The ACIT, Circle-10, Ahmedabad V. Smt. Kalpanaben M.Bhatt, Ahmedabad

ITA 2378/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60498 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 16-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 22-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: B R POPAT
• Keywords: Capital asset; Valuation report
• Section: 54F; 142(1); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND A. MOHAN ALANKAMON Y, AM) ITA NO.2192/AHD/2010 A. Y.: 2007-08 KALPANABEN M. BHATT, C/O. MR. M. K. MEHTA, 9, PROFESSORS COLONY, NEAR VIJAY CHAR RASTA, AHMEDABAD PA NO. ACHPB 7452 N VS THE D. C. I. T., CIRCLE 10, NARAYAN CHAMBERS, 1 ST FLOOR, OPP. PATANG HOTEL, NEAR NEHRU BRIDGE, ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) ITA NO.2378/AHD/2010 A.Y.: 2007-08 THE A. C. I. T.,CIRCLE 10, NARAYAN CHAMBERS, 1 ST FLOOR, OPP. PATANG HOTEL, NEAR NEHRU BRIDGE, ASHRAM ROAD, AHMEDABAD VS KALPANABEN M. BHATT, C/O. MR. M. K. MEHTA, 9, PROFESSORS COLONY, NEAR VIJAY CHAR RASTA, AHMEDABAD PA NO. ACHPB 7452 N (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI B. R. POPAT, AR DEPARTMENT BY SHRI B. L. YADAV, SR. DR DATE OF HEARING: 16-04-2012 DATE OF PRONOUNCEMENT: 08-06-2012 ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 2 O R D E R PER A. MOHAN ALANKAMONY: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF THE LEARN ED CIT(A)- XVI, AHMEDABAD DATED 17 TH MAY, 2012 IN APPEAL NO. CIT(A)- XVI/DCIT.CIR-10/121/09-10 FOR ASSESSMENT YEAR 2007- 08. BOTH THE APPEALS WERE HEARD TOGETHER AND SHALL BE D ISPOSED OF BY THIS COMMON AND CONSOLIDATED ORDER AS UNDER. ITA NO.2192/AHD/2010 (ASSESSEES APPEAL) 2. THE ASSESSEE IN ITS APPEAL HAS TAKEN THE FOLLOWI NG GROUNDS: THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) XVI, AHMEDABAD HAD ERRED IN: 1. CONFIRMING THE ADDITION OF RS.1,00,00,000/- ON ACCOUNT OF DISALLOWANCE UNDER SECTION 54 OF THE ACT. CONSIDERING THE FACTS OF THE CASE AND THE LEGAL POSITION, HE OUGHT TO HAVE DELETED THE ADDITION BY DIRECTING THE AO TO ALLOW THE CLAIM OF DEDUCTION UNDER SECTION 54 OF THE ACT, AS CLAIMED. 2. NOT MENTIONING ANYTHING ABOUT THE APPLICABILITY OF THE PROVISIONS OF SECTION 54F OF THE ACT, WHEN HE UPHELD THE DECISION OF THE AO ONLY ON THE GROUND OF THE LONG TERM CAPITAL ASSET NOT BEING A RESIDENTIAL HOUSE. ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 3 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 13-09-2007 DECLA RING TOTAL INCOME OF RS.2,34,13,970/-. THE SAME WAS PROC ESSED U/S 143(1) OF THE ACT ACCEPTING THE RETURNED INCOME . THE RETURN WAS SELECTED FOR SCRUTINY ISSUING NOTICE U/S 143(2) OF THE ACT AND SUBSEQUENTLY NOTICE U/S 142(1) OF THE A CT WAS ISSUED CALLING THE ASSESSEE FOR THE RELEVANT DETAIL S. IN RESPONSE THERETO THE ASSESSEE FILED THE REQUIRED DE TAILS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HA S SHOWN LONG TERM CAPITAL GAIN OF RS.2,08,19,029/- AN D OTHER INTEREST INCOME OF RS.26,79,329/- IN THE RETURN OF INCOME. CAPITAL GAIN INCOME OF RS.2,08,19,029/- WAS EARNED ON TRANSFER OF ASSESSEES SHARE @3.125% IN THE PROPERT Y SITUATED AT 5, MANSINGH ROAD, NEW DELHI. THE SAID S HARE OF 3.125% WAS RECEIVED THROUGH WILL OF ASSESSEES MOTH ER HAVING 1/6 TH SHARE IN THE SAID PROPERTY ON HER DEMISE IN 1998. THE SAID PROPERTY WAS TRANSFERRED BY THE OWNE RS FOR RS.1,48,93,93,500/- AND ASSESSEES SHARE @ 3.125% I N CAPITAL GAIN WAS DETERMINED AT RS.3,58,19,029/-. TH E ASSESSEE CLAIMED EXEMPTION U/S. 54EC OF THE ACT FOR RS.50,00,000/- BEING THE AMOUNT INVESTED IN REC BON DS AND RS.1,00,00,000/- BEING AMOUNT DEPOSITED IN CAPI TAL ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 4 GAIN ACCOUNT SCHEME WITH STATE BANK OF INDIA AND IN COME UNDER THE HEAD CAPITAL GAIN WAS OFFERED AT RS.2,08, 19,029/-. 3.1 REGARDING CLAIM OF EXEMPTION U/S 54 OF THE ACT, THE AO ASKED THE ASSESSEE TO FURNISH COPY OF THE SALE DEED AND THE DETAILS OF EXPENDITURE INCURRED ON TRANSFER OF THE PROPERTY. THE ASSESSEE FILED COPY OF THE SALE DEED AND DETAIL S OF EXPENDITURE ON TRANSFER OF THE PROPERTY. THE ASSESS EE HAS SHOWN TOTAL EXPENSES OF RS.8,93,93,572/- AND ASSESS EES SHARE OF EXPENDITURE @3.125% HAS BEEN SHOWN AT RS.27,93,549/-. ON EXAMINATION OF THE VALUATION RE PORT AS ON 01-04-1981 THE AO NOTICED THAT THE TOTAL AREA OF PLOT OF LAND IS 3.85 ACRES WHICH INCLUDES THE PROPERTY HAVI NG BUILT- UP AREA OF 1266.13 SQ. YARDS IN THE PLOT OF LAND AD MEASURING 18634 SQ. YARDS AND THAT THE VALUE OF THE PROPERTY IS ASSESSED AT RS.4.89 CRORES IN WHICH THE VALUE OF TH E LAND IS ESTIMATED AT RS.4,67,50,000/- AND THE VALUE OF THE BUILDING IS ESTIMATED AT RS.21,45,000/-. THE AO FURTHER NOTICE D THAT THE VALUATION REPORT AS ON THE DATE OF SALE OF THE PROP ERTY HAS NOT BEEN PRODUCED. HOWEVER, THE AO OBSERVED FROM TH E SALE DEED THAT THE CONSIDERATION OF RS.148,93,93,500/- W AS TOWARDS THE PROPERTY BEARING PLOT NO.2, BLOCK NO.15 , NEW CAPITAL OF DELHI WHICH IS KNOWN AS 5, MANSINGH ROAD , NEW ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 5 DELHI ADMEASURING 3.85 ACRES OF LAND INCLUDING CONS TRUCTION THEREON. 3.2 REGARDING CLAIM OF REIMBURSEMENT OF EXPENSES TO INDIAN HOTELS AS CONSIDERATION FOR VACATING PART OF THE PROPERTY, ON EXAMINATION OF THE DOCUMENTS FURNISHED BY THE ASSESSEE THE AO FOUND THAT THERE WAS TRIPARTITE AGR EEMENT AMONGST (I) PATANI FAMILY, (II) INDIAN HOTELS C. LT D. AND (III) MINERALS MANAGEMENT SERVICES INDIA LTD. - THE BUYER OF THE PROPERTY IN RESPECT OF JOINT DEVELOPMENT OF THE PRO PERTY AND THE ASSESSEE AGREED TO REIMBURSE RS.97,00,000/- FOR HANDOVER OF PEACEFUL AND VACANT POSSESSION OF THE P ROPERTY TO THE PATANI FAMILY. ACCORDINGLY, THE AO FELT THAT THE CONDITIONS OF SECTION 54 OF THE ACT FOR CLAIMING EX EMPTION FROM CAPITAL GAIN TAX ON TRANSFER OF A RESIDENTIAL HOUSE PROPERTY HAVE NOT BEEN FULFILLED BY THE ASSESSEE AN D THE ASSESSEE WAS ASKED TO SUBSTANTIATE HER CLAIM FOR EX EMPTION OF RS.1,00,00,000/- U/S 54 OF THE ACT. THE ASSESSEE IN RESPONSE SUBMITTED THAT THE PROPERTY AT NEW DELHI W AS RESIDENTIAL HOUSE WHICH WAS BUILD BY P.D. PATANI AN D THE SAME WAS THE SOURCE OF CAPITAL GAIN OF THE ASSESSEE . IT WAS FURTHER SUBMITTED THAT THE PROPERTIES AROUND MANSIN GH ROAD HAVE BEEN DECLARED AS LUTYENS ZONE AND NO COMMERCI AL USE IS PERMITTED. ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 6 3.3 REGARDING REIMBURSEMENT OF EXPENSES TO INDIAN H OTELS CO. LTD. THE ASSESSEE SUBMITTED THAT THOUGH THE JO INT DEVELOPMENT AGREEMENT/UNDERSTANDING WAS ARRIVED AT THE FOR DEVELOPMENT OF THE PROPERTY, BUT SAME HAD TO BE CALLED OFF SUBSEQUENTLY AND SINCE DURING THE INTERVENING P ERIOD INDIAN HOTELS CO. LTD. HAS INCURRED EXPENSES OF RS.97,00,000/- THE SAME WAS REIMBURSED TO THEM AS P ER THE UNDERSTANDING/AGREEMENT. 3.4 THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, COPY OF THE SALE DEED, VALUATION REPORT A ND COPY OF LETTER OF THE INDIAN HOTELS CO. LTD. DATED 17-11 -2005 SIGNED BY THE 3 PARTIES AS AFORESAID WAS OF THE VIE W THAT FOR AVAILING EXEMPTION U/S 54 OF THE ACT THE ASSESSEE H AD TO FULFILL THE FOLLOWING RELEVANT CONDITIONS: (I) THE TRANSFER SHALL BE BY INDIVIDUAL OR A HUF (II) THE LONG TERM CAPITAL ASSET SHALL BE BUILDING OR LAND APPURTENANT TO BUILDING. (III) THE BUILDING SHOULD BE A RESIDENTIAL HOUSE IN COME OF WHICH IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 3.5 WITH REGARD TO POINT (I) ABOVE THE AO OBSERVED THAT THERE WAS STILL UNDIVIDED SHARE IN THE PROPERTY OF THE MEMBERS AS PER TERMS OF THE WILL OF LATE SMT. SAVIT A GAURI ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 7 B. PATTANI AS MENTIONED IN CLAUSE 2 (C) OF THE SALE DEED AND THAT THE PROPERTY WAS NEVER DISTRIBUTED. THE SAID P ROPERTY REMAINED THE ESTATE OF LATE SHRI PRABHASHANKAR D. P ATANI AS A SEPARATE ENTITY. THEREFORE, THE AO HELD THAT T HE CONDITIONS REGARDING TRANSFER OF CAPITAL ASSET BY A N INDIVIDUAL OR A HUF IS NOT FULFILLED BY THE ASSESSEE. 3.6 WITH REGARD TO POINT (II) ABOVE, THE AO OBSERVE D FROM PAGE 6 OF THE SALE DEED THAT SHRI PRABHASHANKAR D. PATTANI WAS ALLOTTED A PLOT OF LAND ADMEASURING 3.85 ACRES BY A PERPETUAL LEASE DEED DATED 20-08-1921 AND THUS THE CAPITAL ASSET CAME INTO EXISTENCE WAS A PLOT OF LAN D ADMEASURING 3.85 ACRES. THEREAFTER, CONSTRUCTION WA S CARRIED OUT ON 6.79% OF THE PLOT OF LAND AND THE VA LUE OF THE LAND WAS ESTIMATED AT RS.4,67,50,000/- AS ON THAT D ATE AND THE VALUE OF THE BUILDING WAS ESTIMAT4ED AT RS.21,4 5,000/- WHICH CONSTITUTES 4.58% OF THE TOTAL VALUE OF THE P ROPERTY. THE AO ALSO OBSERVED THAT THE PRESENT SALE DEED WAS PRIMARILY FOR TRANSFER OF 3.85 ACRES OF LAND AND NO T FOR TRANSFER OF THE BUILDING CONSTRUCTED THEREON. THE AO ACCORDI NGLY HELD THAT THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 54 OF THE ACT ON CAPITAL GAIN REALIZED ON TRANSFER OF THE PRO PERTY. ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 8 3.7 WITH REGARD TO POINT (III) ABOVE, THE AO OBSERV ED THAT AS PER THE LETTER WRITTEN BY THE INDIAN HOTELS CO. LTD . THE PATTANI FAMILY ENTERED INTO AN AGREEMENT WITH THE S AID HOTEL GROUP FOR DEVELOPMENT OF THE PROPERTY AND THE PROPE RTY WAS UNDER POSSESSION OF THE INDIAN HOTELS CO. LTD. AND AS PER TERMS OF THE UNDERSTANDING ON PAYMENT OF RS.97,00,0 00/- THE INDIAN HOTELS CO. LTD. WOULD HAND OVER PEACEFUL VACANT POSSESSION OF THE PROPERTY AND WOULD WITHDRAW THE P OLICE COMPLAINT AND OTHER SUITS. ACCORDINGLY, THE AO HELD THAT THE PROPERTY DID NOT REMAIN AS RESIDENTIAL PROPERTY. TH E AO FURTHER OBSERVED THAT THE ASSESSEE HAS NEITHER DISC HARGED HER WEALTH TAX LIABILITY IN RESPECT OF THE PROPERTY ACQUIRED BY HER FROM HER MOTHER AS PER THE WILL IN 1998 NOR OFF ERED ANY RENTAL INCOME TO TAX U/S 22 OF THE ACT KNOWING FULL Y THAT THE SAID PROPERTY HAS BEEN CONVERTED INTO A COMMERCIAL PROPERTY BY WAY OF THE AGREEMENT WITH THE INDIAN HOTELS CO. LTD. ACCORDINGLY, THE AO TREATED THE PROPERTY AS NOT RES IDENTIAL HOUSE ON THE DATE OF TRANSFER AND THAT THE ASSESSEE DID NOT FULFILL THE CONDITION REGARDING TRANSFER OF RESIDEN TIAL BUILDING AND LAND APPURTENANT THERETO PRESCRIBED U/S 54 OF T HE ACT FOR AVAILING EXEMPTION AND DISALLOWED ASSESSEES CLAIM U/S 54 OF THE ACT FOR RS.1,00,00,000/-. ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 9 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) AND IT WAS MAINLY CONTENDED BEFORE HIM THAT DURING ASSESSMENT PROCEED INGS THE AO ASKED THE ASSESSEE TO EXPLAIN THAT THE PROPE RTY IN QUESTION WAS A RESIDENTIAL PROPERTY. THE ASSESSEE R EPLIED THE QUERY. IT WAS FURTHER SUBMITTED THAT THE AO REJ ECTED THE CLAIM OF THE ASSESSEE U/S 54 OF THE ACT ON THREE GR OUNDS IN THE ASSESSMENT ORDER WITHOUT CONFRONTING THE SAME T O THE ASSESSEE. THE ASSESSEE ALSO WANTED TO FILE ADDITION AL EVIDENCE BY WAY OF REPLY IN RESPECT OF FIRST AND SE COND GROUND ON WHICH THE AO REJECTED THE CLAIM OF THE AS SESSEE U/S 54 OF THE ACT AND SENT A COPY OF THE PAPER BOOK DATED 24-2-2010 FOR HIS COMMENT. THE AO IN HIS COMMENT REGARDING CLAIM OF RS.1,00,00,000/- BEING DEPOSITED IN A/C NO. 30420499531 IF SBI, ALKAPURI BRANCH, BARODA UND ER CAPITAL GAINS ACCOUNT SCHEME STATED THAT THE SAME I S A NORMAL SAVING PASS BANK PASS BOOK AND THERE IS NO M ENTION THAT THE SAID ACCOUNT IS UNDER THE CAPITAL GAINS AC COUNT SCHEME, HENCE ASSESSEES CLAIM IS NOT CORRECT. IT W AS FURTHER STATED BY THE AO THAT THE PROPERTY WAS NOT USED AS RESIDENTIAL HOUSE BY THE ASSESSEE. ACCORDINGLY, THE AO ASKED TO SUBSTANTIATE HER CLAIM WITH SUPPORTING DOC UMENTS AND EVIDENCES. ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 10 4.1 IN REPLY THE ASSESSEE SUBMITTED THAT THE PROPER TY WAS A RESIDENTIAL HOUSE WHICH WAS CONSTRUCTED BY SIR P D. PATANI AND IT WAS THE SOURCE OF CAPITAL GAIN. IT WAS FURTH ER SUBMITTED THAT THE PROPERTY WAS DECLARED AS LUTYENS ZONE AND NO COMMERCIAL USE OF PROPERTY WAS ALLOWED IN THAT AREA . 4.2 IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT T HE AO PASSED ORDER U/S 143 (3) DISALLOWING DEDUCTION OF RS.1,00,00,000/- ON THE GROUNDS THAT: (I) THE APPELLANT IS NOT THE OWNER, THE PROPERTY BELONGS TO THE ESTATE OF LATE SHRI PRABHASHANKAR PATANI (II) THE PROPERTY CANNOT BE CONSIDERED AS RESIDENTI AL HOUSE BUT COMMERCIAL PREMISES (III) THE PROPERTY IS NOT A RESIDENTIAL HOUSE WITH LAND APPURTENANT THERETO. 4.3 IT WAS FURTHER CONTENDED BEFORE THE LEARNED CIT (A) THAT FIRST AND THIRD ISSUE ABOVE, WERE NOT CONFRONTED TO THE ASSESSEE DURING ASSESSMENT PROCEEDINGS. THE ASSESSE E ALSO FILED COPY OF THE PAPER BOOK FILED BEFORE THE AO AS THE SAME WAS NOT CONSIDERED BY HIM. SINCE THE PAPER BOO K CONTAINED ONLY THE REPLY TO POINTS NO.1 & 3 ABOVE, THE SAME WAS CONSIDERED BY THE LEARNED CIT(A) ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 11 4.4 REGARDING TRANSFER SHALL BE BY INDIVIDUAL OR A HUF THE ASSESSEE CONTENDED THAT THE AO FAILED TO APPREC IATE THAT THE ASSESSEE ACQUIRED 3.125% SHARE IN THE PROPERTY OF ESTATE OF LATE PRABHASHANKAR PATANI WHO WAS HER GRE AT GRAND FATHER AND THAT THE AOS VIEW THAT THE PROPER TY BELONGS TO ESTATE OF DECEASED IS BASED ON THE FACT THAT THE PROPERTY WAS NOT DISTRIBUTED BETWEEN THE BENEFICIAR IES IN METES & BOUNDS AMONGST THE MEMBERS OF THE HUF. IT W AS ALSO SUBMITTED THAT PHYSICAL DISTRIBUTION OF THE PR OPERTY COULD NOT BE DONE DUE TO THE PREVAILING MUNICIPAL LAW AND THAT THE SAME WAS ACCORDINGLY OWNED JOINTLY AS CO-OWNERS AS PER SECTION 26 OF THE IT ACT, WHICH THE AO DID NOT TAKE INTO CONSIDERATION. 4.5 REGARDING TRANSFER NOT BEING A RESIDENTIAL HO USE WITH LAND APPURTENANT THERETO IT WAS SUBMITTED BY THE ASSESSEE THAT THE AO HAS NOT APPRECIATED THAT THE FACTS OF T HE CASE, LEGAL POSITION AND RATIO OF VARIOUS JUDICIAL PRONOU NCEMENTS AND THAT INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY IS CHARGEABLE U/S 22 OF THE ACT ACCORDING TO WHICH THE ANNUAL VALUE OF THE PROPERTY CONSISTING BUILDIN G OR LAND APPURTENANT THERETO OF WHICH THE ASSESSEE IS OWNER, OTHER THAN SUCH PORTIONS AS MAY OCCUPY FOR THE PURPOSE OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND THE PR OFITS OF ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 12 WHICH ARE CHARGEABLE TO INCOME TAX. IT WAS FURTHER SUBMITTED THAT LAND APPURTENANT THERETO HAS NOT BEEN DEFINE D IN THE INCOME TAX ACT AND THAT THEREFORE, THE ASSESSEE REL IED UPON VARIOUS DICTIONARY MEANINGS. THE ASSESSEE ALSO FURT HER RELIED UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS SMT. M. KALPAGAM, 227 ITR 733 AN D THE DECISION IN THE CASE OF CIT VS ZAIBUNNISA BEGUM, 15 1 ITR 320 IN WHICH IT WAS HELD THAT LAND APPURTENANT IS TO BE CONSTRUED IN A BROAD AND NON-TECHNICAL SENSE AND TH E TAX AUTHORITIES SHOULD DETERMINE THE EXTENT OF LAND APP URTENANT BY ENQUIRING INTO THE ENJOYMENT OF THE BUILDING AND LAND BY THE OCCUPIERS. 4.6 REGARDING BUILDING SHOULD BE A RESIDENTIAL HO USE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY IT WAS SUBMITTED BY THE ASSESSEE T HAT THE AO HAS OBSERVED THAT THE PROPERTY UNDER TRANSFER WA S NOT A HOUSE PROPERTY AS DEFINED U/S 22 OF THE ACT ON THE BASIS OF LETTER RECEIVED FROM THE INDIAN HOTELS CO. LTD. WHE REIN IT WAS MENTIONED OF REVOCATION OF ALL UNDERSTANDING, W RITING AND AGREEMENT BETWEEN THE PATANI FAMILY AND THE COM PANY FOR JOINT DEVELOPMENT. IT WAS FURTHER SUBMITTED THA T THE PROPERTY WAS SITUATED IN LUTEYANS ZONE AND THEREFO RE, IT COULD BE USED EITHER FOR RESIDENCE OR FOR SETTING A RESIDENTIAL ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 13 HOTEL OF STAR CATEGORY PROVIDED A SPECIAL APPROVAL IN THIS REGARD. HOWEVER, DUE TO LEGAL RESTRICTION JOINT DEV ELOPMENT COULD NOT BE REALIZED AND THE CO-OWNERS OF THE PROP ERTY GOT BUYER WHO WAS INTERESTED TO BUY THE PROPERTY AS HER ITAGE HOME FOR RESIDENTIAL PURPOSE AND FOR THAT PURPOSE T HE CO- OWNERS OF THE PROPERTY GOT A COMFORT LETTER FROM TH E INDIAN HOTELS CO. LTD. AND THAT FOR GETTING THE COMFORT LE TTER THE CO- OWNERS HAD TO REIMBURSE THE EXPENSES INCURRED BY TH E INDIAN HOTELS CO. LTD. DURING THE PERIOD. IT WAS FU RTHER SUBMITTED THAT THE PROPERTY WAS OCCUPIED BY THE PAT ANI FAMILY AND WAS NOT USED FOR ANY COMMERCIAL PURPOSE. 4.7 REGARDING CHARGEABILITY OF WEALTH TAX, IT WAS S UBMITTED BY THE ASSESSEE THAT THAT SINCE THE SELF OCCUPIED P ROPERTY IS EXEMPT U/S 5 (VI) OF THE ACT THE SAME IS NOT REQUIR ED TO BE TAXED UNDER WEALTH TAX ACT AND THAT SINCE THE ASSES SEE WAS NOT HAVING ANY RESIDENTIAL HOUSE, NOTIONAL RENT IS NOT REQUIRED TO BE PAID. IT WAS, THEREFORE, SUBMITTED B Y THE ASSESSEE THAT THE PROPERTY WAS NOT HANDED OVER TO T HE INDIAN HOTELS CO. LTD. AND THE SAME WAS USED FOR RE SIDENTIAL PURPOSE AND THAT THE CONDITION THAT THE PROPERTY IS RESIDENTIAL HOUSE HAS BEEN FULFILLED AS PER SECTION 54 OF THE A CT. ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 14 5. THE LEARNED CIT(A) CONSIDERING THE FACTS OF THE CASE, THE SUBMISSION OF THE ASSESSEE AND THE REMAND REPO RT OF THE AO ULTIMATELY HELD THAT THE ASSESSEE IS THE CO- OWNER OF THE PROPERTY AND AT THE SAME BREATH FURTHER HELD TH AT THE LARGE EXTEND OF LAND IS NOT LAND APPURTENANT TO THE BUILDING AND THE PROPERTY IS COMMERCIAL. 6. THE LEARNED AR REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. ON THE OTHER HAND, TH E LEARNED DR SUPPORTED THE ORDER OF THE LEARNED CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD AND THE PAPER BOOK CONTAINING 1 TO 149 PAGES FILED BY THE ASSESSEE. FR OM THE FACTS OF THE CASE IT IS EVIDENT THAT THE GROUSE OF THE LEARNED AO FOR DENYING EXEMPTION U/S 54 OF THE ACT WAS DUE TO THE FOLLOWING THREE REASONS: (1)THE ASSET WHICH IS THE SUBJECT MATTER OF TRANSFER BELONGED TO THE ASSETS OF LATE S HRI PRABHASHANKAR PATNI WHICH IS SEPARATE ASSESSABLE EN TITY AND NOT THE ASSESSEE. (2)THE ASSET WHICH IS THE SU BJECT MATTER OF TRANSFER IS PREDOMINANTLY IS A CASE OF TR ANSFER OF LAND AND THE SAME CANNOT BE TREATED AS TRANSFER OF BUILDING WITH LAND APPURTENANT THERETO AS ENVISAGED U/S 54 O F THE ACT. ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 15 (3) THE SUBJECT MATTER OF ASSETS BEING TRANSFERRED WAS CONVERTED TO COMMERCIAL ASSET AND NO MORE REMAINED AS HOUSE PROPERTY AS DEFINED U/S 22 OF THE ACT. 7.1 IN RESPECT OF THE FIRST ISSUE THAT THE ASSET WH ICH IS THE SUBJECT MATTER OF TRANSFER BELONGED TO THE ASSETS O F LATE SHRI PRABHASHANKAR PATNI WHICH IS SEPARATE ASSESSABLE EN TITY AND NOT THE ASSESSEE; ON OUR PERUSAL OF THE RECORDS THE APPREHENSION OF THE LEARNED AO DOES NOT SEEM TO BE JUSTIFIED. FROM THE SALE DEED EXECUTED ON 23-08-200 6 BETWEEN THE MEMBERS OF THE HUF AND M/S.MINERALS MANAGEMENT SERVICES PVT. LTD., IT IS EVIDENT THAT S HRI PRABHASHANKAR D. PATNI WAS THE GREAT GRANT FATHER O F THE ASSESSEE. THE DOCUMENTARY EVIDENCES SHOW THAT LATE SHRI PRABHASHANKAR D. PATNI ACQUIRED THE LAND BY VIRTUE OF PERPETUAL LEASE FOR CONSIDERATION OF RS.1,656/- AND 4 ANAS ON 20-08-1921. THE LEASE AGREEMENT IS ON RECORD. THEREAFTER, LATE SHRI PRABHASHANKAR D. PATNI CONSTR UCTED A DOUBLE STORY RESIDENTIAL HOUSE ALONG WITH SERVANT Q UARTERS AND GARAGES PROTECTED BY COMPOUND WALL AFTER OBTAIN ING SANCTION FROM THE APPROPRIATE AUTHORITIES AT THE RE LEVANT POINT OF TIME. SINCE, THE LAND WAS SITUATED IN VVIP ZONE OF NEW DELHI WHICH WAS DESIGNATED AS LUTYENS BUNGALOWS ZONE; ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 16 THERE WERE STRINGENT RESTRICTIONS FOR CONSTRUCTION ON THE LARGE EXTENT OF 3.85 ACRES OF RESIDENTIAL PLOT. LATE SHRI PRABHASHANKAR D. PATNI CONSTRUCTED HIS RESIDENTIAL HOUSE UTILIZING THE MAXIMUM PERMISSIBLE AREA ALLOWED FOR CONSTRUCTION ON THE LARGE EXTENT OF 3.85 ACRES PLOT WHICH WORKS OUT TO 6.79% OF THE TOTAL AREA OF THE PLOT. T HE ASSESSEE HAD COME OUT WITH VARIOUS DOCUMENTS TO EST ABLISH THESE FACTS AND THE REVENUE HAS NOT DISPUTED THE SA ME. FURTHER, FROM THE SALE DEED IT IS EVIDENT THAT SHRI PRABHASHANKAR D. PATNI PASSED AWAY AND THE PROPERTY DEVOLVED ON HIS TWO SONS SHRI A. P. PATNI AND BATUK BHAI P. PATNI. THEREAFTER, THE RIGHTS IN THE PROPERTY FURTH ER DEVOLVED THROUGH SUCCESSIVE DEMISE OF THE MEMBERS OF THE FAM ILY. IN JULY, 1976 AN ORAL PARTITION WAS EFFECTED WHICH WAS RECORDED AS MEMORANDUM ON 03-08-1976. THIS WAS ALSO RECOGNIZ ED BY THE REVENUE BY ORDER U/S 171 OF THE ACT DATED 15 -05-1979 PASSED BY THE ITO-I, BHAVNAGAR WHICH IS PLACED IN T HE PAPER BOOK BEFORE US IN PAGE 26. SUBSEQUENT TO THE ORAL PARTITION, THERE WAS FURTHER DEVOLUTION IN THE PROPERTY. AS A RESULT, THE ASSESSEE HAD BECOME OWNER OF 3.125% SHARE OF THE RESIDENTIAL HOUSE WHICH IS APPARENT FROM THE SALE D EED. THUS, IT IS ESTABLISHED THAT ALL THE PARTIES MENTIO NED IN THE SALE DEED HAD BECOME JOINT OWNERS OF THE RESIDENTIA L ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 17 PROPERTY. THIS FACT IS FURTHER CEMENTED SINCE THE R EVENUE HAD RECOGNIZED THE ORAL PARTITION IN ANOTHER PROCEE DING BEFORE IT AS MENTIONED HEREINABOVE. THERE IS NO PR OHIBITION FOR SUCH ORAL PARTITIONS IN THE EYE OF LAW AND THEY ARE VALID. FURTHER, IT IS NOT MANDATORY TO PARTITION THE PROPE RTY IN METES AND BOUNDS IN ORDER TO DISTRIBUTE THE SAME AMONGST THE LEGAL HEIRS. IN FACT, SUCH PHYSICAL DIVISION OF IMMOVABLE PROPERTY IN CERTAIN CASE IS NOT POSSIBLE AS IN THE ASSESSEES C ASE. SINCE THE ASSET HAS BEEN ORALLY PARTITIONED AMONGST THE M EMBERS OF THE RELATED HINDU UNDIVIDED FAMILIES THOUGH NOT BY METES AND BOUNDS, THE MEMBERS OF THE HUFS WERE HOLDING TH E PROPERTY AS CO-OWNERS IN THEIR INDIVIDUAL CAPACITY AND NOT IN THE STATUS OF HUF. THEREFORE, THE LEARNED AO HAS ER RED TO HOLD THAT THE CONDITIONS REGARDING TRANSFER OF RESI DENTIAL BUILDING AND LAND APPURTENANT THERETO PRESCRIBED IN SECTION 54 OF THE ACT IN ORDER TO AVAIL EXEMPTION IS NOT FU LFILLED. FROM THE FACTS OF THE CASE, IT IS EVIDENT THAT THE ASSES SEE IS THE JOINT OWNER OF THE PROPERTY IN HER INDIVIDUAL CAPAC ITY BY VIRTUE OF THE ORAL PARTITION AND IS ENTITLED TO CLAIM DEDU CTION U/S 54 OF THE ACT ON SALE OF THE RESIDENTIAL BUILDING ALON G WITH LAND APPURTENANT THERETO, SUBJECT TO THE FULFILLMENT OF OTHER CONDITIONS LAID DOWN UNDER THE ACT. 7.2 THE OTHER ARGUMENT OF THE REVENUE WAS THAT THE SUBJECT ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 18 MATTER OF TRANSFER OF ASSETS WAS NOT RELATED TO TRA NSFER OF A RESIDENTIAL HOUSE WITH LAND APPURTENANT THERETO BUT PREDOMINANTLY LAND; ALSO DOES NOT APPEAR TO HAVE AN Y MERIT. FROM THE FACTS, IT IS EVIDENT THAT THE LAND WAS ALL OTTED BY THE GOVERNMENT ON 20-08-1921 TO THE ASSESSEES GREAT GR AND FATHER WHICH FALLS IN VVIP AREA OF LUTYENS BUNGALOWS ZONE AND THIS AREA IS BOUND BY VARIOUS STRINGENT RULES A ND REGULATIONS WITH RESPECT TO CONSTRUCTION OF BUILDIN G. THOUGH THE GOVERNMENT HAD ALLOTTED 3.85 ACRES OF LAND TO T HE ASSESSEES GREAT GRAND FATHER, THE LAND FALLS IN TH E RESIDENTIAL ZONE WHEREIN CONSTRUCTION IS POSSIBLE F OR A RESTRICTED AREA OF RESIDENTIAL BUILDING. THE ASSESS EES GREAT GRAND FATHER HAD UTILIZED THE ENTIRE PERMISSIBLE AR EA AVAILABLE FOR CONSTRUCTION, FOR CONSTRUCTING THE RE SIDENTIAL HOUSE. IN SUCH CIRCUMSTANCES, IT IS OBVIOUS THAT TH E NOMENCLATURE OF THE ASSET PREDOMINANTLY FALLS IN TH E CATEGORY OF RESIDENTIAL BUILDING THOUGH LARGE EXTEND OF THE PREMISES CONSIST OF LAND. IT IS PERTINENT TO NOTE THAT THE VACANT LAND CANNOT BE USED FOR ANY OTHER PURPOSE OTHER THAN TO REMAIN AS AN INTEGRAL PART OF THE RESIDENTIAL BUILDING. CONSIDERING THE FACTS OF THIS CASE WE ARE OF THE CONSIDERED VIE W THAT THE LARGE EXTENT OF LAND OF 3.85 ACRES IS LAND APPU RTENANT TO THE RESIDENTIAL HOUSE AND BOTH THE LAND AND THE ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 19 BUILDING ARE NOT DIVISIBLE. THE ASSESSEE HAS RIGHTLY RELIED ON THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT, A. P. II, HYDERABAD VS ZAIBUNNISA BEGUM, 151 ITR 320 WHEREIN IT IS HELD THAT SECTION 54 OF THE I. T. ACT, 1961, GRANTS A CONCESSION WHERE CAPITAL GAINS ARISE FROM THE TRANSFER OF BUILDINGS OR LANDS APPURTENANT THERETO USED BY THE ASSESSEE IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE OF TRANSFER AS HIS O WN OR HIS PARENTS RESIDENCE, IF HE CONSTRUCTS A HOUSE PR OPERTY OR PURCHASES ONE FOR PURPOSES OF RESIDENCE WITHIN T HE TIME SPECIFIED IN THE PROVISION. THE EXPRESSION LA ND APPURTENANT THERETO OCCURRING IN S. 54 HAS NOT BEE N DEFINED. IT MUST, THEREFORE, BE UNDERSTOOD IN ITS P OPULAR AND NON-TECHNICAL SENSE. IT IS NOT POSSIBLE TO ACCE PT THE CONTENTION THAT CL. (B) OF THE EXPLANATION TO S. 5 (1) (IVC) OF THE W. T. ACT, 1957, DEFINING LAND APPURTENANT FOR THE PURPOSE OF THAT CLAUSE SHOULD BE CONSIDERED EQU ALLY APPLICABLE FOR THE PURPOSE OF UNDERSTANDING THAT EXPRESSION OCCURRING IN S. 54 OF THE I. T. ACT. THE EXPLANATION IN THE W. T. ACT IS ONLY FOR THE PURPOS E OF S. 5 (1) (IVC) BECAUSE IT IS SPECIFICALLY STATED SO. T HE MEANING ASSIGNED TO THAT EXPRESSION IN THE URBAN CEILING AND REGULATION ACT IS ALSO NOT RELEVANT. TH E TAX ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 20 AUTHORITIES WILL HAVE TO DETERMINE THE EXTENT OF LA ND APPURTENANT TO A BUILDING TRANSFERRED, TAKING INTO CONSIDERATION A VARIETY OF CIRCUMSTANCES THAT MAY B E RELEVANT FOR THE PURPOSE. IT IS NOT POSSIBLE TO LAY DOWN IN FALLIBLE TESTS TO BE APPLIED AS THE TESTS WOULD VAR Y DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE. FOR INSTANCE: (1) IF THE BUILDING TOGETHER WI TH THE LAND IS TREATED AS AN INDIVISIBLE UNIT AND ENJOYED AS SUCH BY THE PERSONS OCCUPYING THE BUILDING, IT IS A N INDICATION THAT THE ENTIRE EXTENT OF LAND IS APPURT ENANT TO THE BUILDING ; (2) IF THE BUILDING HAS EXTENSIVE LA NDS APPURTENANT THERETO AND EVEN IF THE BUILDING AND TH E LAND HAVE BEEN TREATED AS ONE SINGLE UNIT AND ENJOY ED AS SUCH BY THE OCCUPIERS, AN INQUIRY COULD BE MADE TO FIND OUT WHETHER ANY PART OF THE LAND CONTIGUOUS TO THE BUILDING CAN BE PUT TO INDEPENDENT USER WITHOUT CAU SING ANY DETRIMENT TO THE ENJOYMENT OF THE BUILDING AS S UCH. SUCH AN ENQUIRY SHOULD BE CONDUCTED NOT BASED ON AN Y ARTIFICIAL CONSIDERATIONS BUT FROM THE POINT OF VIE W OF THE PERSONS OCCUPYING THE BUILDING. THE NUMBERS OF PERSONS OR DIFFERENT BRANCHES OF FAMILIES RESIDING IN THE BUILDING, THE REQUIREMENTS OF THE PERSONS OCCUPYING THE BUILDING, CONSISTENT WITH THEIR SOCIAL STANDING, ET C., ARE ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 21 RELEVANT FOR THE PURPOSE. IF ANY SURPLUS IS ARRIVED AT ON SUCH ENQUIRY, THEN THE EXTENT OF SUCH SURPLUS LAND MAY NOT QUALIFY TO BE TREATED AS LAND APPURTENANT TO TH E BUILDING; (3) IF THERE IS ANY EVIDENCE TO INDICATE THAT ANY PORTION OF THE LAND CONTIGUOUS TO THE BUILDING WAS APPLIED TO USER OTHER THAN THE ENJOYMENT OF THE BUI LDING, THEN THAT PROVIDES A SAFE INDICATION REGARDING THE EXTENT OF LAND APPLIED FOR SUCH USER. FOR INSTANCE, THE LA ND USED BY THE OCCUPIERS FOR COMMERCIAL OR AGRICULTURA L PURPOSES ALTHOUGH FORMING PART OF THE LAND ADJACENT TO THE BUILDING, DOES NOT QUALIFY TO BE TREATED AS LAN D APPURTENANT TO THE BUILDING; (4) IF THE OWNER OR OC CUPIER IS DERIVING ANY INCOME FROM THE LAND WHICH IS NOT L IABLE TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY UNDER S. 22 OF THE I. T. ACT, THEN THE EXTENT OF SUCH LAND D OES NOT QUALIFY TO BE TREATED AS LAND APPURTENANT TO THE BU ILDING; AND (5) ANY MATERIAL POINTING TO BE ATTEMPTED USER OF THE BUILDING FOR PURPOSES OTHER THAN THE EFFECTIVE AND PROPER ENJOYMENT OF THE HOUSE WOULD ALSO AFFORD A S AFE GUIDE TO DETERMINE THE EXTENT OF SURPLUS LAND AND N OT QUALIFYING TO BE TREATED AS LAND APPURTENANT TO THE BUILDING. THE ABOVE TESTS ARE ILLUSTRATIVE AND BY N O MEANS EXHAUSTIVE. IT IS FOR THE TAX AUTHORITIES TO APPLY ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 22 THEIR MIND PROPERLY TO THE FACTS OF EACH CASE AND T O DEVISE TESTS SUITABLE AND APPROPRIATE TO EACH CASE. WITH THE ABOVE DISCUSSION WE HOLD THAT THE ASSET TR ANSFERRED BY THE ASSESSEE IS HER SHARE IN THE RESIDENTIAL BUI LDING ALONG WITH LAND APPURTENANT THERETO AS ENVISAGED IN THE A CT AND THEREFORE THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTI ON U/S 54 OF THE ACT SUBJECT TO THE COMPLIANCE OF THE OTHER P ROVISIONS OF THE ACT. 7.3 ON THE THIRD GROUSE OF THE LEARNED AO THAT THE PROPERTY IN QUESTION WAS NOT A RESIDENTIAL HOUSE BASED ON A LETTER FROM M/S. INDIA HOTELS CO. LTD.; ALSO DOES NOT APPE AR TO BE JUSTIFIABLE. DURING THE ENDEAVOR FOR SALE OF THE PR OPERTY THE OWNERS OF THE PROPERTY WERE DRAWN TO THE INTEREST S HOWN BY THE NEIGHBORING GROUP OF FIVE STAR HOTELS. THE INDI AN HOTEL CO. LTD., BEING A FLAGSHIP COMPANY OF TATA RUNNIN G AND OPERATING SEVERAL FIVE STAR HOTELS SHOWED INTEREST IN THE PROPERTY FOR DEVELOPING IT AS A FIVE STAR HOTEL. TH E PROPOSAL OF THE STAR GROUP OF HOTELS WAS FOR JOINT DEVELOPME NT. SINCE THE GROUP WAS PRIMA FACIE INTERESTED IN THE JOINT D EVELOPMENT THE REPRESENTATIVES OF THE COMPANY WERE PERMITTED N EED BASED ACCESS TO THE PROPERTY SO THAT THEY COULD ASS ESS THE COMMERCIAL POTENTIALITY OF THE PROPERTY AND COULD A PPROACH ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 23 THE GOVERNMENT FOR SPECIAL APPROVAL TO SET UP A HOT EL. THE PROPOSAL OF THE GROUP OF FIVE STAR HOTELS TO THE VE NDORS WAS THAT, IF SUCH APPROVAL WOULD HAVE BEEN OBTAINED, TH E ASSESSEE AND THE CO-OWNERS OF THE PROPERTY WOULD FU RTHER NEGOTIATE TO BECOME PART THE JOINT VENTURE IN ASSOC IATION WITH INDIAN HOTEL CO. LTD. IN SUCH EVENTUALITY, THE EXIS TING RESIDENTIAL HOUSE WOULD HAVE TO BE DEMOLISHED AND A HOTEL BUILDING WOULD HAVE TO BE ERECTED AS PER THE JOINT DEVELOPMENT AGREEMENT. HOWEVER, DUE TO THE STRINGEN T RULES AND REGULATIONS OF THE LUTYENS BUNGALOWS ZONE WHICH CAME IN WAY, PERMISSION COULD NOT BE OBTAINED FOR SUCH V AST CONSTRUCTION. AT THIS JUNCTURE, THE MEMBERS OF THE PATNI FAMILY DECIDED TO SEVER THE TIES WITH INDIAN HOTEL CO. LTD., AND WERE ON THE LOOKOUT FOR ANOTHER BUYER WHO WOULD BE INTERESTED TO PURCHASE THE PROPERTY AS HERITAGE HOM E FOR RESIDENTIAL PURPOSE. THE PROPERTY WAS NOT CAPABLE O F BEING SUB-PLOTTED AND DUE TO STRINGENT RULES AND REGULATI ONS OF LUTYENS BUNGALOWS ZONE IT WAS A DIFFICULT TASK TO FIND SUITABLE BUYER WHO MIGHT BE INTERESTED TO INVEST IN VERY LARGE AMOUNT FOR RESIDENTIAL HOUSE PROPERTY. THUS, THE PR OPERTY REMAINED ALL THROUGH AS A RESIDENTIAL PROPERTY AND THERE WAS NO CONVERSION OF THE SAME AS A COMMERCIAL PROPERTY AS CLAIMED BY THE REVENUE. FROM THE ABOVE FACTS IT IS EVIDENT ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 24 THAT EVEN IF THE ASSESSEE AND THE CO-OWNERS HAD DES IRED AND ATTEMPTED TO CONVERT THE PROPERTY AS COMMERCIAL PROPERTY, LAW PROHIBITED THEM TO DO SO AND THE PROP ERTY REMAINED AS RESIDENTIAL BUILDING WITH LAND APPURTEN ANT THERETO. THE EARNEST EFFORT TAKEN UP BY THE CO-OWNE RS AND THE PROBABLE JOINT DEVELOPERS TO CONVERT THE PROPER TY INTO A COMMERCIAL PROPERTY CANNOT BE CONSTRUED TO HOLD THA T THE PROPERTY IS CONVERTED AS A COMMERCIAL PROPERTY. THE REFORE CONSIDERING THE FACTS OF THE CASE WE DO NOT HAVE AN Y HESITATION TO HOLD THAT THE RELEVANT PROPERTY ALWAY S STOOD AS A RESIDENTIAL BUILDING WITH LAND APPURTENANT THERET O. FURTHER FROM THE FACTS BEFORE US IT IS EVIDENT THAT THE RES IDENTIAL BUILDING AND THE LARGE EXTEND OF LAND OF 3.85 ACRES ARE AN INTEGRAL UNIT AND THE SAME IS UNDIVIDABLE OR INSEPA RABLE. THUS THIS ISSUE IS ALSO DECIDED IN FAVOR OF THE ASS ESSEE. 7.4 TO SUM UP, FROM OUR ABOVE DISCUSSIONS AND FIN DINGS WE HOLD THAT BY VIRTUE OF ORAL PARTITION THE ASSESSEE IS THE INDIVIDUAL OWNER OF THE 3.125% UNDIVIDED SHARE IN T HE RESIDENTIAL BUILDING WITH 3.85 ACRES OF LAND APPURT ENANT THERETO. FURTHER THE ENTIRE ASSET ALWAYS REMAINED I N THE NOMENCLATURE OF RESIDENTIAL BUILDING ALONG WITH LAN D APPURTENANT THERETO AS ENVISAGED IN THE ACT. THUS T HE CONDITIONS PRESCRIBED TO CLAIM THE BENEFIT UNDER SE CTION 54 OF ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 25 THE ACT WITH RESPECT TO OWNERSHIP OF THE ASSET AND THE ASSET TO BE A RESIDENTIAL BUILDING WITH LAND APPURTENANT THERETO IS FULFILLED. THEREFORE BOTH THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED NEEDLESS TO MENTION THAT THE ASSESSEE W ILL BE ENTITLED TO CLAIM THE BENEFIT U/S 54 OF THE ACT SUB JECT TO COMPLIANCE OF ALL OTHER CONDITIONS PRESCRIBED UNDER THE ACT. ITA NO.2378/AHD/2010(REVENUES APPEAL) 8. THE REVENUE IN ITS APPEAL IN HAS TAKEN THE FOLLO WING GROUNDS: 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN HOL DING THAT THE LAND TRANSFERRED IS LAND APPURTENANT TO BUILDING AS AGAINST THE FINDING OF A. O. THAT IT IS A DISTINCT & INDEPENDENT. 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT IT IS ONLY A LAND AREAS AND NOT A RESIDENTIAL PROPERTY BECAUSE THE LAND COMPRISE OF 93.2% OF VACANT LAND AND ONLY 6.8% IS THE BUILDING AREA AND THE PURCHASER HAS PURCHASED THE PROPERTY ONLY TO EXPLOIT THE LAND FOR COMMERCIAL USE AND NOT TO USE THE BUILDING ON THE LAND. 3. THE LD. CIT(A) HAS ERRED IN GIVING A FINDING THA T THE PROPERTY SOLD IS A RESIDENTIAL PROPERTY WITH ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 26 APPURTENANT LAND, WHICH IS CONTRARY TO HIS OWN FINDING IN THE ORDER, THAT THE PROPERTY IS A COMMERCIAL ONE, WHICH IS TRANSFERRED BY THE ASSESSEE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 9. WHILE ADJUDICATING THE APPEAL OF THE ASSESSEE A LL THE GROUNDS RAISED BY THE REVENUE ARE CONSIDERED AND DE CIDED AGAINST THE REVENUE. THEREFORE THE APPEAL OF THE RE VENUE IS DISMISSED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08-06-2012 SD/- SD/- (D. K. TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD ITA NO.2192 & 2378/AHD./2010 (AY: 2007-08) SMT. KALPANABEN M. BHATT 27 6. GUARD FILE BY ORDER DY. REG ISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR.P.S ./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: