Asst. Commissioner of Income Tax, Circle-8(1), Hyderabad V. Sri Velupuri Rama Rao, Hyderabad

ITA 26/HYD/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2681 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 06-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURESH BABU
• Keywords: Capital asset; Search and seizure; Question of law
• Section: 143(3); 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 26/HYD/2014 ASSESSMENT YEAR: 2009-10 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-8(1), HYDERABAD VS SRI VELUPURI RAMA RAO, HYDERABAD [PAN: ABVPV0506A] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI SURESH BABU, DR FOR ASSESSEE : SHRI G.V.N. HARI, AR DATE OF HEARING : 22-01-2018 DATE OF PRONOUNCEMENT : 25-01-2018 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, HYDERABAD , DATED 14-10-2013 FOR THE AY. 2009-10. THE GROUNDS RAISED BY ASSESSEE ARE AS UNDER: 1. THE CIT (A) ERRED ON FACTS AND IN LAW. 2. WHETHER THE CIT(A) IS CORRECT IN ALLOWING EXPENS ES TOWARDS UNVERIFIABLE EXPENDITURE TOWARDS FILLING WITH STONES AND SAND, D EMOLITION OF EXISTING BUILDING, EVICTION OF FAMILY RESIDING THEREIN, CONS TRUCTION RETAINING WALL AND BOUNDARY WALL WHICH WERE NOT SUBSTANTIATED BY T HE ASSESSE ON THE GROUND THAT THE AO HAS ALLOWED THE EXPENDITURE WHIC H ARE LEGAL IN NATURE. I.T.A. NO. 26/HYD/2014 :- 2 - : 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) IS CORRECT IN HOLDING THAT EXEMPTION U/S 54 IS TO BE ALLOWED E VEN WHEN THE NEW PROPERTY PURCHASED BY THE ASSESSE IN JOINT NAME. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT (A) IS CORRECT IN HOLDING THAT A ONE-TO-ONE CORRESPONDENCE BETWEEN THE MONEY RECEIVED FROM THE SALE OF ASSETS AND THE MONEY GIVE N FOR THE PURCHASE EOF A NEW HOUSE IS NOT ESSENTIAL PARTICULARLY WHEN THE ASSESSE FALLS INTO THE CATEGORY OF 'CONSTRUCTION OF RESIDENTIAL HOUSE' . 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 2. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM CAPITAL GAINS AND INCOME FROM OTHER SOURCES. HE HAS FILED HIS RETURN OF INCOME FOR THE AY. 2009-10 ON 19-12-2009, D ECLARING TOTAL INCOME OF RS. 2,35,54,589/-. THE ASSESSING OFFI CER (AO) COMPLETED THE ASSESSMENT ON 08-12-2011 U/S. 143(3) OF THE INCOME TAX ACT [ACT], DETERMINED TOTAL INCOME AT RS.3,88 ,03,095/-. WHILE DOING SO, AO DID NOT ALLOW THE SET-OFF OF THE LOSSES WHICH LD.CIT(A) CONFIRMED AND ASSESSEE HAS ACCEPTED. IN TH E COMPUTATION OF CAPITAL GAINS, AO DID NOT ALLOW COST OF IMPROVEMENTS TO AN EXTENT OF RS. 19,56,000/- AND RESTRI CTED THE CLAIM U/S. 54 TO AN EXTENT OF RS. 31,74,400/- AS AGA INST THE CLAIM OF RS. 1,02,06,143/-. AO WAS OF THE OPINION THAT ONLY AN AMOUNT OF RS. 83,48,800/- WAS PROVED ON VERIFICATION AND OU T OF THAT, AN AMOUNT OF RS. 20,00,000/- WAS PAID PRIOR TO SALE OF TH E PROPERTY AND INVESTMENT WAS MADE IN WIFE NAME ALSO, SO RESTRICTE D TO HALF SHARE OF HUSBAND. 3. ON APPEAL, LD.CIT(A) HAS ACCEPTED THE DETAILED CON TENTIONS OF ASSESSEE. I.T.A. NO. 26/HYD/2014 :- 3 - : A) ON THE ISSUE OF COST OF IMPROVEMENTS, HIS FINDINGS ARE AS UNDER: 5.2 DURING APPEAL PROCEEDINGS THE APPELLANT ARGUED THAT ALL THE EXPENSES HAD BEEN DULY EXPLAINED TO THE ASSESSING OFFICER AN D HAD BEEN INCURRED FOR THE PURPOSES OF IMPROVEMENTS TO BE MADE TO THE PROPERTY. THEY WERE ALLOWABLE UNDER THE INCOME TAX ACT AND THAT THE ASS ESSING OFFICER HAD NOT PROVIDED ANY DETAILS OR REASONS AS TO WHY THE REST OF THE EXPENSES WERE BEING DISALLOWED. 5.3 I HAVE SEEN CAREFULLY THE FACTS AND EVIDENCE AN D I FIND THAT THE ASSESSING OFFICER HAS NOT PROVIDED ANY COGENT REASO N FOR DISALLOWING THE BALANCE EXPENSES. IF THE ASSESSING OFFICER WAS NOT SATISFIED ABOUT THE QUALITY OF EVIDENCE, THEN THE ENTIRE EXPENSES SHOUL D HAVE BEEN DISALLOWED. HOWEVER, IT APPEARS THAT THE ASSESSING OFFICER WAS SATISFIED WITH THE SAME EVIDENCE VIS-A-VIS SOME EXPENSES AND NOT FOR THE OTHER. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE EXPE NSE IN QUESTION WERE NOT INCURRED OR THAT THE CLAIM OF EXPENSES MADE WAS BOG US. IF SUCH IS NOT THE CASE, THEN DISALLOWANCE CANNOT BE MADE WITHOUT ASSI GNING ANY REASON WHATSOEVER. IN VIEW OF THE ABOVE FACTS AND CIRCUMST ANCES, I HOLD THAT THE EXPENSES ON IMPROVEMENT ARE TO BE ALLOWED TO THE AP PELLANT. THIS GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE APPELLANT. B) ON THE DISALLOWANCE OF CLAIM U/S. 54, HIS FINDIN GS ARE AS UNDER: 6.2 I HAVE SEEN CAREFULLY THE FACTS AND EVIDENCE. I HAVE ALSO SEEN THE ASSESSMENT FILE AND THE ASSESSMENT ORDER FOR TH E SAME ASSESSMENT YEAR PERTAINING TO THE APPELLANT'S WIFE MRS ANURADH A VELPURI. ALTHOUGH, SHE HAS SUBSTANTIAL SOURCES OF HER OWN, SHE HAS NOT MADE THE CLAIM OF THE AFOREMENTIONED DEDUCTION IN HER RETURN OF INCOME. T HE ASSESSING OFFICER HAS ALSO NOT DISPUTED THE FACT THAT THE ORIGINAL PR OPERTY IN QUESTION BELONGED TO THE APPELLANT AND THE INVESTMENT IN THE NEW PROPERTY WAS MADE ENTIRELY OUT OF THE SALE PROCEEDS OF THE ORIGI NAL CAPITAL ASSET BELONGING ONLY TO THE APPELLANT. UNDER THESE CIRCUM STANCES, IT IS CLEAR THAT THE NAME OF THE APPELLANT'S WIFE WAS ONLY ADDED BY THE APPELLANT NOT BECAUSE SHE HAD INVESTED HALF THE MONEY BUT FOR OTH ER REASONS. IN THIS REGARD THE HONOURABLE HIGH COURT OF DELHI IN THE CA SE OF COMMISSIONER OF INCOME TAX VERSUS KAMAL WAHAL (2013) 30 TAXMAN 34 H AS HELD THAT IT IS NOT ESSENTIAL FOR THE PURPOSES OF CLAIMING OF DEDUC TION U/S 54F THAT THE NEW RESIDENTIAL HOUSE SHOULD BE PURCHASED BY THE AS SESSEE IN HIS OWN EXCLUSIVE NAME. IT IS OKAY IF THE NAME OF HIS WIFE IS ADDED AS LONG AS THE ENTIRE INVESTMENT HAD COME OUT OF THE PROCEEDS OF T HE SALE OF OLD PROPERTY HELD EXCLUSIVELY IN THE NAME OF THE APPELLANT. I.T.A. NO. 26/HYD/2014 :- 4 - : 6.3 IN THE CURRENT CASE, THESE FACTS APPLY SQUARELY TO THE APPELLANT. ACCORDINGLY, RESPECTFULLY FOLLOWING THE ORDERS OF T HE HONOURABLE HIGH COURT REFERRED TO SUPRA, I HOLD THAT THE ASSESSING OFFICE R IS NOT CORRECT IN DENYING 50% OF THE ELIGIBLE DEDUCTION. WITH REGARD TO THE A MOUNT OF RS. 20 LAKHS, IT HAS BEEN CONSISTENTLY HELD BY THE COURTS THAT A ONE -TO-ONE CORRESPONDENCE BETWEEN THE MONEY RECEIVED FROM THE SALE OF ASSETS AND THE MONEY GIVEN FOR THE PURCHASE OF A NEW HOUSE IS NOT ESSENTIAL. T HE FACT REMAINS THAT THE PURCHASE OF THE NEW RESIDENTIAL HOUSE CORRESPONDS T O THE SALE OF THE OLD ASSET. THEREFORE THE AMOUNT OF RS. 20 LAKHS IS NOT TO BE DISALLOWED. THIS GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE APPELL ANT. REVENUE IS AGGRIEVED. 4. AFTER HEARING THE PARTIES AND PERUSAL OF THE DOCUM ENTS ON RECORD, WE DO NOT FIND ANY REASON TO INTERFERE WITH TH E ORDER OF LD.CIT(A). AS FAR AS THE COST OF IMPROVEMENTS ARE CO NCERNED, THE SAME ARE FACTUAL AND REVENUE HAS NOT BROUGHT ANYTHING ON RECORD TO DIFFER FROM THE FINDINGS ON THE ISSUE. THUS, THER E IS NO MERIT IN REVENUES GROUND. 4.1. AS FAR AS THE PAYMENT OF RS. 20,00,000/- IS CONC ERNED, EVENTHOUGH THE ADVANCE WAS PAID EARLIER, THE PROPERTY WAS REGISTERED AFTER THE DATE OF SALE ON WHICH CAPITAL GAIN WAS OFFERED. ON THAT FACT, THE CONTENTION OF REVENUE FAILS. MOREOVER , THERE IS NO NEED TO HAVE ONE TO ONE CORRELATION OF THE MONEY SO LO NG AS THE NET CONSIDERATION WAS INVESTED IN THE NEW ASSET. EVEN THE DATE OF COMMENCEMENT IS NOT MATERIAL. THE CO-ORDINATE BENCH IN THE CASE OF DCIT VS. DR. CHALASANI MALLIKARJUNA RAO, IN ITA NO. 206/VIZAG/2013, DT. 21-10-2016 HAS EXAMINED THE SAME, BASED ON VARIOUS PRINCIPLES LAID DOWN BY THE HON'BLE HIGH COURTS AND HELD AS UNDER: 10. WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE FOR THE REASON THAT THE ACT DOES NOT PRESCRIBE ANY CONDITION AS TO THE DATE OF I.T.A. NO. 26/HYD/2014 :- 5 - : COMMENCEMENT OF CONSTRUCTION OF NEW HOUSE PROPERTY. THE ONLY CONDITION IS THAT CONSTRUCTION OF THE HOUSE PROPERTY SHOULD B E COMPLETED WITHIN 3 YEARS FROM THE DATE OF TRANSFER. THE DATE OF COMMEN CEMENT OF CONSTRUCTION IS IRRELEVANT AND THE CONSTRUCTION MAY BE COMMENCED EVEN BEFORE THE TRANSFER OF ASSET AS HELD BY THE HON'BLE HIGH COURT OF DELHI, IN THE CASE OF CIT VS. BHARATHI MISHRA (2014) 222 TAXMAN 2. A SIMI LAR VIEW WAS EXPRESSED BY THE HON'BLE HIGH COURT OF KARNATAKA, I N THE CASE OF CIT VS. J.R.SUBRAHMANYA BHAT (1987) 165 ITR 571, WHICH WAS IN TURN FOLLOWED BY THE HON'BLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. H.K. KAPOOR (1998) 234 ITR 753. THEREFORE, WE ARE OF THE CONSID ERED VIEW THAT THE ASSESSEE IS ELIGIBLE TO CLAIM EXEMPTION U/S 54 OF T HE ACT, EVEN THOUGH THE CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE WAS COMME NCED PRIOR TO THE DATE OF TRANSFER OF ORIGINAL ASSET. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE FACTS AVAILABLE ON RECORD, WE FIND THAT THE ASSESSEE HAS COMMENCED CONSTRUCTION OF NEW HOUSE PROPERTY IN THE MONTH OF NOVEMBER, 2004 AND COMPLETED CONSTRUCTION IN THE MONTH OF MARCH, 2007. THE TRANSFER OF ASSET HAS BEEN TAKEN PLACE IN THE MONTH OF JANUARY, 2007. THE CONSTRUCTION OF NEW HOUSE PROPERTY HAS BEEN COMPLETED WITHIN 3 YEAR S FROM THE DATE OF TRANSFER OF ASSET. THEREFORE, THE ASSESSEE IS ELIGI BLE FOR EXEMPTION U/S 54 OF THE ACT. 4.2. ON THE ISSUE OF PURCHASE IN THE NAME OF WIFE, THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KAMAL WAHAL [351 ITR 0004] HAS DECIDED THE ISSUE BY STATING AS UNDER: HELD: IN THE CASE OF CIT VS. RAVINDER KUMAR ARORA (2012) 342 ITR 38 (DEL.) IT WAS HELD THAT THE ENTIRE PURCHASE CONSIDERATION WAS PAID ONLY BY THE ASSESSEE AND NOT A SINGLE PENNY WAS CONTRIBUTED BY THE ASSESSEE'S WIFE. IT ALSO NOTED THAT A PURPOSIVE CONSTRUCTION IS TO B E PREFERRED AS AGAINST A LITERAL CONSTRUCTION, MORE SO WHEN EVEN APPLYING T HE LITERAL CONSTRUCTION, THERE IS NOTHING IN THE SECTION TO SHOW THAT THE HO USE SHOULD BE PURCHASED IN THE NAME OF THE ASSESSEE ONLY. AS A MATTER OF FA CT, SECTION 54F IN TERMS DOES NOT REQUIRE THAT THE NEW RESIDENTIAL PROPERTY SHALL BE PURCHASED IN THE NAME OF THE ASSESSEE; IT MERELY SAYS THAT THE A SSESSEE SHOULD HAVE PURCHASED/CONSTRUCTED 'A RESIDENTIAL HOUSE'. IN VIEW OF THE ABOVE DECISION IT WAS HELD THAT FOR THE PURPOSES OF SECTION 54F, THE NEW RESIDENTIAL HOUSE NEED NOT BE PURCHASE D BY THE ASSESSEE IN HIS OWN NAME NOR IS IT NECESSARY THAT IT SHOULD BE PURCHASED EXCLUSIVELY IN HIS NAME. THE ASSESSEE IN THE PRESENT CASE HAD N OT PURCHASED THE NEW HOUSE IN THE NAME OF A STRANGER OR SOMEBODY WHO WAS UNCONNECTED WITH HIM. HE PURCHASED IT ONLY IN THE NAME OF HIS WIFE. THERE WAS ALSO NO I.T.A. NO. 26/HYD/2014 :- 6 - : DISPUTE THAT THE ENTIRE INVESTMENT HAD COME OUT OF THE SALE PROCEEDS AND THAT THERE WAS NO CONTRIBUTION FROM THE ASSESSEE'S WIFE. HAVING REGARD TO THE RULE OF PURPOSIVE CONSTRUCTION END THE OBJECT W HICH SECTION54F SEEKS TO ACHIEVE AND RESPECTFULLY AGREEING WITH THE ABOVE JUDGMENT, THE SUBSTANTIAL QUESTION OF LAW FRAMED WAS ANSWERED IN THE AFFIRMATIVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 5. THE ORDER OF LD.CIT(A) IS IN ACCORDANCE WITH THE P RINCIPLES ON THE ISSUE. HENCE THE SAME IS CONFIRMED. THERE IS N O MERIT IN THE GROUNDS RAISED. 6. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JANUARY, 2018 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 25 TH JANUARY, 2018 TNMM I.T.A. NO. 26/HYD/2014 :- 7 - : COPY TO : 1. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-8(1 ), HYDERABAD. 2. SRI VELUPURI RAMA RAO, 39, WHIPER VALLY, RAIDURG , SERILINGAMPALLY, HYDERABAD. 3. CIT(APPEALS)-III, HYDERABAD 4. CIT-II, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.