G.Krishnan, CHENNAI V. ITO, CHENNAI

ITA 2731/CHNY/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7874 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 26-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 05-11-2014
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: D ANAND
• Keywords: Capital asset
• Section: 143(3); 54

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 2730/MDS/2014 / ASSESSMENT YEAR :200 5 - 0 6 SHRI K. VINOTH GOPINATH [POA MR. G. KRISHNAN], RAM NAGAR, 9 TH STREET, VELACHERY, CHENNAI 600 042 . [PAN: A BWPV3742M ] VS. THE INCOME TAX OFFICER, BUSINESS WARD IV (3), CHENNAI 600 034 . ( / APPELLANT ) ( / RESPONDENT ) ./ I.T.A.NO. 2731/MDS/2014 / ASSESSMENT YEAR :2005 - 06 SHRI G. KRISHNAN, PLOT NO. 3 & 4, GOMATHY NAGAR, RAM NAGAR, 9 TH STREET, VELACHERY, CHENNAI 600 042. [PAN: AACPK6126F] VS. THE INCOME TAX OFFICER, BUSINESS WARD IV (3), CHENNAI 600 034. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI D. ANAND, ADVOCATE / RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT / DATE OF HEARING : 26 . 11 .201 5 / DATE OF P RONOUNCEMENT : 24 .02 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : BOTH THE APPEAL S FILED BY THE DIFFERENT ASSESSEE S ARE DIRECTED AGAINS T THE COMMON ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) V, I.T.A. NO S . 2730 & 2731 /M/ 14 2 CHENNAI DATED 01.08.2014 FOR THE ASSESSMENT YEAR 2005 - 06. THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO CONFIRMATION AND DISALLOWANCE MADE UNDER SECTIO N 54EC OF THE INCOME TAX ACT [ ACT IN SHORT]. I.T.A. NO. 2730/MDS/2014 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED HIS RETURN ADMITTING TOTAL INCOME OF .39,284/ - . THE CASE OF THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND SELECTED FOR SCRUTINY. NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED. IN RESPONSE TO THE NOTICE, THE AR OF THE ASSESSEE APPEARED AND FURNISHED ALL DETAILS CALLED FOR . AFTER CONSIDERING THE PARTICULARS GIVEN BY THE ASSESSEE, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT BY DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT . 16,91,130/ - . WHILE COMPUTING THE TOTAL INCOME, THE ASSESSING OFFICER REWORKED OUT THE CAPITAL GAINS AND RAISED DEMAND AT .4,93,010/ - . 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) DISMISSED THE GROUNDS RAISED BEFORE HIM WITH REGARD TO PAYMENT OF . 20 LAKHS TO MRS. K. PRABHA [DAUGHTER OF SHRI KRISHNAN], ALLOCATION OF .10 LAKHS TO MRS. JAYALAKSHMI [WIFE OF SHRI KRISHNAN] AND WITH REGARD TO INVESTMENT IN 54EC BONDS, IN THE ABSENCE OF EVIDENCE HAVING INVESTED IN THE SA ID BONDS, I.T.A. NO S . 2730 & 2731 /M/ 14 3 HE REMITTED THE MATTER BACK TO THE ASSESSING OFFICER FOR VERIFICATION AND ALLOW THE SAME IF THE ASSESSEE FURNISH PROOF OF INVESTMENTS MADE IN THE BONDS ON 24.12.2004. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE H EARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CASE, THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE S FATHER SHRI G. KRISHNAN PURCHASED THE PROPERTY COMPRISING OF LAND AND BUILDING AT OLD NO. 3 (THEN NO.10) AT VITH STREET, GOPALAPURAM, CHENNAI ON 17.01.1974. THIS PROPERTY WAS CONVERTED TO HUF PROPERTY. THE BUILDING IN THIS PROPERTY WAS IMPROVED IN 1982 AND FIRST & SECOND FLOORS WERE CONSTRUCTED. SHRI G. KRISHNAN ALLOWED HER WIFE SMT. K. JAYALA KSHMI TO PUT UP A SUPER STRUCTURE IN 1985. BY A DEED OF PARTITION DATED 27.04.1987, THE PROPERTY WAS PARTITIONED AMONG SHRI G. KRISHNAN AND HIS TWO SONS SHRI K. VINODH GOPINATH AND SHRI SURENDRA MOHAN AT 1/3 RD SHARE EACH. THE ABOVE PROPERTY WAS SOLD AS PER SALE DEED DATED 05.07.2004 AT .1,31,00,000/ - AND APPORTIONED THE SAME BY SHRI G. KRISHNAN BETWEEN HIMSELF AND HIS FAMILY MEMBERS. AS PER THE ORAL AGREEMENT BETWEEN THE FAMILY MEMBERS, SMT. K. JAYALAKSHMI WAS ALLOWED ONE LUMPSUM OF .10 LAKHS TOWARDS HER PORTION OF THE BUILDING AND SHRI G. KRISHNAN WAS GIVEN A SHARE OF .25 LAKH SINCE HE HAD MORE RIGHTS OVER VACANT LAND AND TERRACE AS PER PARTITION DEED. THE BALANCE AMOUNT OF .96 LAKHS WAS DIVIDED AMONG THE I.T.A. NO S . 2730 & 2731 /M/ 14 4 FATHER AND THE TWO SONS AT .32 LAKHS EACH. FURT HER, THE SONS AGREED TO PAY THEIR MOTHER SMT. K. JAYALAKSHMI A SUM OF .12 LAKHS EACH TOWARDS ONE TIME FULL SETTLEMENT FOR THE FUTURE MAINTENANCE OF THEIR MOTHER. SHRI G. KRISHNAN GAVE A SUM OF .20 LAKHS TO HIS DAUGHTER SMT. K. PRABHA. THUS, THE FINAL SAL E PROCEEDS RECEIVED BY EACH OF THE FAMILY MEMBERS ARE AS UNDER: G. KRISHNAN (25+32 - 20) LAKHS = .37 LAKHS K. JAYALAKSHMI 10+12+12) LAKHS = .34 LAKHS K. SURENDRA MOHAN (32 - 12) LAKHS = .20 LAKHS K. VINODH GOPINATH (32 - 12) LAKHS = .20 LAKHS K. PRABHA ( 20) LAKHS = .20 LAKHS BASED ON THE ABOVE, THE ASSESSEE HAS COMPUTED THE CAPITAL GAIN AS UNDER: COST ON DATE OF PARTITION (50%) RS.3,00,000 SALE RECEIPT AS PER SALE DEED RS.20,00,000 LESS: BROKERAGE RS.20,000 RS.19,80,000 NET CAPITAL GAINS RS.16,80 ,000 DEPOSITS UNDER SECTION 54EC 13.09.2004 RURAL ELECTRIFICATION CORPORATION RS. 5,00,000 DEC. 2004 RURAL ELECTRIFICATION CORPORATION RS. 3,00,000 RS. 8 ,00,000 CONSTRUCTION OF NEW PROPERTY AT VELACHERY AS PER AGREEMENT DT. AUGUST, 2004 RS.11 ,00,000 6. THE ASSESSING OFFICER DID NOT ACCEPT THE ABOVE COMPUTATION OF CAPITAL GAINS ON THE GROUND THAT ONLY SHRI G. KRISHNAN AND HIS TWO SONS SHRI K. VINODH GOPINATH AND SHRI SURENDRA MOHAN ARE HAVING 1/3 RD RIGHT IN THE PROPERTY. THEREFORE, SMT. K. JAYALAKSHMI AND SMT. K. PRABHA DO NOT HAVE ANY RIGHT IN THE ABOVE PROPERTY. ACCORDINGLY, THE ASSESSING OFFICER WORKED OUT THE CAPITAL GAINS AND COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. AFTER CONSIDERING THE DETAILED SUBMISSIONS AND FACTS O F THE CASE, THE I.T.A. NO S . 2730 & 2731 /M/ 14 5 LD. CIT(A) HAS ACCEPTED THE CAPITAL GAINS COMPUTED BY THE ASSESSING OFFICER AND DISMISSED THE GROUNDS RAISED B Y THE ASSESSEE . WITH REGARD TO THE INVESTMENTS IN 54EC BONDS, DURING THE COURSE OF REMAND PROCEEDINGS, THE ASSESSEE WAS REQUIRED T O FURNISH THE PROOF OF 54EC BONDS TO THE TUNE OF .7.5 LAKHS OUT OF THE SALE CONSIDERATION RECEIVED AND COPY OF THE BANK STATEMENT EVIDENCING THAT THE PAYMENT WAS MADE ON 24.12.2004. BUT THE ASSESSEE HAD MERELY REITERATED THE SUBMISSION MADE BEFORE THE LD. CIT(A) IN HIS GROUNDS OF APPEAL AND NO FURTHER EVIDENCES WERE PRODUCED. THOUGH THE ASSESSEE HAS FILED COPY OF THE INTEREST WARRANT, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY THE PROOF OF 54EC BONDS AND BANK STATEMENT EVIDENCING THAT THE INVE STMENTS IN 54EC BOND WAS MADE ON 24.12.2004 AND ALLOW THE CLAIM OF DEDUCTION. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS VEHEMENTLY CONTENDED THAT THE SUBSTANTIAL PORTION OF THE SALE CONSIDERATION WAS UTILIZED FOR THE PURPOSE OF RE - INVESTMENT IN BONDS , WHILE BALANCE PORTION OF THE SALE CONSIDERATION WAS UTILIZED FOR THE PURPOSE OF REINVESTMENT IN FLAT AND CAPITAL GAINS ACCOUNT IN TERMS OF SECTION 54 OF THE ACT. HE ALSO EXPLAINED THAT FROM THE SALE OF PROPERTY OF .1,31,00,000/ - , A SUM OF .90 LAKHS WAS REINVESTED IN BONDS SET OUT IN SECTION 54EC, .11 LAKHS PAID TOWARDS PURCHASE OF FLAT AND . 15LAKHS IN CAPITAL GAINS ACCOUNT. BY FILING COPY OF THE DECISION IN THE CASE OF DIT V. MRS. JENNIFER BHIDE 349 ITR 80 (KAR), THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE LD. CIT(A) HAS NOT PROPERLY APPRECIATED THE ACTUAL FACTS AND PRAYED THAT APPEAL FILED BY THE I.T.A. NO S . 2730 & 2731 /M/ 14 6 ASSESSEE SHOULD BE ALLOWED. THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF DIT V. MRS. JENNIFER BHIDE (SUPRA) HAS OBSERVED AND HELD AS UNDER: 7. ON A CAREFUL READING OF SECTION 54 AS WELL AS SECTION 54EC ON WHICH RELIANCE IS PLACED MAKES IT CLEAR THAT WHEN CAPITAL GAINS ARISE FROM THE TRANSFER OF LONG - TERM CAPITAL ASSET TO AN ASSESSEE AND THE ASSESSEE HAS WITHIN THE PERIOD OF ONE YEAR BEFORE O R TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASES OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF CONSTRUCTION OF RESIDENTIAL HOUSE THEN INSTEAD OF CAPITAL GAIN BEING CHARGED TO INCOME - TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE PROVISION MADE UNDER THE SECTION WHICH GRANTS EXEMPTION FROM PAYMENT OF CAPITAL GAINS AS SET OUT THEREUNDER. THEREFORE, IN THE ENTIRE SECTION 54, THE PURCHASE TO BE MADE OR THE CONSTRU CTION TO BE PUT UP BY THE ASSESSEE, SHOULD BE THERE IN THE NAME OF THE ASSESSEE, IN NOT EXPRESSLY STATED. SIMILARLY, EVEN IN RESPECT OF SECTION 54EC, THE ASSESSEE HAS AT ANY TIME WITHIN A PERIOD OF SIX MONTHS AFTER THE DATE OF SUCH TRANSFER INVESTED THE WH OLE OR ANY PART OF THE CAPITAL GAINS IN THE LONG - TERM SPECIFIED ASSET THEN SHE WOULD BE ENTITLED TO THE BENEFIT MENTIONED IN THE SAID SECTION. THERE ALSO IT IS NOT EXPRESSLY STATED THAT THE INVESTMENT SHOULD BE IN THE NAME OF THE ASSESSEE. THEREFORE, TO AT TRACT SECTION 54 AND SECTION 54EC OF THE ACT, WHAT IS MATERIAL IS THE INVESTMENT OF THE SALE CONSIDERATION IN ACQUIRING THE RESIDENTIAL PREMISES OR CONSTRUCTING A RESIDENTIAL PREMISES OR INVESTING THE AMOUNTS IN BONDS SET OUT IN SECTION 54EC. ONCE THE SALE CONSIDERATION IS INVESTED IN ANY OF THESE MANNER THE ASSESSEE WOULD BE ENTITLED TO THE BENEFIT CONFERRED UNDER THIS PROVISIONS. IN THE ABSENCE OF AN EXPRESS PROVISION CONTAINED IN THESE SECTIONS THAT THE INVESTMENT SHOULD BE IN THE NAME OF THE ASSESSEE ON LY ANY SUCH INTERPRETATION WERE TO BE PLACED, IT AMOUNTS TO THE COURT INTRODUCING THE SAID WORD IN THE PROVISION WHICH IS NOT THERE. IT AMOUNTS THE COURT LEGISLATING WHEN PARLIAMENT HAS DELIBERATELY NOT USED THOSE WORDS IN THE SAID SECTION. THAT IS THE VIE W TAKEN BY THE HON'BLE MADRAS HIGH COURT AND THE HON'BLE PUNJAB AND HARYANA HIGH COURT AND WE RESPECTFULLY AGREE WITH THE VIEW EXPRESSED IN THE AFORESAID JUDGMENTS. 8 IN THE INSTANT CASE THE ASSESSEE HAS PURCHASED THE PROPERTY JOINTLY WITH HER HUSBAND. SHE HAS INVESTED THE MONEY IN RURAL BONDS JOINTLY WITH HER HUSBAND. IT IS NOBODY'S CASE THAT HER HUSBAND CONTRIBUTED ANY PORTION OF THE CONSIDERATION FOR ACQUISITION OF THE PROPERTY AS WELL AS BONDS. THE SOURCE FOR A CQUISITION OF THE PROPERTY I.T.A. NO S . 2730 & 2731 /M/ 14 7 AND THE BONDS IS THE SALE CONSIDERATION. IT IS NOT IN DISPUTE. ONCE THE SALE CONSIDERATION IS UTILIZED FOR THE PURPOSE MENTIONED UNDER SECTIONS 54 AND 54EC, THE ASSESSEE IS ENTITLED TO THE BENEFIT OF THOSE PROVISION. AS THE ENTIR E CONSIDERATION HAS FLOWN FROM THE ASSESSEE AND NO CONSIDERATION HAS FLOWN FROM HER HUSBAND, MERELY BECAUSE EITHER IN THE SALE DEED OR IN THE BOND HER HUSBAND'S NAME IS ALSO MENTIONED, IN LAW HE WOULD NOT HAVE ANY RIGHT. 9 IN THAT VIEW OF THE MATTER, TH E ASSESSEE CANNOT BE DENIED THE BENEFIT OF DEDUCTION OF THE AFORESAID AMOUNT. THE TRIBUNAL ON PROPER APPRECIATION OF THE MATERIAL ON RECORD HAS RIGHTLY ALLOWED THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ASSESSING AUTHORITY AS WELL AS THE APPELLATE CO MMISSIONER. WE DO NOT SEE ANY INFIRMITY IN THE ORDER WHICH CALLS FOR INTERFERENCE. ACCORDINGLY, THE APPEAL IS DISMISSED. 7. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS ON SIMILAR LINE OF THE JUDGEMENT OF THE HON BLE KARNATAKA HIGH COURT. IN TH AT CASE, THE HON BLE KARNATAKA HIGH COURT HAS CONCLUDED IN THE ABOVE DECISION THAT OUT OF SALE PROCEEDS OF RESIDENTIAL PROPERTY, PURCHASING ANOTHER RESIDENTIAL PROPERTY AND SPECIFIED BONDS, EXEMPTION UNDER SECTIONS 54/54EC COULD NOT BE DENIED TO THE ASSESS EE TO THE EXTENT OF 50 PER CENT ON THE GROUND THAT NEW PROPERTY AND BONDS WERE PURCHASED IN THE NAMES OF ASSESSEE AND HER HUSBAND WHEN ADMITTEDLY NO CONSIDERATION FOLLOWED FROM THE HUSBAND. 8. IN THE INSTANT CASE, BY A DEED OF PARTITION DATED 27.04.1987 , THE PROPERTY WAS PARTITIONED AMONG SHRI G. KRISHNAN AND HIS TWO SONS SHRI K. VINODH GOPINATH AND SHRI SURENDRA MOHAN AT 1/3 RD SHARE EACH. THE ABOVE PROPERTY WAS SOLD AS PER SALE DEED DATED 05.07.2004 AT .1,31,00,000/ - AND APPORTIONED THE SAME BY SHRI G. KRISHNAN BETWEEN HIMSELF AND HIS FAMILY I.T.A. NO S . 2730 & 2731 /M/ 14 8 MEMBERS. IT IS THE CONTENTION OF THE ASSESSEE THAT, THOUGH APPORTIONED, THE SALE CONSIDERATION WAS INVESTED IN BONDS, PURCHASE OF FLAT AND INVESTMENT IN CAPITAL GAI NS ACCOUNT. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT O NCE THE SALE CONSIDERATION IS UTILIZED FOR THE PURPOSE MENTIONED UNDER SECTIONS 54 AND 54EC, THE ASSESSEE IS ENTITLED TO THE BENEFIT OF THE PROVISION . MOREOVER, IN THE ABSENCE OF AN EXPRESS PROV ISION CONTAINED IN THESE SECTIONS THAT THE INVESTMENT SHOULD BE IN THE NAME OF THE ASSESSEE OR SHOULD NOT BE IN THE NAME OF ANY OTHER FAMILY MEMBERS OF THE ASSESSEE, IN VIEW OF THE RATIO LAID DOWN BY THE HON BLE KARNATAKA HIGH COURT, WE AGREE AND DIRECT TH E ASSESSING OFFICER TO ALLOW THE CLAIM OF DEDUCTION UNDER SECTION 54EC OF THE ACT. HOWEVER, THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE INVESTMENTS MADE BY THE ASSESSEE AS TO WHETHER THE INVESTMENTS WERE MADE AS PER THE PROVISIONS OF SECTION, BECAUSE, DURING THE COURSE OF REMAND PROCEEDINGS, THE ASSESSEE HAS NOT FILED THE PROOF OF 54EC BONDS AND COPY OF THE BANK STATEMENT EVIDENCING THAT THE PAYMENT WAS MADE ON 24.12.2004. ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . I.T.A. NO. 2731 /MDS/2014 9. WITH REGARD TO THE ASSESSEE I.E., SHRI G. KRISHNAN, FATHER OF SHRI K. VINOTH GOPINATH, THE ISSUE RAISED IN HIS APPEAL IS SIMILAR ON IDENTICAL FACTS AS I.T.A. NO S . 2730 & 2731 /M/ 14 9 RAISED IN I.T.A. NO. 2730/MDS/2014 DECIDED HEREINABOVE. ACCORDINGLY, T HE APPEAL IN I.T.A. NO. 2731/MDS/2014 IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 1 0 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE ASSESSEE S ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 24 TH FEBRUARY , 201 6 AT CHENNAI. SD/ - SD/ - ( CHA NDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 24 . 0 2 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.