LATE SHRI HIMMATLAL H.DADIA (THROUGH LEGAL HEIR JITEN H DADIA), MUMBAI V. JCIT, RANGE 13(3), MUMBAI

ITA 2532/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84098 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2014
• Appeal Filed By: Assessee
• Bench Allotted: H
• Next Hearing Date: 01-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2013
• Court: TRIBUNAL
• Keywords: Capital asset; Opportunity of being heard; Surrender of tenancy right
• Section: 54F; 14A; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO. 2532/M/2013 ( AY: 2009 - 2010 ) LATE SHRI HIMMATLAL H.DADIA ( THROUGH LEGAL HEIR JITEN H. DADIA ), 304, SUJATHA CHAMBERS, 1/3, A.G. MARG, OFF. NARSI NATHA STREET, MASID BUNDER, MUMBAI - 400 009. / VS. JCIT, RANGE 13(3), MUMBAI. ./ PAN: AACPD 1484 B ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIJAY MEHTA / RESPONDENT BY : SHRI JITENDRA KUMAR, DR / DATE OF HEARING : 16.10.2014 / DATE OF PRONOUNCEMENT : 12 .11.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT (A) - 24, MUMBAI DATED 4.1.2013 FOR THE ASSESSMENT YEAR 2009 - 2010. 2. IN THIS APPEAL, ASSESSEE RAISED 8 GROUNDS IN TOTO. GROUND NOS.1, 6 AND 7 ARE GENERAL IN NATUR E AND THEREFORE, THEY ARE NOT PRESSED. ACCORDINGLY, THE SAID GROUNDS ARE DISMISSED AS NOT PRESSED. IN CONNECTION WITH GROUND NO.3, 4 & 5, IT IS THE SUBMISSION OF THE LD COUNSEL FOR THE ASSESSEE THAT THESE WERE NOT ONLY FAILED TO RAISE THE RELEVANT ISSUES DURING THE ASSESSMENT PROCEEDINGS BUT ALSO, WHEN RAISED BEFORE THE CIT (A) THE SAME WERE NOT REMANDED TO THE AO BEFORE THE ISSUES WERE ADJUDICATED. AFTER HEARING THE LD COUNSELS FOR BOTH THE PARTIES, WE FIND THAT GROUND NO.3 - RELATING TO DISALLOWAN CE OF R S. 49,325/ - , GROUND NO.4 - RELATING TO THE DISALLOWANCE OF RS. 1,23,750/ - AND GROUND NO.5 - RELATING TO THE INVOKING OF THE PROVISIONS OF SECTION 14A OF THE ACT , HAVE TO BE REMANDED TO THE FILE OF THE AO FOR 2 FRESH CONSIDERATION AND ADJUDICATION AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NOS.3,4 AND 5 ARE ALLOWED FOR STATISTICAL PURPOSES. THUS, ONLY GROUND NO.2 IS LEFT FOR ADJUDICATION AND THE SAME READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW AND WITHOUT PREJUDICE TO OUR ABOVE STAND, LD CIT (A) HAS NOT APPRECIATED THAT THE AO HAD ERRED IN ASSESSING SURRENDER OF TENANCY RIGHT UNDER SECTION 54 OF THE ACT. THE SAME IS A CAPITAL ASSET THAT ENTAILS A RIGHT OF USE OF THE PROPERTY AND APPELLANT IS NOT THE OWNER OF THE PROPERTY. THE RIGHT TO USE THE PROPERTY BEING AN INTANGIBLE RIGHT, WOULD BE CORRECTLY COVERED UNDER SECTION 54F OF THE ACT. 3. IN CONNECTION WITH THE ABOVE GROUND, LD COUNSEL FROM THE ASSESSEE OWNS TENANCY RIGHTS IN RE SPECT OF A PROPERTY. THE SAID RIGHT WERE SURRENDERED TO THE DEVELOPER . ASSESSEE DID NOT RECEIVE ANY SALE CONSIDERATION FOR THE SURRENDER OF THE SAID TENANCY RIGHTS. DURING THE ASSESSMENT PROCEEDINGS, AO CONCLUDED THAT THE SAID TENANCY RIGHTS CONSTITUTE O WNING A RESIDENTIAL HOUSE. ACCORDINGLY, HE REJECTED THE CLAIM OF DEDUCTION OF THE ASSESSEE U/S 54F OF THE ACT. AO ALSO NOT GRANTED THE BENEFIT OF DEDUCTION U/S 54 OF THE ACT AS WELL. CONTENTS OF PARA 4 AND 5 OF THE ASSESSMENT ORDER ARE RELEVANT IN THIS REGARD. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) CONCURRED WITH THE VIEWS OF THE AO. THE CONTENTS OF PA RA 4.3.2 ARE RELEVANT IN THIS REGARD AND THE SAME READS AS UNDER: 4.3.2. SECOND GROUND OF APPEAL TAKEN BY THE ASSESSEE ALSO RELATES TO TAXABILITY OF CAPITAL GAINS AND ALLOWABILITY OF DEDUCTION U/S 54 AND/OR 54F OF I.T. ACT, 1961 IN RESPECT OF THE SURREND ER OF TENANCY RIGHTS IN A RESIDENTIAL BUILDING IN THE FLAT IN SANTACRUZ, MUMBAI AND IS DISCUSSED IN THIS PARAGRAPHS SINCE, THE FACTS FOR CONSIDERATION ARE THE SAME. IT HAS BEEN SUBMITTED IN GROUNDS OF APPEAL THAT ASSESSING OFFICER ERRED IN ASSESSING SURRE NDER OF TENANCY RIGHTS U/S 54 OF THE I.T. ACT, 1961 AND THE RIGHT TO USE RESIDENTIAL HOUSE, INTANGIBLE ASSET, WOULD BE COVERED UNDER SECTION 54F OF THE I.T. ACT, 1961. CAPITAL GAINS ON SURRENDER OF TENANCY RIGHTS ARE TAXED UNDER SECTION 45 OF THE I.T. ACT, 1961 AND SECTION 54 AND 54F OF THE I.T. ACT, 1961 ARE THE SECTIONS GRANTING DEDUCTIONS UNDER CHAPTER IV OF I.T. ACT, 1961. MOREOVER, THE SURRENDER OF TENANCY RIGHTS IN A RESIDENTIAL BUILDING ALSO CARRY THE CHARACTER OF A RESIDENTIAL UNIT ONLY AND CANNOT BE EQUATED WITH INTANGIBLE RIGHT.. 5. THUS, IT IS THE VIEW OF THE CIT (A) THAT THE TENANCY RIGHTS IN RESPECT OF BUILDING CARRY THE CHARACTER OF RESIDENTIAL UNIT AND THE SAME IS NOT AN INTANGIBLE RIGHT. 3 6. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL F OR THE ASSESSEE BROUGHT OUR ATTENTION TO THE FACTS OF THE PRESENT CASE AND ARGUED THAT THE TENANCY RIG HT IS ENTIRELY DIFFERENT FROM THAT OF THE RIGHT OF OWNERSHIP OF A RESIDENTIAL UNIT. LD COUNSEL FURTHER, MENTIONED THAT W HILE THE RESIDENTIAL UNIT IS COVERED BY THE PROVISIONS OF SECTION 54 OF THE ACT, THE RIGHTS, SUCH AS TENANCY RIGHTS, ARE COVERED BY THE PROVISIO NS OF SECTION 54F OF THE ACT AS THE TENANCY RIGHTS ARE DISTINCTLY DIFFERENT FROM THAT OF THE OWNERSHIP OF A RESIDENTIAL HOUSE. 7. ON THE OTH ER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON HEARING BOTH THE PARTIES, W E FIND MERIT IN THE ARGUME NTS OF THE LD COUNSEL. IT IS NOT UNDERSTANDABLE AS TO HOW THE TENANCY RIGHT, WHICH IS DIFFERENT TYPE OF CAPITAL RIGHT, COVERED U/S 55(2) OF THE ACT AND CAN BE TREATED ON PAR WITH THE OWNERSHIP RIGHT OF A RESIDENTIAL HOUSE. TENANCY RIGHT IS ONE OF SUCH CAP ITAL RIGHTS ATTACHED TO THE RESIDENTIAL HOUSE. THEREFORE, WE ARE OF THE OPINION THAT THE CIT (A) ERRED IN EQUATING THE TENANCY RIGHTS WITH THAT OF A RIGHT OF OWNERSHIP OF A RESIDENTIAL HOUSE. SUBJECT TO THE FULFILLMENT OF OTHER CONDITIONS, IN OUR OPINION , ASSESSEES CASE IS COVERED BY THE PROVISIONS OF SECTION 54F OF THE ACT AND THE AO IS DIRECTED TO GRANT RELIEF ACCORDINGLY AND IN ACCORDANCE WITH LAW. ACCORDINGLY, GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE I S PARTLY ALLOWED. ORDER PRONO UNCED IN THE OPEN COURT ON 1 2 T H NOVEMBER, 2014. S D / - S D / - ( VIJAY PAL RAO ) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 1 2 /11/2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 4 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI