Shri Hitesh G.Somani, Baroda V. The Income tax Officer,Ward-1(2)(2), Baroda

ITA 323/AHD/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5532 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 01-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rule of consistency; Tax effect; Benefit of exemption; Capital Gains
• Section: 54; 2; 143(3); 54F; 153A; 143(2); 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH (CONDUCTED THROUGH VIRTUAL COURT) BEFORE: SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBE R HITESH G SOMANI, 8 SEVAK NAGAR, RACE COURSE CIRCLE, BEHIND GAUTAM NAGAR, ALKAPURI, VADODARA-390007 PAN: ALUPS5813L (APPELLANT) VS THE ITO, WARD-1(2)(2), VADODARA (RESPONDENT) REVENUE BY: SHRI R.R. MAKWANA, SR. D.R. ASSESSEE BY: SHRI SAKAR SHARMA, A.R . DATE OF HEARING : 08-09-2021 DATE OF PRONOUNCEMENT : 21-09-202 1 /ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- THIS ASSESSEES APPEAL FOR A.Y. 2015-16, ARISES FRO M ORDER OF THE CIT(A)-5, VADODARA DATED 15-01-2019, IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- TAX EFFECT RELATING TO EACH GROUND OF APPEAL 1 THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN REST RICTING RS. 7,66,598/- BEING TAX |20% OF ITA NO. 323/AHD/2019 ASSESSMENT YEAR 2015-16 I.T.A NO. 323/AHD/2019 A.Y. 2015-16 PAGE NO HITESH G. SOMANI VS. ITO 2 EXEMPTION U/S 54 TO RS. 24,25,513/- AGAINST 'RS. 62.58,503/-CLAIMED BY THE APPELLANT IN RESPECT O F NEWLY ACQUIRED RESIDENTIAL HOUSE WHILE COMPUT ING LONG TERM CAPITAL GAIN RS. 38,32,990/- PLUS RS. 22,998/- BEING EDUCATION CESS ]3% OF TAX AMOUNT) TOTAL RS. 7,89,596/- 2 THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN TREATI NG ONE RESIDENTIAL HOUSE TO BE AS THREE INDEPENDENT RESIDENTIAL HOUSES FOR THE PURPOSE OF COMPUTING EXEMPTION U/S 54, TOTAL TAX EFFECT RS. 7,89,596/- 3. THE FACT IN BRIEF IS THAT RETURN OF INCOME DEC LARING TOTAL INCOME OF RS. 11,12,090/- WAS FILED ON 29 TH AUGUST, 2015. THE CASE WAS SUBJECT TO SCRUTINY ASSESSMENT AND NOTICE U/S. 143(2) OF THE ACT WAS IS SUED ON 20 TH SEP, 2016. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFI CER NOTICED THAT ASSESSEE HAS SOLD RESIDENTIAL HOUSE FOR A TOTAL CONSIDERATIO N OF RS. 75 LACS. THE TOTAL CAPITAL GAIN ON THE SALE OF THE HOUSE ARRIVED AT TH E HAND OF THE ASSESSEE WAS RS. 62,58,503/- ON WHICH ASSESSEE HAS CLAIMED EXEMP TION U/S. 54 OF THE ACT FOR MAKING INVESTMENT IN PURCHASING OF THREE UNITS OF RESIDENTIAL FLATS FOR TOTAL CONSIDERATION OF RS. 77 LACS. THE ASSESSING OFFICER STATED THAT EXEMPTION U/S. 54 OF THE ACT IS NOT AVAILABLE TO TH E ASSESSEE IN VIEW OF THE AMENDMENT MADE IN THE SECTION 54 OF THE ACT W.E.F. 1 ST APRIL, 2015 WHICH IS REPRODUCED AS UNDER:- 'IN SECTION 54 OF THE INCOME-TAX ACT, IN SUB-SECTIO N (1), FOR THE WORDS 'CONSTRUCTED, A RESIDENTIAL HOUSE', THE WORDS 'CONSTRUCTED, ONE RESIDENTIAL HOU SE IN INDIA' SHALL BE SUBSTITUTED WITH EFFECT FROM THE 1 ST DAY OF APRIL, 2015.' ON QUERY, THE ASSESSEE EXPLAINED THAT HE HAS CLAIME D DEDUCTION WITH REGARD TO ONE RESIDENTIAL HOUSE AND ALSO PLACED RELIANCE O N VARIOUS JUDICIAL PRONOUNCEMENTS. HOWEVER, THE ASSESSING OFFICER HAS NOT AGREED WITH THE SUBMISSION OF THE ASSESSEE AND STATED THAT THE AMEN DMENT MADE W.E.F. 1 ST APRIL, 2015 IS OF CLARIFICATORY IN NATURE AND IN VI EW OF THE AMENDMENT I.T.A NO. 323/AHD/2019 A.Y. 2015-16 PAGE NO HITESH G. SOMANI VS. ITO 3 ASSESSEE IS ENTITLED FOR EXEMPTION OF CAPITAL GAIN INCOME U/S. 54 OF THE ACT IN ONE RESIDENTIAL HOUSE ONLY WHICH COMES TO RS. 24 ,25,513/- AS AGAINST THE EXEMPTION CLAIMED BY THE ASSESSEE AGAINST THREE UNI TS. THEREFORE, CLAIM OF EXEMPTION TO THE EXTENT OF RS. 38,32,990/- WAS DISA LLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 4. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE HO LDING THAT AS PER THE AMENDMENT IN FINANCE ACT, 2014 APPLICABLE W.E.F. AS SESSMENT YEAR 2015-16 WHEREIN LEGISLATURE HAS CLARIFIED THAT EXEMPTION IS AVAILABLE ONLY FOR INVESTMENT IN ONE HOUSE. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS SUBMITTED PAPER BOOKED COMPRISING COPIES OF DOC UMENTS AND DETAILS OF INFORMATION FURNISHED BEFORE THE ASSESSING OFFICER AND LD. CIT(A). THE LD. HAS COUNSEL REFERRED LETTER DATED 28 TH JULY, 2017 VIDE WHICH DETAILED SUBMISSION WAS MADE BEFORE THE ASSESSING OFFICER AL ONG WITH DOCUMENTARY EVIDENCES DEMONSTRATING THAT THREE UNITS WERE NOT I NDEPENDENT AS THERE WAS SINGLE ENTRY AND EXIT AND THEY HAVE COMBINED THREE ADJACENT RESIDENTIAL UNITS ON THE SAME 9 TH FLOOR INTO ONE COMBINED FLAT TO GET LARGER FLOORIN G AREA AND PURCHASED UNIT WAS A PART OF THE BUILDER TAILOR MAD E COMBINED FLAT ON THE SAME FLOOR SPECIFICALLY CONSTRUCTED FOR THE ALLOTTE E. THE LD. COUNSEL HAS ALSO CONTENDED BY REFERRING TO THE PAGE NO. 79 OF THE PA PER BOOK COMPRISING SINGLE SALE AGREEMENT MADE FOR ALL THE THREE UNITS. THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON THE DECISION OF HONBLE HIGH COU RT OF DELHI IN THE CASE OF GEET DUGGAL (2013) 30 TAXMANN.COM (DELHI) AND DECI SION OF BOMBAY HIGH I.T.A NO. 323/AHD/2019 A.Y. 2015-16 PAGE NO HITESH G. SOMANI VS. ITO 4 COURT IN THE CASE OF CIT VS. DEVDAS NAYAK (2014) 49 TAXMAN.COM 30 (BOMBAY), DECISION OF HONBLE HIGH COURT OF KARNATK A IN THE CASE OF CIT VS. SMT. K.G. RUKMANIAMMA (2011) 196 TAXMAN 86 (KAR ) AND DECISION OF ITAT AHMEDABAD IN THE CASE OF MOHMMEDANIF SULTANALI PRADHAN VS. DY. CIT (2020) 114 TAXMAN.COM 508 (AHMEDABAD-TRIB). ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF LOWER AUTHORITIES. 6. HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WITHOUT REITERATING THE FACTS AS ELABORATED ABOVE, ASSESSEE HAD INVESTED THE SALE CONSIDERATION RECEIVED ON SALE OF IMMOVABLE PROPERT Y IN PURCHASING COMBINED THREE ADJACENT FLATS AS A RESIDENTIAL HOUS E. AS PER SALE DEED DATED 17 TH JUNE, 2014 ON 18 TH JULY, 2014 THE BUILDER HAS ISSUED ALLOTMENT LETTER FOR SINGLE COMBINED RESIDENTIAL FLAT TO THE ASSESSEE. WITH THE SUPPORT OF DOCUMENTARY EVIDENCES, THE ASSESSEE HAS DEMONSTRATE D THAT ALL THE THREE UNITS WERE NOT INDEPENDENT AS THERE WAS SINGLE ENTRY AND EXIT AND STATED THAT IT WAS ONE RESIDENTIAL HOUSE. THE ASSESSEE HAS ALSO ENCLO SED COPY OF ALLOTMENT LETTER DATED 17 TH JULY, 2014 IN THE PAPER BOOK WHEREIN THE DEVELOPER HAS STATED THAT TAILOR MADE COMBINED FLATS ON THE SAME FLOOR WAS SPECIFICALLY CONSTRUCTED FOR THE ALLOTTEE AND THERE SHALL BE SIN GLE ENTRY AND EXIT FOR THE ALLOTTEE AND MAINTENANCE AS PER THE SOCIETY RULES W OULD BE APPLICABLE IN SINGULAR MANNER ON THE BUILT UP AREA OF 3045 SQUARE FEET. WE HAVE ALSO GONE THROUGH THE JUDICIAL PRONOUNCEMENT REFERRED BY THE LD. COUNSEL IN THE CASE OF GEET DUGGAL (2013) 30 TAXMANN.COM (DELHI). THE RELE VANT PART OF THE FINDINGS OF THE HONBLE HIGH COURT OF DELHI IS REPR ODUCED AS UNDER:- SECTION 54/54F USES THE EXPRESSION RESIDENTIAL HO USE. THE EXPRESSION USED IS NOT 'A RESIDENTIAL UN IT'. THIS IS A NEW CONCEPT INTRODUCED BY THE ASSESSING OFFICER INTO TH E SECTIO?I. SECTION 54/54F REQUIRES THE ASSESSEE TO ACQUIRE A 'RESIDENTIAL HOUSE' AND SO LONG AS THE ASSESSEE ACQUIRES A BUILD ING, WHICH MAY BE CONSTRUCTED, FOR THE SAKE OF CONV ENIENCE, IN SUCH A MANNER AS TO CONSIST OF SEVERAL UNITS WHICH CAN, IF THE NEED ARISES, BE CONVENIENTLY AND INDEPENDENTLY USED AS AN INDEPENDENT RESIDENCE, THE REQUIREMENT OF THE SECTI ON SHOULD BE TAKEN TO HAVE BEEN SATISFIED. THERE IS NOTHING IN THESE I.T.A NO. 323/AHD/2019 A.Y. 2015-16 PAGE NO HITESH G. SOMANI VS. ITO 5 SECTIONS WHICH REQUIRE THE RESIDENTIAL HOUSE TO BE CONSTRUCTED IN A PARTICULAR MANNER. THE ONLY REQUIR EMENT IS THAT IT IS RESIDENTIAL USE AND NOT FOR COMMERCIAL USE. IF THER E IS NOTHING IN THE SECTION WHICH REQUIRES THAT THE RESIDENTIAL HOUSE SHOULD BE BUILT IN A PARTICULAR MANNER, IT SEEMS TO US THAT THE INCOME TAX AUTHORITIES CANNOT INSIST U PON THAT REQUIREMENT. A PERSON MAY CONSTRUCT A HOUSE ACCORDING TO HIS PLANS AND REQUIREMENTS. MOST OF THE HOUSES ARE CONSTRUCT ED ACCORDING TO THE NEEDS AND REQUIREMENTS AND EVEN COMPULSIONS. FO R INSTANCE, A PERSON MAY CONSTRUCT A RESIDENTIAL HO USE IN SUCH A MANNER THAT HE MAY USE THE GROUND FLOOR FOR HIS OWN RESIDENCE AND LET OUT THE FIRST FLOOR HAVING AN IN DEPENDENT ENTRY SO THAT HIS INCOME IS AUGMENTED. IT IS QUITE COMMON TO FIND SUCH ARRANGEMENTS, PARTICULARLY POST-RETIREME NT. ONE MAY BUILD A HOUSE CONSISTING OF FOUR BEDROOMS (ALL IN THE SAME OR DIFFERENT FLOORS) IN SUCH A MANNER THAT AN. INDE PENDENT RESIDENTIAL UNIT CONSISTING OF TWO OR THREE BEDROOMS MAY BE CAR VED OUT WITH AN INDEPENDENT ENTRANCE SO THAT IT CAN BE LET OUT. HE MAY EVEN ARRANGE FOR HIS CHILDREN AND FAMILY TO STAY TH ERE, SO THAT THEY ARE NEARBY, AN ARRANGEMENT WHICH CAN BE MUTUALLY SUPPORTIVE. HE WAY CONSTRUCT HIS RESIDENCE IN SUCH A MANNER THAT IN CASE OF A FUTURE NEED HE MAY BE AB LE TO DISPOSE OF A PART THEREOF AS AN INDEPENDENT HOUSE. THERE MAY BE SEVERAL SUCH CONSIDERATIONS FOR A PERSON WHILE CONS TRUCTING A RESIDENTIAL HOUSE. WE ARE THEREFORE, UNABLE TO SEE HOW OR WHY THE PHYSICAL STRUCTURING OF THE NEW RESI DENTIAL HOUSE, WHETHER IT IS LATERAL OR VERTICAL, SHOULD COME IN T HE WAY OF CONSIDERING THE BUILDING AS A RESIDENTIAL HOUSE. WE DO NOT THINK THAT THE FACT THAT THE RESIDENTIAL HOUSE CONSISTS O F SEVERAL INDEPENDENT UNITS CAN BE PERMITTED TO ACT AS AN IMPEDIMENT TO THE ALLOWANCE OF THE DEDUCTION, UNDER SECTION 54/54F. IT IS NEITHER EXPRESSLY NOR BY NECESSARY IMPLICATIO N PROHIBITED. WE HAVE ALSO GONE THROUGH THE JUDICIAL PRONOUNCEMEN T IN THE CASE OF CIT VS. D. ANANDA BASAPPA (2009) TAXMAN 4 (KAR). THE R ELEVANT PART OF THE DECISION OF HONBLE HIGH COURT OF KARNATAKA IS REPR ODUCED AS UNDER:- SECTION 54 OF THE INCOME-TAX ACT, 1961 - CAPITAL GAINS - PROF IT ON SALE OF PROPERTY USED FOR RESIDENTIAL PURPOSE - ASSESSMENT YEAR 1996-97 - WHE THER EXPRESSION 'A RESIDENTIAL HOUSE' AS OCCURRING IN SECTION 54(1) SHOULD BE UNDERSTOOD IN A SENSE THAT BUILDING SHOULD BE RESIDENTIAL IN NATURE AND 'A' SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NUMBER - HELD, YES - WHETHER WHEN AN HUF'S RESIDENTIAL HOUSE IS SOLD AND MEMBERS OF H UF, KEEPING IN VIEW FUTURE NEEDS IN EVENT OF SEPARATION, INVEST CAPITAL GAIN IN PURCHASING MORE THAN ONE RESIDENTIAL BUILDING, BENEFIT OF EXEMPTION UNDER SECTION 54(1) WOULD BE AVAILABLE TO HUF -HELD, YES WE HAVE ALSO GONE THROUGH THE JUDICIAL PRONOUNCEMEN T IN THE CASE OF MOHMMEDANIF SULTANALI PRADHAN VS. DY. CIT (2020) 1 14 TAXMAN.COM 508 (AHMEDABAD-TRIB). THE RELEVANT PART OF THE DECISIO N OF THE ITAT AHMEDABAD IS REPRODUCED AS UNDER:- SECTION 54F OF THE INCOME-TAX ACT, 1961 - CAPITAL GAINS - EXEMPTION OF, IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE (PURCHASE OF TWO ADJOINING FLATS) - ASSESSMENT YEAR 2015-2016 - DURING RELEVANT YEAR, ASSESSEE CLAIMED EXEMPTION UNDER SECTION 54F ON LONG-TERM CAPITAL GAIN INVESTED IN TWO BUNGALOWS WHICH WERE ADJACENT TO EACH OTHER AND USE D AS ONE RESIDENTIAL UNIT - ASSESSING OFFICER DISALLOWED SAME ON GROUND THAT ASSESSEE COULD HAVE CLAIMED EXEMPTION UNDER SECTION 54F WITH RESPECT TO INVESTMENT IN ONE BUNGALOW ONLY - HOWEVE R, UNDER PROVISIONS OF SECTION 54F, NO DEFINITION/CLARIFICATION ABOUT AREA OF RESIDENTIAL PROPERTY, HAS BEEN PROVIDED, HENCE, ONE ASSESSEE CAN BUY HUGE BUNGALOW/PROPERTY SAY THOUSAND SQUARE METERS AND CAN CLAIM DEDUCTION SUBJECT TO CONDITIONS - WHETHER THEREFORE, ASSESSEE COULD NOT HAVE BEEN DEPRIVED OF BENEFIT CONFERRED UNDER STATUTE MERELY ON REASONING THAT THERE WERE TWO DIF FERENT REGISTRIES OF BUILDINGS/PROPERTIES AS FROM POINT OF VIEW OF ASSESSEE, IT WAS SINGLE PROPERTY - HELD, YES - WHETHER FURTHER, IN VIEW OF FACT THAT BOTH PROPERTIES PURCHASED BY ASSESSEE WERE LOCATED IN SAME GEOGRAPHICAL AREA, ASSESSEE WOULD BE ENTITLED FOR EXEMPTION PROVIDED UNDER SECTION 54F - HELD, YES [PARAS 7.1, 7.2 AND 7.4] [IN FAVOUR OF ASSESSEE] I.T.A NO. 323/AHD/2019 A.Y. 2015-16 PAGE NO HITESH G. SOMANI VS. ITO 6 WE FIND THAT ISSUES AND FACTS RAISED BEFORE THE TRI BUNAL IN THE CASE OF THE ASSESSEE ARE SIMILAR TO THE FACTS AND ISSUE ADJUDIC ATED BY THE CO-ORDINATE BENCH OF THE ITAT AHMEDABAD IN THE CASE OF MOHMMEDA NIF SULTANALI PRADHAN VS. DY. CIT (2020) 114 TAXMAN.COM 508 AS REFERRED ABOVE. THEREFORE, IT WOULD NOT BE APPROPRIATE FOR US TO DE VIATE FROM THE VIEW TAKEN IN THE ABOVE CASE WITHOUT POINTING OUT ANY MATERIAL CHANGE IN FACTS AND CIRCUMSTANCES IN THE CASE OF THE ASSESSEE. SINCE ID ENTICAL ISSUE WAS DEALT WITH BY TRIBUNAL IN THE ABOVE REFERRED CASE, THEREF ORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY, WE DIRECT THE ASSESSING O FFICER TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21-09-2021 SD/- SD/- (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 21/09/2021 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,