Dr.Ramakrishna Easwaran, Trichy V. DCIT, Trichy

ITA 2472/CHNY/2007

• Counselvise Citation: 247221714 RSA 2007
• Duration Of Justice: 5 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-07-2013
• Assessment Year: 2000-2001
• Appeal Filed On: 29-11-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETEGIRI
• Assessee Lawyers: S SRIDHAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH CHENN AI BEFORE SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER .. ITA NOS.2472,2473 & 2474/MDS./2007 ASSESSMENT YEARS:2000-01,2001-02 & 2004-05 DR.RAMAKRISHNA EASWARAN, 95-E,T.V.K.NAGAR,PUTHUR, TIRUCHIRAPALLI 620 017. VS. THE DEPUTY COMMISSIONER OF INCOME- TAX, RANGE-III, TIRUCHIRAPALLI. PAN AAGPR 0437 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.SRIDHAR, ADVOCATE RESPONDENT BY : SHRI T N BETEGIRI, JCIT D.R. DATE OF HEARING : 31.07.13 DATE OF PRONOUNCEMENT : 14.08 .13 O R D E R PER ABRAHAM P GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEARS IN WHICH HE ASSAILS DENIAL OF HIS CLAIM FOR INTEREST ON HOUSE PROPERTY. ITA. 2472 TO 2474 /MDS/07 DR.RAMAKRISHNA EASWARAN 2 2. BRIEF FACTS AS CULLED OUT FROM THE ASSESSMENT O RDER AND CIT(A) ORDER ARE THAT WIFE OF THE ASSESSEE MRS.RADH A ALIA PARVATHY HAD ACQUIRED A VACANT PLOT OF LAND BEARIN G NO.95E T.V.K.NAGAR, PUTHUR, TIRUCHIRAPALLI AT A COST OF ` 3,52,300/- IN FINANCIAL YEAR 1995-96. A HOUSE WAS CONSTRUCTED IN THE PLOT. FOR THE CONSTRUCTION OF SUCH HOUSE, DURING FINANCIAL YE AR 1998-99 SHE SPENT ` 2,09,200/- AND IN FINANCIAL YEAR 1999-2000, SHE SP ENT ` 1,56,100/-. THERE WAS AN AGREEMENT ENTERED BY THE ASSESSEE WITH HIS WIFE ON 3 RD JUNE 1998, ACCORDING TO WHICH, THE TOTAL CONSTRUCTION COST FOR THE HOUSE WAS ESTIMATED AT ` 13 LAKHS. THIS WAS APART FROM THE LAND COST OF ` 3,52,300/-. AS PER THE SAID AGREEMENT, ASSESSEE WAS TO BEAR ` 6 LAKHS OUT OF THE TOTAL CONSTRUCTION COST, WHEREAS ASSESSEES WIFE WAS TO B EAR THE BALANCE COST. FOR THE PURPOSE OF MAKING HIS INVEST MENT IN THE CONSTRUCTION OF THE HOUSE, ASSESSEE HAD TAKEN A LOA N OF ` 5 LAKHS FROM HDFC BANK WHEREAS THE BALANCE SUM OF ` 1 LAKH WAS RAISED FROM HIS OWN SOURCES. CLAIM OF ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT HE WAS THE CO-OWNER OF THE HOUSE HAVING 35% SHARE THEREIN, AS MENTIONED IN THE AGREE MENT ENTERED BY HIM WITH HIS WIFE ON 3 RD JUNE, 1998. IN THE COMPUTATION OF INCOME, ASSESSEE HAD CLAIMED INTERES T PAID TO ITA. 2472 TO 2474 /MDS/07 DR.RAMAKRISHNA EASWARAN 3 HDFC BANK AS AN EXPENSE UNDER THE HEAD INCOME FROM HOUSE PROPERTY, RESULTING IN A LOSS UNDER THAT HEAD. AS SESSING OFFICER NOTED THAT THE AGREEMENT DATED 03.06.1998 ENTERED B Y THE ASSESSEE WITH HIS WIFE, MENTIONED ASSESSEES WIFE AS THE OWNER OF THE PROPERTY. ASSESSING OFFICER ALSO FOUND FROM THE PURCHASE DEED THAT THE PLOT WAS PURCHASED EXCLUSIVELY IN HER NAME. HENCE, ACCORDING TO THE ASSESSING OFFICER, ASSESSEE HAD ONLY LENT FUNDS OF ` 6 LAKHS TO HIS WIFE AND WAS NOT A CO-OWNER OF THE PROPERTY. AS PER THE ASSESSING OFFICER, ASSESSEE H AD NOT PRODUCED ANY DOCUMENT, OR EXTRACT OF MUNICIPAL REC ORDS WHICH WOULD SHOW THAT HE HAD ANY SHARE IN THE PROPERTY. THEREFORE, HE WAS OF THE OPINION THAT ASSESSEE WAS NOT ENTITLED T O CLAIM INTEREST ON THE LOAN TAKEN FROM HDFC BANK UNDER THE HEAD IN COME FROM HOUSE PROPERTY. SUCH CLAIMS WERE DISALLOWED FOR A LL THE THREE YEARS. 3. ASSESSEE MOVED IN APPEALS BEFORE THE CIT(A). C ONTENTION OF THE ASSESSEE WAS THAT M/S.HDFC BANK HAD GIVEN TH E LOAN TO THE ASSESSEE FOR CONSTRUCTION OF HOUSE AND NOT FOR GIVING ANY FURTHER LOAN TO HIS WIFE. AS PER THE ASSESSEE, HDFC BANK HAD SANCTIONED THE LOAN IN THE JOINT NAME OF ASSESSEE A ND HIS WIFE. THUS, ACCORDING TO HIM, HE WAS ENTITLED TO CLAIM IN TEREST PAID OF ` 5 LAKHS BORROWED FROM HDFC BANK UNDER THE HEAD IN COME FROM ITA. 2472 TO 2474 /MDS/07 DR.RAMAKRISHNA EASWARAN 4 HOUSE PROPERTY. HOWEVER, THE CIT(A) WAS NOT IMPRE SSED. ACCORDING TO HIM, BY BORROWING ` 5 LAKHS FROM HDFC BANK , ASSESSEE WAS ONLY HELPING HIS WIFE IN THE CONSTRUCT ION OF THE HOUSE AND THIS DID NOT MAKE HIM A CO-OWNER OF THE P ROPERTY. AMOUNT ADVANCED BY THE ASSESSEE TO HIS WIFE COULD O NLY BE TREATED AS LOAN. FURTHER, AS PER LD. CIT(A), SHARE OF THE ASSESSEE IN THE LAND OR IN THE BUILDING WAS NEITHER DEFINITE NOR ASCERTAINABLE. ACCORDING TO HIM, ASSESSEE COULD NO T BE TREATED AS A CO-OWNER OF THE PROPERTY AS PROVIDED UNDER SEC TION 26 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). HE WAS THEREFORE OF THE OPINION THAT ASSESSING OFFICER WAS JUSTIFIED IN DEN YING THE CLAIM. 4. NOW BEFORE US, LD. A.R STRONGLY ASSAILING THE O RDERS OF THE AUTHORITIES BELOW, SUBMITTED THAT THE AGREEMENT ENT ERED WITH HIS WIFE ON 3 RD JUNE, 1998 PLACED AT PAGE 26 TO 28 OF PAPER BOOK MENTIONED THE RESPECTIVE SHARES OF THE PARTIES IN T HE PROPERTY. BOTH THE PARTIES WERE CO-OWNERS OF THE BUILDING AS PER THIS AGREEMENT. FURTHER AS PER LD. A.R, CONSTRUCTION CO ST OF ` 6 LAKHS WAS PAID BY THE ASSESSEE DIRECTLY TO THE CONTRACTOR AND THIS WAS DULY ACKNOWLEDGED BY THE CONTRACTOR AS WELL. LOWE R AUTHORITIES TOOK A PRESUMPTION THAT ASSESSEE HAD LOANED THE S UM OF ` 5 LAKHS TO HIS WIFE FOR MEETING THE CONSTRUCTION COST . IT WAS A JOINT EFFORT BY BOTH THE PERSONS, HUSBAND AND WIFE. MU NICIPAL RECORDS ITA. 2472 TO 2474 /MDS/07 DR.RAMAKRISHNA EASWARAN 5 WERE PRODUCED BEFORE THE CIT(A), BUT HE DID NOT ACC EPT IT. CIT(A) DID NOT GIVE DUE RECOGNITION TO THE LOAN APP LICATION AND LOAN AGREEMENT ENTERED BY THE ASSESSEE WITH HDFC BA NK. EVEN THE INTEREST CERTIFICATE ISSUED BY HDFC BANK WAS IN THE JOINT NAMES OF BOTH THE PERSONS. LD. CIT(A) FAILED TO REC OGNIZE THAT EVEN IF THE LAND WAS HELD BY ONE PERSON, BUILDING COULD BE OWNED BY ANOTHER OR JOINTLY. THERE WAS NO TRANSF ER OF THE BUILDING AT ALL. BUILDING WAS CONSTRUCTED JOINTLY AND OWNERSHIP OF THE BUILDING ALSO JOINT. HENCE AS PER THE LD. A.R, ASSESSEE WAS ENTITLED TO CLAIM INTEREST ON THE LOANED FROM HDFC BANK UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 5. PER CONTRA, LD. D.R SUBMITTED THAT SHARES OF AS SESSEE AND HIS WIFE WERE NOT DEFINITE AND ASCERTAINABLE TO TRE AT THEM AS CO- OWNERS. FURTHER, ACCORDING TO HIM, LAND WAS SOLEL Y OWNED BY ASSESSEES WIFE. SUBSTANTIAL PORTION OF THE CONSTR UCTION COST WAS ALSO MET BY HER. ASSESSEE HAD TAKEN A LOAN AND GI VEN IT TO HIS WIFE FOR HELPING HER IN THE CONSTRUCTION. THIS BY ITSELF WOULD NOT MAKE THE ASSESSEE A CO-OWNER. AGREEMENT ENTERED B Y THE ASSESSEE WITH HIS WIFE ON 3 RD JUNE, 1998 WAS A SELF SERVING ONE AND WOULD NOT CONVERT THE PROPERTY HELD BY ASSESSEE S WIFE TO A JOINT PROPERTY. THEREFORE, ACCORDING TO HIM, LOWER AUTHORITIES WERE ITA. 2472 TO 2474 /MDS/07 DR.RAMAKRISHNA EASWARAN 6 JUSTIFIED IN DENYING THE INTEREST CLAIM UNDER THE H EAD INCOME FROM HOUSE PROPERTY. 6. WE HAVE PERUSED THE ORDERS OF THE LOWER AUTHORI TIES AND HEARD THE RIVAL CONTENTIONS. THERE IS NO DISPUTE THAT THE LAND ON WHICH THE HOUSE WAS CONSTRUCTED WAS HELD IN THE NAM E OF ASSESSEES WIFE ALONE. AT THE SAME TIME, NONE OF T HE AUTHORITIES HAVE DOUBTED THE GENUINENESS OF THE AGREEMENT FOR C ONSTRUCTION ENTERED BY THE ASSESSEE WITH HIS WIFE ON 3 RD JUNE, 1998. RELEVANT PARTS OF THIS AGREEMENT APPEARING AT PAPER BOOK PAGES 26 TO 28 ARE REPRODUCED HEREUNDER:- AGREEMENT FOR CONSTRUCTION OF A HOUSE THIS DEED OF AGREEMENT EXECUTED ON 03RD DAY OF JUNE , 1998 BETWEEN SMT. RADHA, W/O. RAMAKRISHNA EASWARAN, RESIDING AT FLAT NO.G1,MADURAM APARTMENTS, BEHIND YMCA OFFICERS COLO NY, PUTHUR, TIRUCHIRAPALLI-17 (HEREINAFTER CALLED AS THE PARTY OF THE FIRST PART) AND SRI. R. RAMAKRLSHNA EASWARAN, SON OF EASWARAN, RESI DING AT FLAT NO.G1, MADURAM APARTMENTS, BEHIND YMCA OFFICERS COL ONY, PUTHUR, TIRUCHIRAPALLI-17 (HEREINAFTER CALLED THE AS THE PA RTY OF THE SECOND PART) THE TERMS 'PARTY OF THE FIRST PART' AND 'PARTY OF T HE SECOND PART' SHALL UNLESS REPUGNANT TO THE CONTEXT MEAN AND INCLUDE TH EIR RESPECTIVE HEIRS, LEGAL REPRESENTATIVES, EXECUTORS, ADMINISTRATORS AN D ASSIGNS. AND WHEREAS THE UNDERMENTIONED PROPERTY IS A VACANT SITE OWNED BY PARTY OF THE FIRST PART, AND ITS PRESENT MARKET VAL UE IS DETERMINED AS RA.3,50,000/- (RUPEES THREE LAKHS FIFTY THOUSAND ON LY). WHEREAS BOTH THE PARTIES TO THE FIRST PART AND SECO ND PART DESIROUS OF CONSTRUCTING A HOUSE ON THE UNDERMENTIONED VACAN T SITE. AND WHEREAS BOTH PARTIES HAVE MUTUALLY AGREED TO CONSTRUCT CONS ISTING OF GROUND FLOOR AND FIRST FLOOR. ITA. 2472 TO 2474 /MDS/07 DR.RAMAKRISHNA EASWARAN 7 AND WHEREAS BOTH PARTIES HAVE ESTIMATED THE ENTI RE CONSTRUCTION COST ALL A SUM OF RS.13,00,000/- EXCLUSIVE OF LAND COST OF RS.3,50,000/- - ALL AGGREGATING A SUM OF RS.16,50,000/- (RUPEES SIXTEEN LAKHS FIFTY THOUSAND ONLY) AND IT HAS BEEN SHARED BETWEEN BOTH PARTIES; IE., PARTY OF FIRST PARTY PAY SHALL PAY RS.7,00,000/- (EXCLUSIVE OF LAND COST OF RS.3,50,000/-) AND PARTY OF SECOND PART SHALL PAY RS.6,00,000/-. THE P ERCENTAGE OF SHARE MUTUALLY AGREED BY BOTH THE PARTIES TO THE FIRST PA RT AND SECOND PART SHALL AT 65% AND 35% RESPECTIVELY. CLAUSE 4 & 6 OF THIS AGREEMENT ARE ALSO PERTINENT. THESE ARE REPRODUCED HEREUNDER:- 4. BOTH PARTIES SHALL PAY THE CONSTRUCTION EXPENS ES AS INSTALMENT IN THE RESPECTIVE LEVELS. AND WE BOTH PA RTIES MUTUALLY AGREED THAT IT MAY PROCEED WITH CONSTRUCTION OF BUI LDING WITH THEIR OWN MONEY OR BY RAISING LOANS ETC. AND IF LOANS AVA ILED FROM BANKS OR FINANCIAL INSTITUTION BOTH PARTIES HELD RESPONSI BLE FOR THE LOAN AND THEY HAVE TO CLEAR THE LOAN WITH INTEREST WITHIN TH E STIPULATED PERIOD OF TIME. 6. BOTH PARTIES ARE THE CO-OWNERS OF THE BUILDING WITH THEIR RESPECTIVE SHARES MENTION ABOVE, AND THEY SHALL KEE P THEM IN THEIR JOINT POSSESSION AND ENJOYMENT. ONCE THE AUTHENTICITY OF THE AGREEMENT IS NOT DOUBT ED, RESULTS FLOWING THERE-FROM CANNOT BE BRUSHED ASIDE. 7. THAT THE ASSESSEE HAD RAISED LOANS OF ` 5 LAKHS FROM HDFC BANK IS ALSO NOT DISPUTED. A LOOK AT THE LOAN APPLICATION PLACED AT PAGES 12 & 13 OF PAPER BOOK WOULD CLEARLY SHOW THAT THE APPLICANT FOR THE LOAN WAS SHRI RAMAKRISHNA EAS WARAN, THE ASSESSEE, AND CO-APPLICANT WAS HIS WIFE MRS.PARVATH Y RAMAKRISHNA. LOAN SOUGHT IS CLEARLY MENTIONED AS H OME LOAN, ITA. 2472 TO 2474 /MDS/07 DR.RAMAKRISHNA EASWARAN 8 AND FOR MEETING THE CONSTRUCTION COST. A LOOK AT T HE LOAN AGREEMENT PLACED AT PAGES 14 TO 24 OF PAPER BOOK CL EARLY SHOW THAT THE LOAN WAS TO BE DISBURSED WITH REFERENCE T O THE PROGRESS OF CONSTRUCTION. IT IS ALSO MENTIONED AT ARTICLE-5 .1 OF THE VERY SAME AGREEMENT THAT THE ENTIRE LOAN WAS TO BE UTIL IZED FOR CONSTRUCTION OF THE PROPERTY AS INDICATED IN THE LO AN APPLICATION. IF WE READ THIS LOAN APPLICATION AND AGREEMENT, ALONG WITH THE AGREEMENT FOR CONSTRUCTION ENTERED BY THE ASSESSEE WITH HIS WIFE ON 3 RD JUNE, 1998, IT WOULD CLEARLY IMPLY THAT THE HOUSE WAS JOINTLY OWNED BY THE ASSESSEE ALONG WITH HIS WIFE. TAX RECEIPT ISSUED BY THE MUNICIPALITY PLACED AT PAGES 7 TO 11 OF PAPER BOOK, WERE ALSO IN THE JOINT NAMES OF ASSESSEE AND HIS WI FE. IN OUR OPINION, THIS IS NOT A CASE WHERE THERE HAS BEEN A TRANSFER OF A BUILDING. THIS IS A CASE WHERE THE BUILDING WAS JO INTLY CONSTRUCTED BY THE ASSESSEE AND HIS WIFE. 8. THAT PROPERTY CAN BELONG TO ONE PERSON AND STRU CTURE CAN BELONG TO ANOTHER IS TRITE LAW. HONBLE APEX COURT IN THE CASE OF CIT VS. PODAR CEMENT PVT LTD. IN 226 ITR 625 AND AL SO IN THE CASE OF MYSORE MINERALS LTD. VS. ITO IN 239 ITR 775 HAS ACCEPTED THIS POSITION. HONBLE KERALA HIGH COURT I N THE CASE OF CIT VS. PARTHAS TRUST IN 249 ITR 120 HAS REITERATE D THIS POSITION. JUST BECAUSE THE ASSESSEES WIFE WAS THE SOLE OWNE R OF THE LAND, ITA. 2472 TO 2474 /MDS/07 DR.RAMAKRISHNA EASWARAN 9 IT CANNOT BE PRESUMED THAT THE BUILDING WAS ALSO SO LELY OWNED BY HER. FACTS HERE SHOW THAT THE BUILDING WAS JOINTLY CONSTRUCTED. ASSESSEE HAS BEEN ABLE TO ESTABLISH CO-OWNERSHIP OF THE BUILDING. AS FOR THE DECISION OF HONBLE CALCUTTA H IGH COURT IN THE CASE OF CIT VS. HASINA BEGUM, IN 158 ITR 215 RELIE D ON BY LD. CIT(A), THE QUESTION THERE WAS WHETHER SOURCE OF I NVESTMENT SHOWN BY THE ASSESSEE AS LOAN TAKEN FROM HER HUSBAN D COULD BE BELIEVED. IT WAS NOT A CASE WHERE THE CLAIM OF ASS ESSEE WAS THAT SHE WAS JOINT OWNER ALONG WITH HER HUSBAND. THIS C ASE, IN OUR OPINION, HAS NO RELEVANCE HERE. 9. ONCE ASSESSEE IS CONSIDERED AS CO-OWNER OF BUI LDING, SEC.26 WILL DEFINITELY COME TO HIS AID. THE SAID SE CTION IS REPRODUCED HEREUNDER:- PROPERTY OWNED BY CO-OWNERS. 26. WHERE PROPERTY CONSISTING OF BUILDINGS OR BUILDINGS AND LANDS APPURTENANT THERETO IS OWNED BY TWO OR MORE PERSONS AND THEIR RESPECTIVE SHARES ARE DEFINITE AND ASCERTAINABLE, SUCH PERSONS SHALL NOT IN RESPECT OF SUCH PROPERTY BE ASSESSED AS AN ASSOCIATION OF PER SONS, BUT THE SHARE OF EACH SUCH PERSON IN THE INCOME FROM THE PROPERTY AS COMPUTED IN ACCORDANCE WITH SECTIONS 22 TO 25 SHALL BE INCLUDED IN HIS TOTAL INCOME . CO-OWNERSHIP, THUS CAN BE EITHER FOR A BUILDING ALO NE OR, BUILDING AND LAND APPURTENANT THERETO. ONCE ASSESSEE IS A C O-OWNER, HE ITA. 2472 TO 2474 /MDS/07 DR.RAMAKRISHNA EASWARAN 10 HAS EVERY RIGHT TO COMPUTE HIS INCOME FROM HOUSE PR OPERTY IN ACCORDANCE WITH SECTIONS 22 TO 25 OF THE ACT. IN SUCH CIRCUMSTANCES, ASSESSEES CLAIM UNDER SECTION 24 OF THE ACT FOR INTEREST PAID ON THE LOAN TAKEN FROM HDFC BANK COU LD NOT HAVE BEEN DENIED. WE ARE OF THE OPINION THAT THE ASSESS EE WAS ENTITLED TO CLAIM SUCH INTEREST. WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DIRECT THE ASSESSING OFFICER TO ALLOW SUCH INTEREST CLAIM IN THE RESPECTIVE ASSESSMENT YEARS. 10. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALL OWED. ORDER PRONOUNCED ON WEDNESDAY, THE 14 TH AUGUST, 2013 AT CHENNAI. SD/- SD/- (S.S.GODARA) (ABRAHAM P GEORGE) JUDICIAL MEMBER ACC OUNTANT MEMBER CHENNAI, DATED 14 TH AUGUST, 2013 . K S SUNDARAM COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE ITA. 2472 TO 2474 /MDS/07 DR.RAMAKRISHNA EASWARAN 11