ITO, Virudhunagar V. M/s. P.R. Venketarama Raja (HUF), Rajapalayam

ITA 3179/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4512 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 18-11-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: JAGADISAN
• Keywords: Capital asset; Assessment record
• Section: 54F

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI . .. # , ' ) BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER, AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.3179/MDS/2016 *+ + /ASSESSMENT YEAR: 2011-12 THE INCOME TAX OFFICER, WARD-5, VIRUDHUNAGAR. VS. M/S.P.R.VENKETARAMA RAJA (HUF), NO.642, RAMAMANDIRAM, TENKASI ROAD, RAJAPALAYAM-626 117. [PAN: AAAHV 5302 A ] ( . /APPELLANT) ( /0. /RESPONDENT) . 1 / APPELLANT BY : MR.SHIVA SRINIVAS, JCIT /0. 1 /RESPONDENT BY : MR.JAGADISAN, CA 1 /DATE OF HEARING : 29.03.2017 1 /DATE OF PRONOUNCEMENT : 30.05.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 29.03.2016 OF COMMISSIONER OF INCOME TAX (APPEALS)- 3, CHENNAI, IN ITA NO.0044/2014-15 FOR THE AY 2011-12. 2.0 ALL THE GROUNDS OF THE APPEAL ARE RELATED TO TH E DEDUCTION U/S.54 F OF INCOME TAX ACT. THE ASSESSEE FILED THE RETURN OF I NCOME DECLARING TOTAL INCOME OF RS.48,288/- AND AGRICULTURAL INCOME OF RS .23,39,762/- ON ITA NO.3179/MDS/2016 :- 2 -: 13.07.2011. THE ASSESSMENT WAS COMPLETED U/S.143(3 ) ON TOTAL INCOME OF RS.3,26,41,570/-. IN THE ASSESSMENT ORDER MADE U/S .143(3) DATED 26.02.2014, THE AO DISALLOWED THE DEDUCTION CLAIME D BY THE ASSESSEE U/S.54F OF IT ACT. 3.0 DURING THE ASSESSMENT YEAR, THE ASSESSEE SO LD PROPERTIES FOR A CONSIDERATION OF RS.3,26,94,600/- AS PER THE DETAIL S GIVEN BELOW: SL. NO. NAME OF THE PURCHASER DESCRIPTION OF THE PROPERTIES SOLD DATE OF SALE SAL E VALUE 1 M/S.P.A.C. RAMASAMY RAJA CENTENARY TRUST RESIDENTIAL PROPERTIES AT DOOR NOS.32, 33 & 34, JAWAHAR MAIDAN STREET, RAJAPALAYAM, DOOR NO.504 & 505, TENKASI ROAD, RAJAPALAYAM 23.09.2010 RS.64,26,000 2 M/S.RAJAPALAYAM MILLS LTD. RESIDENTIAL PROPERTIES AT DOORS NOS.43A & 44, SAMSIKAPURAM, ANDALPURAM, RAJAPALAYAM 23.09.2010 RS.2,63,68,600 TOTAL RS.3,27,94,600 THE ENTIRE LONG TERM CAPITAL GAINS RELATING TO SAL E CONSIDERATION ON ACCOUNT OF SALE OF PROPERTIES WAS CLAIMED AS EXEMPT U/S.54F OF THE INCOME TAX ACT. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE ON TWO REASONS AS FOLLOWS: (I) THE RECEIPT OF CAPITAL GAINS ON SALE OF PROPERT IES MENTIONED ABOVE WERE RESIDENTIAL HOUSES AND THE DEDUCTION U/S.54 F IS NOT PERMISSIBLE ON SALE OF THE RESIDENTIAL PROPERTIES. (II) THE ASSESSEE OWNS MORE THAN ONE RESIDENTIAL HO USE AS ON THE DATE OF TRANSFER OF THE ASSET AND 54F RESTRICTS THE DED UCTION IF THE ASSESSEES OWNS MORE THAN ONE RESIDENTIAL HOUSE OTHER THAN NEW ASSET. 4.0 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) CALLED FOR THE REMAND REPORT FROM ITA NO.3179/MDS/2016 :- 3 -: THE AO. THE AO SUBMITTED THE REMAND REPORT STATING THAT THE PROPERTIES SOLD WERE COMMERCIAL AS WELL AS RESIDENTIAL UNITS AND THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S.54 F OF THE INCOME TAX A CT. THE LD. CIT(A) VERIFIED THE FACTS OF THE CASE AND ALLOWED THE ASSE SSEES APPEAL AND HAS GIVEN THE FOLLOWING FINDINGS/OBSERVATIONS: 12.4. FIRSTLY ON A PERUSAL OF THE RECORDS OF THE CASE AND OF THE INCOME TAX AND WEALTH TAX RETURNS (IT & WT RETURNS) OF THE APPELLA NT FOR THE AY'S 2008-09 TILL 2010 -11 (TILL THE DATE OF SALE OF THE SAID PR OPERTIES), T IS SEEN THAT IN BOTH THE IT & WT RETURNS OF THE APPELLANT, THE PROP ERTIES SOLD HAVE BEEN MENTIONED AS COMMERCIAL PROPERTIES . 12.5 THE ASSESSING OFFICER HAS NOT PROPERLY VERIFIE D THE IT & WT RETURNS OF THE APPELLANT FOR THE PREVIOUS YEARS. THE AC HAS ERRONE OUSLY PRESUMED THAT THE PROPERTIES SOLD BY THE APPELLANT ARE RESIDENTIAL IN NATURE. 12.6. SECONDLY, THE ASSESSING OFFICER HAS ERRONEOUS LY PRESUMED THAT THE APPELLANT HAS NEITHER PURCHASED ANY PROPERTY NOR INVESTED IN ANY NEW ASSET. HE HAS PRESUMED THAT THE APPELLANT HAS PURCHASED THE PROPERTY 'IN H IS INDIVIDUAL AND NOT 'IN THE CAPACITY OF HIS HUF' AS THE PAN REFERENCE GIVEN IN THE SALE DEED IS AAYPV5127H WHICH IS THE PAN FOR 'INDIVIDUAL STATUS'. HE THEREF ORE PRESUMED THAT THE ENTITY WHO HAS SOLD THE PROPERTIES IS THE APPELLANT 'IN THE CA PACITY OF HIS HUF' AND THE ENTITY THAT HAS PURCHASED THE NEW PROPERTY IS THE APPELLAN T 'IN HIS INDIVIDUAL CAPACITY'. 12.7. THE AO HAS HELD THAT AS PER THE PURCHASE DEED THE APPELLANT HAS PURCHASED THE PROPERTY 'IN HIS INDIVIDUAL CAPACITY' SINCE THE NAME OF THE APPELLANT APPEARING IN THE PURCHASE DEED IS THAT OF THE INDIVIDUAL NAMELY P.R. VENKETRAMA RAJA BEARING THE PAN NO AAYPV5127H WHICH RELATES TO THE APPELLANT 'I N HIS INDIVIDUAL CAPACITY' WHILE THE CLAIM UNDER SECTION 54F IS RELATED TO THE APPEL LANT 'IN THE CAPACITY OF HIS HUF'. 12.8. FURTHER THE AO HELD THAT THE APPELLANT ENTERE D INTO AN AGREEMENT FOR CONSTRUCTION OF THE NEW RESIDENTIAL PROPERTY WITH M /S RAMCONS IN THE NAME OF P.R. VENKETRAMA RAJA (INDIVIDUAL). 12.9. SINCE BOTH THE ENTITIES ARE DIFFERENT, HE HAS HELD THAT THE APPELLANT WILL NOT BE ELIGIBLE FOR EXEMPTION U/S 54F OF THE IT ACT. 12.10 THIRDLY, THE AO HAS GIVEN ANOTHER FINDING THA T THE APPELLANT HAS RECEIVED CAPITAL GAINS FROM THE SALE OF RESIDENTIAL PROPERTI ES, AND HENCE THE APPELLANT WILL NOT BE ELIGIBLE FOR EXEMPTION U/S 54F OF THE IT ACT ITA NO.3179/MDS/2016 :- 4 -: 12.11. THIS FINDING OF THE AO IS ALSO ERRONEOUS, BE CAUSE ON A PERUSAL OF THE IT & WT RETURNS OF THE APPELLANT FOR THE PREVIOUS YEARS .TI LL THE DATE OF SALE OF THE PROPERTIES, IT IS SEEN THAT THE PROPERTIES SOLD HAVE BEEN MENTI ONED AS COMMERCIAL PROPERTIES. 12.12. FOURTHLY THE AO HAS GIVEN ANOTHER FINDING TH AT SINCE THE APPELLANT OWNS MORE THAN ONE RESIDENTIAL HOUSE AS ON THE DAY OF TRANSFE R OF THE ASSET, THE APPELLANT WILL NOT BE ELIGIBLE FOR EXEMPTION U/S 54F OF THE IT ACT . 12.13. THIS FINDING OF THE AO IS ALSO ERRONEOUS, BE CAUSE ON A PERUSAL OF THE IT & WT RETURNS OF THE APPELLANT FOR THE PREVIOUS YEARS TIL L THE DATE OF SALE OF THE PROPERTIES, THERE IS NO MENTION OF OWNERSHIP OF ANY RESIDENTIAL PROPERTY IN THE NAME OF THE APPELLANT IN THE CAPACITY OF HIS HUF. THE APPELLANT HAS CONFUSED THE OWNERSHIP OF RESIDENTIAL PROPERTY IN THE NAME OF THE APPELLANT ' IN HIS INDIVIDUAL CAPACITY' WITH THAT OF THE 'HUF. 12.14. FROM THE RECORDS, IT IS SEEN THAT THE FUNDS FOR THE PURCHASE OF THE NEW PROPERTY HAVE COME FROM THE HANK ACCOUNT OF THE APP ELLANT 'IN THE CAPACITY OF HIS HUF AND NOT FROM 'HIS INDIVIDUAL CAPACITY'. 12.15 EVEN THOUGH THE PURCHASE DEED FOR THE PROPERT Y STATES THE NAME OF THE APPELLANT AS P.R. VENKETRAMA RAJA BEARING THE PAN N O AAYPV5127H WHICH RELATES TO THE APPELLANT IN HIS INDIVIDUAL CAPACITY' AND THE A GREEMENT FOR CONSTRUCTION OF THE NEW RESIDENTIAL PROPERTY WITH M/S RAMCONS DATED 12. 12.2008 IS ALSO IN THE NAME OF P.R. VENKETRARNA RAJA, THE LEGAL POSITION IS THAT T HE APPELLANT CAN ENTER INTO THE PURCHASE AND SALE OF ANY PROPERTY OF THE HUF, IN HI S CAPACITY AS THE KARTHA OF THE HUF'. IN FACT THE KARTHA OF THE HUF CAN REPRESENT T HE HUF IN THE SALE OR PURCHASE OF ANY PROPERTY OF THE HUF OR ENTER INTO ANY TRANSACTI ON ON BEHALF OF THE HUF AND THIS IS LEGAL AS PER THE PROVISIONS OF THE HUF ACT OR TH E IT ACT. 5.0 AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE RE VENUE IS ON APPEAL BEFORE US. APPEARING FOR THE REVENUE, THE LD. DR ARGUED THAT THE ASSESSEE HAD SOLD THE RESIDENTIAL PROPERTY WHICH IS EVIDENCED BY THE WEALTH TAX RETURN, ELECTRICITY CONNECTIONS AND MUNICIPAL RECORDS. THE ASSESSEE ALSO OWNS MORE THAN ONE RESIDENTIAL PROPERTY WHICH IS ALSO EV IDENT FROM THE WEALTH TAX ASSESSMENT RECORDS AND ELECTRICITY CONNECTIONS. THE LD. DR FURTHER ARGUED THAT DEDUCTION U/S.54 F OF INCOME TAX ACT IS ALLOWED SUBJECT TO THE FOLLOWING CONDITIONS: ITA NO.3179/MDS/2016 :- 5 -: (I) THE CAPITAL GAINS SHOULD BE FOR SALE THE ASSET OTHER THAN THE RESIDENTIAL HOUSE. (II) THE ASSESSEE SHOULD NOT OWN MORE THAN ONE RESI DENTIAL HOUSE OTHER THAN NEW HOUSE AS ON THE DATE OF TRANSFER OF THE AS SET. THE LD. DR FURTHER SUBMITTED THAT IN THE INS TANT CASE PROPERTY SOLD BY THE ASSESSEE WAS RESIDENTIAL HOUSE AND THE ASSESSEE OWNS THE RESIDENTIAL HOUSE AS ON THE DATE OF TRANSFER OF THE ASSET, HENC E THE ASSESSEE HAS NOT SATISFIED THE CONDITIONS LAID DOWN IN SECTION 54F F OR GRANTING RELIEF U/S 54F. FURTHER, THE LD. DR ALSO SUBMITTED THAT THE NEW PR OPERTY WAS PURCHASED IN THE NAME OF THE ASSESSEE BY QUOTING INDIVIDUAL P AN AND THE PROPERTIES SOLD WERE RELATED HUF. SINCE THE PROPERTIES WERE N OT ACQUIRED IN THE NAME OF HUF, THE OWNER OF THE PROPERTIES WHO TRANSF ERRED THE CAPITAL ASSETS, THE DEDUCTION IS NOT ALLOWABLE U/S.54 F OF INCOME TAX ACT. ON THE OTHER HAND, THE LD.AR ARGUED THAT AS PER THE EXISTI NG LAWS HUF CANNOT ENTER INTO CONTRACT WITH ANOTHER PERSON AND THE PR OPERTIES CANNOT BE REGISTERED IN THE NAME OF THE HUF AND THE PROPERTY IS ALWAYS PURCHASED BY THE HUF REPRESENTED BY KARTA OF HUF. THE ASSESS EE HAS GOT REGISTERED THE PROPERTIES QUOTING THE INDIVIDUAL PAN, SINCE TH E REGISTRATION AUTHORITIES DO NOT REGISTER THE PROPERTY WITHOUT PHOTO IDENTITY OF PAN. THE SALE PROCEEDS WERE CREDITED IN TO HUF ACCOUNT AND FROM T HE FUNDS OF THE HUF ACCOUNT, THE PROPERTIES WERE ACQUIRED AND ACCOUNTED IN THE HUF ACCOUNTS. THEREFORE, THE LD. A.R ARGUED THAT DEPARTMENTS CON TENTION THAT THE PROPERTY WAS ACQUIRED IN THE THIRD PARTYS NAME IS INCORRECT AND THE PROPERTY WAS ACQUIRED BY THE HUF AND THE SAME WAS A CCOUNTED IN HUF ACCOUNT. THE LD.AR FURTHER ARGUED THAT THE PROPERT IES IN QUESTION SOLD ITA NO.3179/MDS/2016 :- 6 -: WERE NOT RESIDENTIAL PROPERTIES BUT COMMERCIAL PROP ERTIES. THE THREE PROPERTIES MENTIONED BY THE AO WERE USED FOR THE PU RPOSE OF HOSPITAL AND THE GODOWN AND HENCE, THE A.R CONTENDED THAT T HE PROPERTIES IN QUESTION SHOULD NOT BE TREATED AS RESIDENTIAL PROPE RTIES. MERE PAYMENT OF ELECTRICITY CHARGES OR USAGE OF ELECTRICITY CHARGES AS RESIDENTIAL UNITS CANNOT BE CONCLUSIVE EVIDENCE TO PROVE THE COMMERCI AL PROPERTIES OR RESIDENTIAL PROPERTIES. THE LD.A.R FURTHER SUBMITT ED THAT THE PROPERTIES HELD IN THE NAME OF THE ASSESSEE ON THE DATE OF SAL E WERE COMMERCIAL BUILDINGS BUT NOT THE RESIDENTIAL PROPERTIES. THERE FORE, THE LD.AR CONTENDED THAT THE ASSESSEE HAS SATISFIED ALL THE C ONDITIONS FOR GRANTING RELIEF UNDER SECTION 54F OF IT ACT AND THE LD.CIT( A) HAS RIGHTLY ALLOWED THE DEDUCTION U/S.54 F OF INCOME TAX ACT AND NO INT ERFERENCE IS CALLED FOR. THE LD.AR FURTHER ARGUED THAT THE ASSESSEE HAS MADE AN ALTERNATE CLAIM FOR DEDUCTION U/S.54 OF INCOME TAX BEFORE THE LD.CI T(A) IN THE EVENT OF BEING HELD NOT ELIGIBLE FOR DEDUCTION U/S.54F AND AND THE SAME WAS ALLOWED BY THE LD.CIT(A). RESPONDING TO THE ALTERNA TE CLAIM MADE BY THE ASSESSEE FOR DEDUCTION U/S54 THE LD.DR ARGUED THAT THE ALTERNATE CLAIM IS NOT PERMISSIBLE IN THE ABSENCE OF ANY SUCH CLAIM MA DE IN THE RETURN OF INCOME. THE LD.AR ARGUED THAT THERE IS NO ERROR IN THE LD.CIT(A) ORDER AND NO INTERFERENCE IS CALLED FOR. 6.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US. THE FIRST OBJECTION OF REVENUE IS PURCHASE OF NEW PROPERTY IN THE NAME OF SHRI P.R. VENKATA RAMARAJA, INDIVIDUAL QUOT ING THE OWN PAN ITA NO.3179/MDS/2016 :- 7 -: NUMBER FOR CLAIMING THE DEDUCTION U/S 54F. THE ASS ESSEE HAS SOLD THE PROPERTIES (LONG TERM CAPITAL ASSETS) OF HUF AND IN VESTED IN ACQUIRING NEW PROPERTY AND CLAIMED THE DEDUCTION. THE NEW PROPER TY WAS REGISTERED IN THE NAME SHRI P.R. VENKATA RAMARAJA, KARTA OF HUF Q UOTING INDIVIDUAL PAN BUT NOT HUF PAN NUMBER. DURING THE APPEAL, IT WAS ARGUED BY THE LD.AR THAT THE PROPERTIES CANNOT BE ACQUIRED IN THE NAME OF HUF AND ALWAYS ACQUIRED BY THE KARTA OF HUF IN HIS REPRESEN TATIVE CAPACITY. IN THE REGISTRATION DOCUMENTS, THE ASSESSEE HAS QUOTED HIS PAN NUMBER SINCE IT CONTAINS THE PHOTOGRAPH. IT WAS FURTHER SUBMITTED B Y THE A.R THAT REGISTRATION AUTHORITIES DOES NOT ACCEPT THE PAN WI THOUT THE PHOTOGRAPH. THE FUNDS WERE BELONGING TO THE CORPSE OF HUF AND T HE PROPERTY WAS THROWN INTO THE COMMON HOTCHPOTCH OF HUF AND ACCOUN TED IN THE HUF ACCOUNTS. THE LD.DR OR THE AO DID NOT BRING ANY EVI DENCE TO PROVE THAT THE PROPERTY WAS NOT ACQUIRED BY THE HUF. NOW, IT IS WELL SETTLED ISSUE THAT HUF CANNOT ENTER INTO CONTRACT OR AGREEMENT WI TH ANOTHER PERSON. THE LD.CIT(A) WHILE ALLOWING THE APPEAL OF THE ASSE SSEE RELIED ON THE FOLLOWING DECISIONS: CIT VS. KALU BABU LAL REPORTED IN 37 ITR 123 (SC) CIT VS. DHANWATEY REPORTED IN 68 ITR 365 (SC) CIT VS. MATHURA PRASAD REPORTED IN 60 ITR 428 (SC) CIT VS. PN KRISHNA IYER REPORTED IN 73 ITR 539 (SC) 6.1 THE ASSESSEE HAS PURCHASED THE PROPERTIES FROM THE FUNDS OF THE HUF, PURCHASED IN THE CAPACITY OF HUF AS KARTA AND THROWN THE PROPERTY INTO THE COMMON STOCK OF HUF PROPERTIES. THE KARTA OF HUF HAS QUOTED HIS INDIVIDUAL PAN NUMBER IN THE REGISTRATION DOCUM ENT SINCE THE ITA NO.3179/MDS/2016 :- 8 -: REGISTRATION AUTHORITIES INSIST THE PAN CARD WITH P HOTOGRAPH. THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT TH E PROPERTY WAS NOT ACQUIRED BY THE HUF AND NOT FOR THE BENEFIT OF THE HUF. THE RATIO OF THE HONBLE SUPREME COURT IN [1959] 37 ITR 123 (SC), COMMISSIONER OF INCOME-TAX. V. KALU BABU LAL CHAND IS THAT - IT IS NOW WELL SETTLED THAT AN HUF CANNOT AS SUCH ENTER INTO A CONTRACT OF PARTNERSHIP WITH ANOTHER PERSON OR PERSONS. THE KAR TA OF THE HUF, HOWEVER, MAY AND FREQUENTLY DOES ENTER INTO PARTNERSHIP WITH OUT SIDERS ON BEHALF AND FOR THE BENEFIT OF HIS JOINT FAMILY. BUT WHEN HE DOES SO, T HE OTHER MEMBERS OF THE FAMILY DO NOT, VIS--VIS THE OUTSIDERS, BECOME PARTNERS IN THE FIRM. THEY CANNOT INTERFERE IN THE MANAGEMENT OF THE FIRM OR CLAIM ANY ACCOUNT OF THE PARTNERSHIP BUSINESS OR EXERCISE ANY OF THE RIGHTS OF A PARTNER. SO FAR AS THE OUTSIDERS ARE CONCERNED, IT IS THE KARTA WHO ALONE IS, AND IS IN LAW RECOGNISED AS , THE PARTNER. WHETHER IN ENTERING INTO A PARTNERSHIP WITH OUTSIDERS, THE KAR TA ACTED IN HIS INDIVIDUAL CAPACITY AND FOR HIS OWN BENEFIT OR HE DID SO AS RE PRESENTING HIS JOINT FAMILY AND FOR ITS BENEFIT IS A QUESTION OF FACT. IF FOR THE P URPOSE OF CONTRIBUTION OF THIS SHARE OF THE CAPITAL IN THE FIRM THE KARTA BROUGHT IN MON IES OUT OF THE TILL OF THE HUF, THEN HE MUST BE REGARDED AS HAVING ENTERED INTO THE PARTNERSHIP FOR THE BENEFIT OF THE HUF AND AS BETWEEN HIM AND THE OTHER MEMBERS OF HIS FAMILY HE WOULD BE ACCOUNTABLE FOR ALL PROFITS RECEIVED BY HIM AS HIS SHARE OUT OF THE PARTNERSHIP PROFITS AND SUCH PROFITS WOULD BE ASSESSABLE AS INC OME IN THE HANDS OF THE HUF. 6.2 SIMILARLY IN THE CASE OF CIT VS. DHANWATEY REPORTED IN 68 ITR 365 (SC), HONBLE APEX COURT HELD THAT THE THE GENERAL DOCTRINE OF HINDU LAW IS THAT PROPERTY ACQUIRED BY A KARTA OR A COPAR CENER WITH THE AID OR ASSISTANCE OF JOINT FAMILY ASSETS IS IMPRESSED WITH THE CHARACTER OF JOINT FAMILY PROPERTY. TO PUT IT DIFFERENTLY, IT IS AN ES SENTIAL FEATURE OF SELF- ACQUIRED PROPERTY THAT IT SHOULD HAVE BEEN ACQUIRED WITHOUT ASSISTANCE OR AID OF THE JOINT FAMILY PROPERTY. THE TEST OF SELF- ACQUISITION BY THE KARTA OR COPARCENER IS THAT IT SHOULD BE WITHOUT DETRIMENT T O THE ANCESTRAL ESTATE. THEREFORE, BEFORE AN ACQUISITION COULD BE CLAIMED T O BE A SEPARATE PROPERTY, IT MUST BE SHOWN THAT IT WAS MADE WITHOUT ANY AID OR ASSISTANCE FROM THE ANCESTRAL OR JOINT FAMILY PROPERTY. ITA NO.3179/MDS/2016 :- 9 -: 6.3 IN THE INSTANT CASE THE PROPERTY SOLD WAS HUF PROPERTY, THOUGH THE ASSESSEE REGISTERED THE NEW ASSET IN THE NAME OF IN DIVIDUAL, QUOTING HIS OWN PAN NUMBER, HE HAPPENS TO BE KARTA OF HUF AND THE PROPERTY WAS THROWN INTO THE COMMON HOTCHPOTCH OF HUF. THEREFORE THE REVENUES OBJECTION FOR REGISTERING THE PROPERTY IN INDIVIDUA LS NAME FOR DENYING THE DEDUCTION UNDER SECTION 54F IS BASELESS AND ACCORDI NGLY REJECTED AND THE REVENUES GROUND IN THIS ISSUE IN GROUND NO.4 IS DI SMISSED. 7.0 GROUND NOS.2 & 3 ARE RELATED TO THE DEDUCTION U /S.54 F OF THE INCOME TAX ACT: THE ASSESSEE HAS SOLD THE LONG TERM CAPITAL ASSET AND CLAIMED THE DEDUCTION U/S.54 F. DURING THE FIRST APPEAL PROCEE DINGS, THE ASSESSEE ALSO MADE ALTERNATE CLAIM FOR DEDUCTION U/S.54. THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE U/S.54 F AS WELL AS 54 WHICH IS BEING AGITATED BY THE REVENUE. THE ASSESSEE HAS SOLD THE LONG TERM ASSET AS PER THE SCHEDULE GIVEN ABOVE. THE ASSESSEE CLAIMED THAT THE PROPERT IES WERE NON- RESIDENTIAL AND LONG TERM CAPITAL ASSETS. FURTHER, THE ASSESSEE ALSO OWNS OTHER RESIDENTIAL ASSETS. THE ASSESSEES CLAIM WAS THE PROPERTIES SOLD WERE COMMERCIAL PROPERTIES AND THE PROPERTIES IN PO SSESSION AFTER THE TRANSFER OF LONG TERM CAPITAL ASSETS WERE ALSO COMM ERCIAL PROPERTIES, HENCE ENTITLED FOR DEDUCTION U/S.54F. THE ASSESSE E HAS FILED COPIES OF WEALTH TAX RETURNS FOR THE AYS 2008-09 & 2009-10. IN THE RETURNS, THE ASSESSEE HAS ADMITTED THAT DR.NO.32, 33, 34 JAWAHAR MAIDAN STREET, SOLD FOR A CONSIDERATION OF RS.64,26,000/- AS RESIDENTIA L PROPERTY. SIMILARLY, THE ASSESSEE HAS SHOWN RESIDENTIAL PROPERTY IN WEALTH T AX RETURNS BEARING ITA NO.3179/MDS/2016 :- 10 -: NO.S 494, 495 AND 505, TENKASI ROAD, WHICH WAS OWN ED BY THE ASSESSEE. FROM THE WEALTH TAX RETURNS, WHICH WAS FILED BY THE ASSESSEE, IT IS AN IRREFUTABLE FACT THAT THE ASSESSEE OWNS THREE RESID ENTIAL UNITS WITH DR.NO.494, 495 AND 505. AS PER THE PROVISIONS OF S EC.54F OF THE INCOME TAX THAT , IF THE ASSESSEE OWNS MORE THAN ONE RESID ENTIAL HOUSE AT THE TIME OF ACQUIRING A NEW ASSET OR AT THE TIME OF SAL E OF THE PROPERTY, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S.54F. FO R READY REFERENCE, WE EXTRACT THE RELEVANT PART OF SEC.54 F OF INCOME TAX ACT AS UNDER: [ CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENT IAL HOUSE. 83 54F. (1) 84 [SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), WHER E, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY], THE CAPITA L GAIN ARISES FROM THE TRANSFER OF ANY LONG- TERM CAPITAL ASSET, NOT BEING A 85 RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERR ED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHIN A PER IOD OF ONE YEAR BEFORE OR 86 [TWO YEARS] AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE 85 PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE 87 [CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA] (HERE AFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEA LT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN THE N ET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE NET C ONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 45: [ PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL A PPLY WHERE (A) THE ASSESSEE, (I) OWNS 89 MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR (II) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR (III) 90 CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NE W ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGI NAL ASSET; AND (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER THAN TH E ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET, IS CHARGEAB LE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'.] FROM THE PLAIN READING OF SEC.54F, IT IS APPARENTL Y CLEAR THAT THE DEDUCTION U/S.54 F IS AVAILABLE ONLY IN CASE OF TH E ASSESSEE WHO SOLD THE LONG TERM CAPITAL ASSETS DOES NOT OWN MORE THAN ONE RESIDENTIAL ASSET ON ITA NO.3179/MDS/2016 :- 11 -: THE DATE OF TRANSFER, THE INCOME OF WHICH IS CHARGE ABLE TO TAX UNDER THE HEAD INCOME FROM PROPERTY. IN THE INSTANT CASE, TH E ASSESSEE SOLD RESIDENTIAL PROPERTIES AT DR.NO.32, 33 & 34 WHICH I S EVIDENCED FROM THE WEALTH TAX RETURNS AND ALSO OWNS MORE THAN ONE RESI DENTIAL HOUSE ON WHICH THE INCOME IS CHARGEABLE UNDER THE HEAD INCOM E FROM HOUSE PROPERTY AS PER PAGE NO.26 OF THE PAPER BOOK. THER EFORE, WE HOLD THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S.54 F AND THE ORDER OF THE LD.CIT(A) IS SET-ASIDE ON THIS ISSUE. THE REVENUES APPEAL ON THIS GROUND IS ALLOWED. 8.0 THE ASSESSEE MADE ALTERNATE CLAIM DURING THE AP PEAL PROCEEDINGS BEFORE THE LD.CIT(A). AS DECIDED BY THE HONBLE SUPREME COURT IN 187 ITR 687, THE APPELLATE AUTHORITIES ARE PERMITTED TO ALLOW THE FR ESH CLAIM DURING THE APPEAL PROCEEDINGS ON THE MERITS OF THE CASE. THE LD.CIT(A) ENTERTAINED THE FRESH CLAIM OF THE ASSESSEE AND ALLOWED THE APP EAL. IN THE INSTANT CASE, THE ASSESSEE HAS SOLD THE LONG TERM CAPITAL A SSETS CONSISTING OF RESIDENTIAL HOUSE AND NON-RESIDENTIAL HOUSE. AS PE R SEC.54, THE CAPITAL GAIN ARISING FROM TRANSFER OF LONG TERM CAPITAL ASS ETS BEING BUILDINGS, LANDS OR APARTMENTS ARE USED WITHIN A PERIOD OF ONE YEAR BEFORE THE TRANSFER OF THE CAPITAL ASSET OR WITHIN THE PERIOD OF THREE YEA RS AFTER THE DATE OF TRANSFER CONSTRUCTED ONE RESIDENTIAL HOUSE IN INDIA THEN THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S.54 OF INCOME TAX ACT. F OR READY REFERENCE, WE REPRODUCE THE SEC.54 OF INCOME TAX ACT WHICH READS AS UNDER: ITA NO.3179/MDS/2016 :- 12 -: PROFIT ON SALE OF PROPERTY USED FOR RESIDENCE. 68 54. 69 [(1)] 70 [ 71 [SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), WHER E, IN THE CASE OF AN ASSESSEE 72 BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET 73 [***], BEING BUILDINGS OR 74 LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE 74 , THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' (HEREAFTER IN THI S SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERIOD OF 75 [ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED 76 ], OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE 77 [CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA], 76 THEN], INSTEAD OF THE 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 ACCO RDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, (I) IF THE AMOUNT OF THE CAPITAL GAIN 78 [IS GREATER THAN THE COST OF 79 [THE RESIDENTIAL HOUSE] SO PURCHASED OR CONSTRUCTED (HEREAFTER IN TH IS SECTION REFERRED TO AS THE NEW ASSET)], THE DIFFERENCE BETWEEN THE AMOUNT OF T HE CAPITAL GAI N AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT O F THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE NIL; OR (II) IF THE AMOUNT OF THE CAPITAL GAIN IS EQUAL TO OR LE SS THAN THE COST OF THE NEW ASSET, THE CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRA NSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR C ONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE REDUCED BY THE AMOUNT OF THE CAPI TAL GAIN. IN THIS CASE, THERE IS NO DISPUTE REGARDING ACQUIR ING OF THE HOUSE WITHIN A STIPULATED PERIOD BY THE ACT. THE CONTENT ION OF THE ASSESSEE WAS THAT THE ASSESSEE HAS UTILIZED THE SALE PROCEEDS FO R CONSTRUCTION OF THE HOUSE AND IT WAS CONSTRUCTED WITHIN A PERIOD OF THR EE YEARS FROM THE DATE OF SALE OF THE ASSET AND ENTITLED FOR DEDUCTION U/S .54. IN THE INSTANT CASE, THE LD.CIT(A) ENTERTAINED THE FRESH CLAIM OF DEDUCT ION U/S.54 ALSO. AS PER THE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF 3 87 ITR 688 THE APPELLATE AUTHORITIES ARE DUTY BOUND TO ACCEPT THE FRESH CLAIMS MADE DURING THE APPEAL PROCEEDINGS. THE CONTENTION OF T HE LD. DR THAT THE ASSESSEE HAS NOT CLAIMED BEFORE THE AO DOES NOT HOL D ANY MERIT IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT. THE ASSESSEE HAS SOLD THE PROPERTIES CONSISTING OF THE RESIDENTIAL AND NO N-RESIDENTIAL BUILDINGS AND ARGUED THAT HE IS ENTITLED FOR DEDUCTION U/S.54 . HOWEVER THE AO HAS ITA NO.3179/MDS/2016 :- 13 -: NOT EXAMINED THE CLAIM OF THE ASSESSEE WITH REGARD TO SATISFACTION OF THE CONDITIONS LAID DOWN IN SECTION 54 FOR ALLOWING THE DEDUCTION. THE LD. CIT(A) ALSO DID NOT GIVE ANY FINDING ON SATISFACTIO N OF THE CONDITIONS TO ALLOW DEDUCTION U/S 54. THEREFORE, WE ARE OF THE CO NSIDERED OPINION THAT THIS ISSUE SHOULD GO BACK TO THE FILE OF THE AO TO VERIFY WHETHER THE ASSESSEE HAS SATISFIED THE CONDITIONS LAID DOWN U/S .54 FOR CLAIMING DEDUCTION U/S 54 OR NOT. ACCORDINGLY, WE SET-ASIDE THE ORDERS OF THE LD. CIT(A) AND THE A.O. AND REMIT THE BACK TO THE FILE OF AO TO DECIDE THE ISSUE AFRESH ON MERITS. THE APPEAL OF THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. 9.0 GROUND NOS.1 & 5 ARE GENERAL IN NATURE, WHICH D O NOT REQUIRE SPECIFIC ADJUDICATION. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MAY, 2017, AT CHENNAI. SD/- SD/- ( . ) ( DUVVURU RL REDDY )) /JUDICIAL MEMBER ( . . # ) (D.S.SUNDER SINGH) ' /ACCOUNTANT MEMBER /CHENNAI, 7 /DATED: 30 TH MAY, 2017. TLN 1 /*#8 98 /COPY TO: 1. . /APPELLANT 4. : /CIT 2. /0. /RESPONDENT 5. 8 /** /DR 3. : ( ) /CIT(A) 6. + /GF