LAND SURROUNDING TO THE HOUSE, THE SALE PROCEEDS OF SHOPS CONSTRUCTED THERE ON WAS -: 21: - 21 ALSO UTILIZED FOR PURCHASE OF NEW HOUSE. SINCE THE HOUSE PROPERTY SOLD WAS CONSISTING OF HOUSE AS WELL AS SH OPS, BENEFIT OF DEDUCTION U/S 54 WAS NOT AVAILABLE WITH RESPECT TO THE SALE PROCEEDS OF SHOPS. HOWEVER, THE ASSESSEE HAS ALSO M ADE AN ALTERNATE CLAIM OF DEDUCTION U/S 54F, ACCORDING TO WHICH CAPITAL GAINS ARISING OUT OF LONG TERM CAPITAL ASSE TS OTHER THAN HOUSE PROPERTY IS EXEMPT FROM CAPITAL GAIN TAX IF T HE ASSESSEE HAS UTILIZED THE SALE PROCEEDS FOR PURCHASE/CONSTR UCTION OF NEW HOUSE AS PER CONDITIONS STIPULATED THEREIN. THU S, THE ASSESSEE WAS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 54 F. THE PROPERTY SO SOLD WAS IN THE NAME OF SHEHNAI GARDEN, WHICH WAS OWNED BY THE ASSESSEE JOINTLY WITH HIS BROTHER GOPAL KUKREJA. BOTH THE BROTHERS INVESTED THE SALE PROCEE DS OF SHEHNAI GARDEN IN PURCHASES OF RESIDENTIAL HOUSES, WHICH WAS NAMED AS SHEHNAI PALACE. SHEHNAI PALACE WAS PURCHAS ED FROM SHRI SHABHU DAYAL DWARKA DAS AND TWO OTHER COO WNERS. PREVIOUS OWNERS WERE RESIDING IN THE SAID PROPERTY AND THEY HAD ALSO PAID HOUSE TAX FOR THIER RESIDENCE. COPIES OF THE PROPERTY TAX RECEIPTS WAS ALSO PLACED IN THE PAPER BOOK. AS THE SHEHNAI PALACE WAS A HUGE BUILDING, THE ASSESSING O FFICER -: 22: - 22 HELD THAT THE SAID PROPERTY WAS HAVING COMMERCIAL U SE, ACCORDINGLY, HE DECLINED THE CLAIM OF DEDUCTION U/S 54F. THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM ASSESSIN G OFFICER AND DIRECTED THE ASSESSING OFFICER TO VISIT THE SIT E ALONGWITH VALUATION OFFICER AND REPORT THE NATURE OF PROPERTY . IN RESPONSE TO THE CIT(A)S LETTER DATED 16.7.2009, TH E ASSESSING OFFICER VISITED THE SAID PREMISES ALONGWITH VALUATI ON OFFICER, JOINT ENGINEER, INSPECTOR AS WELL AS REPRESENTATIVE OF THE ASSESSEE AND SENT HIS REPORT VIDE LETTER DATED 10.8 .2009 TOGETHER WITH VALUATION OFFICERS REPORT DATED 6.8. 2009. AFTER CONSIDERING THE REMAND REPORT OF THE ASSESSING OFFI CER AS WELL AS REPORT OF THE VALUATION OFFICER, THE CIT(A) RECO RDED A FINDING TO THE EFFECT THAT THE SAID BUILDING SHEHNAI PALACE CONSISTED OF TWO RESIDENTIAL UNITS ONLY. IT WAS ALSO OBSERVED TH AT MERELY BECAUSE THE BUILDING WAS THE PALATIAL BUILDING AND PROVIDED FOR LIVING OF SERVANTS AND WATCHMAN AT THE BACK SID E OF THE BUILDING, THE NUMBER OF RESIDENTIAL BUILDING CANNOT BE CONSIDERED MORE THAN TWO BY COUNTING AVAILABLE PREM ISES FOR SERVANTS AND WATCHMAN. THE SERVANTS AND WATCHMAN WE RE THERE ONLY TO SERVE PEOPLE RESIDING IN THE MAIN PAR T OF THE -: 23: - 23 BUILDING. IT WAS FURTHER OBSERVED THAT THE PORTION OCCUPIED BY THOSE SERVANTS AND WATCHMAN CANNOT BE CONSIDERED AS AN INDEPENDENT RESIDENTIAL UNITS. THE ASSESSEE HAS PUR CHASED THIS PROPERTY CALLED SHEHNAI PALACE FROM THREE OWNE RS, WHO COMPRISED THIS ENTIRE BUILDING AS ONE UNIT, AS IT W AS NOT POSSIBLE TO DIFFERENTIATE ONE PORTION OF ONE OWNER, SINCE IT WAS A JOINT PROPERTY OF THREE PERSONS HAVING SEPARATE S URVEY NUMBERS. FROM THE REGISTRIES OF PROPERTY SO PURCHAS ED, WHICH IS PLACED ON RECORD, IT IS EVIDENT THAT PROPERTY WA S LOCATED AT ONE SURVEY NO. 385. WE ALSO FOUND THAT AS PER THE R EPORT OF THE DVO, THE SAID PROPERTY WAS SUCH THAT IT COULD NOT B E SEPARATED FROM EACH OTHER AND AS SUCH TO CONSIDER T HE THEORY OF PURCHASES OF THREE PROPERTIES BY THE ASSESSING O FFICER WAS NOT TENABLE. WE ALSO FOUND THAT ADVERTISEMENT IN T HE NEWS PAPERS WAS GIVEN BY THE ASSESSEE AFTER PURCHASE OF PROPERTY JUST TO ATTRACT THE PUBLIC TO EXPLORE POSSIBILITIES OF USE OF THE PROPERTY AS THE COMMERCIAL ONE, HOWEVER, THIS ADVER TISEMENT DID NOT WORK AND THE PROPERTY WAS CONTINUED TO BE U SED BY THE ASSESSEE FOR HIS RESIDENTIAL PURPOSE. THUS, MERE AS SESSEES EFFORTS TO USE RESIDENTIAL PROPERTY FOR COMMERCIAL PURPOSES -: 24: - 24 ALSO, WHICH DID NOT MATERIALIZE, CANNOT STAND IN TH E WAY OF ALLOWING ASSESSEES CLAIM OF DEDUCTION U/S 54F. 9. WITH REGARD TO THE ASSESSING OFFICERS OBJECTION T HAT THE ASSESSEE HAS PURCHASE THE PROPERTY THROUGH SEPA RATE REGISTERED DEED, THEREFORE, IT CONSTITUTED SEPARAT E PROPERTY, THE CIT(A) CATEGORICALLY RECORDED A FINDING TO THE EFFECT THAT THE PROPERTY SO PURCHASED WAS TWO RESIDENTIAL UNITS. ON THE BASIS OF REMAND REPORT OF THE ASSESSING OFFICER, WHO VISI TED THE PROPERTY ALONGWITH THE VALUATION OFFICER, THE LD. C IT(A) OBSERVED THAT PROPERTY SO PURCHASED WAS HAVING TWO RESIDENTIAL UNITS AT THE SITE SHEHNAI PALACE THAT O NE FOR GOPAL KUKREJA AND ANOTHER FOR SURESH CHAND KUKREJA. THE C ENTRAL PORTION OF THE PROPERTY IS BEING A HALL CONTAINING MAIN ENTRANCE FROM THE FRONT SIDE. THIS HALL PROVIDES AC CESS TO THE TWO UNITS, WHICH ARE DOUBLE STOREY, EACH WAS ON ITS EITHER SIDE, PREMISES CONTAINED HUGE SIZE ROOMS COMMENSURATE WIT H THE PALATIAL BUILDING. ACCORDINGLY, A FINDING WAS RECOR DED THAT CONSIDERING THE DESCRIPTION OF THE PROPERTY, THE BU ILDING SO PURCHASED WAS HAVING TWO INDEPENDENT RESIDENTIAL UN ITS. THE FINDINGS SO RECORDED BY THE LD.CIT(A) IS AS PER THE FINDING GIVEN -: 25: - 25 BY THE VALUATION OFFICER DURING COURSE OF REMAND PR OCEEDINGS AND WHICH IS AS PER MATERIAL ON RECORD, NO INTERFER ENCE IS REQUIRED IN THE FINDINGS OF THE CIT(A) TO THE EFFEC T THAT HOUSE PROPERTY SO PURCHASED WAS CONSISTING OF TWO RESIDEN TIAL UNITS. MERELY BECAUSE SEPARATE SALE DEED WAS EXECUTED BY T HE CO- OWNERS OF THE PROPERTY, THE NATURE OF PROPERTY WILL NOT CHANGE AND IT REMAINED TO BE TWO RESIDENTIAL UNITS PURCHAS ED BY TWO BROTHERS. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR ALLOWING CLAIM OF DEDUCTION U/S 54F. 10. WE ALSO FOUND THAT AS PER THE FINDINGS RECORDED BY THE LD.CIT(A), SHRI GOPAL KUKREJA WAS HAVING CAPITAL GA IN OF RS. 2,01,48,877/-. HOWEVER, HIS SHARE OF INVESTMENT IN PURCHASE OF NEW RESIDENTIAL PROPERTY NAMED AS SHEHNAI PALACE AMOUNTED TO RS. 2,20,18,730/-, WHICH IS MORE THAN T HE CAPITAL GAINS. SIMILARLY, IN CASE OF SHRI SURESH KU KREJA, THE CAPITAL GAIN WORKS OUT TO RS. 1,37,84,450/-, WHEREA S HIS SHARE OF INVESTMENT IN PURCHASE OF RESIDENTIAL PROPERTY N AMED AS SHEHNAI PALACE AMOUNTED TO RS. 2,28,36,400/-. SINCE THE INVESTMENT IN THE NEW HOUSE PROPERTY WAS MORE THAN THE -: 26: - 26 CAPITAL GAIN AROSE OUT OF SALE OF PROPERTY, THERE I S NO INFIRMITY IN THE ORDER OF CIT(A) FOR ALLOWING CLAIM OF DEDUCT ION U/S 54F. 11. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2012. SD/ - SD/ - (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 TH NOVEMBER, 2012. CPU* 6711