D.JAYARAMAN, CHENNAI V. ACIT CIRCLE 1, CHENNAI

ITA 3338/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8502 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 06-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R V AROON PRASAD
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Capital asset; Business income; Depreciation; Benefit of exemption
• Section: 143(3); 54F

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . , . , BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.3338/CHNY/2018 / ASSESSMENT YEAR :2009-10 SHRI D. JAYARAMAN, 14/45, WASON STREET, T. NAGAR, CHENNAI 600 017. [PAN: ACEPJ0343D] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, CHENNAI. ( /APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI B. RAMAKRISHNAN, C.A. / RESPONDENT BY : SHRI R.V. AROON PRASAD, JCIT / DATE OF HEARING : 03.06.2019 /DATE OF PRONOUNCEMENT : 02.07.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 2, CHENNAI, DATED 31.10.2018 RELEVANT TO THE ASSESSMENT YEAR 2009-10. THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DENIAL OF DEDUCTION CLAIMED UNDER SECTION 54F OF THE INCOME TAX ACT, 1961 [ACT IN SHORT] RELATING TO THE LONG TERM CAPITAL GAIN BY HOLDING THAT THE ASSESSEE OWNED MORE THAN ONE RESIDENTIAL HOUSE PROPERTY AS ON THE DATE OF TRANSFER OF CAPITAL ASSET. I.T.A. NO.3338/CHNY/18 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN CONSTRUCTION BUSINESS, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 28.09.2009 ADMITTING INCOME OF .76,48,902/-. ON VERIFICATION OF THE DETAILS FILED AGAINST STATUTORY NOTICES, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE OWNED MORE THAN ONE RESIDENTIAL PROPERTY AT THE TIME OF SALE OF CAPITAL ASSETS AND THEREFORE, BY DENYING THE EXEMPTION CLAIMED UNDER SECTION 54F OF THE ACT, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT DETERMINING THE TOTAL INCOME AT .2,19,39,475/-. THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE AGAINST WHICH THE DEPARTMENT PREFERRED FURTHER APPEAL BEFORE THE TRIBUNAL. VIDE ORDER IN I.T.A. NO. 1398/MDS/2013 DATED 04.02.2015, THE TRIBUNAL REMITTED THE MATTER BACK TO THE FILE OF LD. CIT(A) FOR FRESH ADJUDICATION. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ELABORATELY DISCUSSING VARIOUS SALE/TRANSFER OF THE PROPERTY, THE LD. CIT(A) CONFIRMED THE REJECTION OF THE EXEMPTION CLAIMED UNDER SECTION 54F OF THE ACT. 3. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. BY FILING THE STATUS OF THE PROPERTIES HELD BY THE ASSESSEE, THE LD. COUNSEL FOR THE ASSESSEE HAS ARGUED THAT THE LD. CIT(A) ERRONEOUSLY HELD IN CONFIRMING THAT THE ASSESSEE OWNED MORE THAN ONE RESIDENTIAL HOUSE PROPERTY AS ON THE DATE OF TRANSFER OF CAPITAL ASSET WITHOUT CONSIDERING THE SUBMISSIONS OF THE I.T.A. NO.3338/CHNY/18 3 ASSESSEE AND PRAYED FOR DELETING THE ADDITIONS CONFIRMED BY THE LD. CIT(A). ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW INCLUDING PAPER BOOK. AS PER THE ASSESSING OFFICER, THE ASSESSEE OWNED MORE THAN ONE RESIDENTIAL PROPERTY AT THE TIME OF SALE OF CAPITAL ASSETS AT PLOT NO. 204, 213, LAKSHMI NAGAR, VALASARAWAKKAM ON 23.08.2008 AS WELL AS PLOT NO. 9, JANAKI NAGAR, A.R. ST., VALSARAVAKKAM ON 20.02.2009 AT THE FOLLOWING PLACES: 1. FLAT NO. 2, VIJI APARTMENTS, PINJALA SUBRAMANIAN STREET, T. NAGAR, CHENNAI. 2. NO. 10, RAGHAVIAH ROAD, T. NAGAR, CHENNAI. 3. NO. 14/A-5, WASON STREET, T. NAGAR, CHENNAI. 4. BALAJI PREMRAJ HOUSE PROPERTY 5. D. MAHESWARAN AND UMA MAHAESWARAN HOUSE PROPERTY. 4.1 THE FIRST RESIDENTIAL PROPERTY LOCATED AT FLAT NO. 2, VIJI APARTMENTS, PINJALA SUBRAMANIAN STREET, T. NAGAR WAS TRANSFERRED THROUGH A SETTLEMENT DEED ONLY ON 18.12.2008 TO HIS WIFE USHA JAYARAMAN. THE SECOND RESIDENTIAL PROPERTY VIZ., RAGHAVIAH ROAD, THE ASSESSING OFFICER OBSERVED THAT THE PROPERTY WAS LET OUT BY THE ASSESSEE FOR PART OF THE YEAR AND A GROSS RENT OF .1,25,000/- WAS ADMITTED AS RENTAL INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE WAS THE ABSOLUTE OWNER OF THE ABOVE RESIDENTIAL PROPERTIES AS ON I.T.A. NO.3338/CHNY/18 4 THE DATE OF SALE OF THE FIRST CAPITAL ASSET LOCATED AT LAKSHMI NAGAR, VALASARAVAKKAM ON 23.08.2008. SINCE THE ASSESSEE HAS ACCEPTED THE ABOVE FINDINGS OF THE ASSESSING OFFICER BEFORE THE LD. CIT(A), HE CONFIRMED THE DENIAL OF BENEFIT UNDER SECTION 54F OF THE ACT WITH REGARD TO THE TRANSFER OF THE FIRST CAPITAL ASSET LOCATED AT LAKSHMI NAGAR, VALASARAVAKKAM. 4.2 WITH REGARD TO THE RESIDENTIAL PROPERTY AT NO. 14/A-5, WASON STREET, T. NAGAR, CHENNAI, THE ASSESSING OFFICER OBSERVED THAT ALTHOUGH THIS PROPERTY WAS USED AS AN OFFICE, THE ASSESSEE DID NOT CLAIM ANY DEPRECIATION IN THE RETURN OF INCOME. THE ASSESSING OFFICER FURTHER OBSERVES THAT IN THE SALE DEED WITH SUDHA SONI DATED 06.10.2008 AND IN THE SALE AGREEMENT WITH DREAM HOME CONSTRUCTIONS DATED 30.08.2008, IT IS MENTIONED THAT THE ASSESSEE IS RESIDING AT THIS PROPERTY. HOWEVER, THE ASSESSEE CONTENDED BEFORE THE LD. CIT(A) THAT IT WAS HIS ADDRESS FOR COMMUNICATION AND THAT IT IS USED ONLY FOR OFFICE PURPOSES AND FURNISHED COPIES OF THE CHALLAN FOR THE PROPERTY TAX PAID FOR THE FINANCIAL YEAR 2007-08 IN SUPPORT OF HIS CLAIM. UPON THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) OBSERVED THAT SINCE THE PROPERTY IS CLEARLY DEFINED TO BE COMMERCIAL IN NATURE IN THE PROPERTY TAX STATEMENTS OF THE ASSESSEE, HE HELD THAT THE ASSESSING OFFICER ERRED IN CONSIDERING IT TO BE RESIDENTIAL IN NATURE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS PASSED BY BOTH THE ASSESSING OFFICER AS WELL AS LD. CIT(A). I.T.A. NO.3338/CHNY/18 5 4.3 WITH REGARD TO THE PROPERTIES VIZ., BALAJI PREMRAJ HOUSE PROPERTY AND D. MAHESWARAN AND UMA MAHESWARAN HOUSE PROPERTY, THE ASSESSING OFFICER OBSERVED THAT THE ABOVE PROPERTIES WERE PURCHASED AS LAND AND BUILDING. THEREFORE, THE ASSESSING OFFICER OBSERVED THAT BOTH THE PROPERTIES ARE TO BE CONSIDERED AS RESIDENTIAL PLOTS. ON THE OTHER HAND, THE ASSESSEE CONTENDED THAT THESE PROPERTIES WERE SOLD IN THE FINANCIAL YEARS RELEVANT TO THE ASSESSMENT YEARS 2010-11 AND 2012-13 RESPECTIVELY AND THE INCOME FROM THE SALE OF THESE PROPERTIES WAS SHOWN AS BUSINESS INCOME IN THE RETURNS FILED FOR THE RESPECTIVE ASSESSMENT YEARS. THEREFORE, THESE TWO PROPERTIES OUGHT TO HAVE BEEN TREATED AS VACANT SITE. HOWEVER, THE LD. CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND UPHELD THE VIEW TAKEN BY THE ASSESSING OFFICER. 4.4 WE HAVE EXAMINED THE NATURE OF THE PROPERTIES. THE ABOVE TWO PROPERTIES WERE PURCHASED ON 28.01.2008 FROM BALAJI PREMRAJ AND FROM D. MAHESWARAN & UMA MAHESWARAN. AS ON THE DATE OF PURCHASE OF THE PROPERTIES, THE ABOVE PROPERTIES CONSIST OF LAND AND BUILDING. BUT THE CONTENTION OF THE ASSESSEE IS THAT THE BUILDING IS IN DILAPIDATED STAGE AND THEREFORE, HE TOOK THE PROPERTIES AS ONLY LAND, AND OFFERED THE SALE PROCEEDS AS BUSINESS INCOME IN THE SUBSEQUENT ASSESSMENT YEARS [2010-11 & 2011-12]. UPON THE PERUSAL OF THE RECORDS, WE FIND THAT THE PROPERTY CONSISTS OF LAND MEASURING ABOUT 2400 SQ. FT. AND A BUILDING ADMEASURING I.T.A. NO.3338/CHNY/18 6 1290 SQ. FT. AT PLOT NO. 276, ASHTALAKSHMI NAGAR, 18 TH STREET, MADURAVOYAL, CHENNAI. SIMILARLY, THE PROPERTY PURCHASED FROM MAHESWARAN & UMA MAHESWARAN CONSISTS OF LAND MEASURING 2850 SQ. FT. AND A BUILDING ADMEASURING 2900 SQ. FT. AT 48, MAIN ROAD, KRISHNAMACHARI NAGAR, VALASARAVAKKAM, CHENNAI. THEREFORE, IT IS CLEAR THAT AS ON THE DATE OF SALE OF THE TWO RESIDENTIAL PLOTS (CAPITAL ASSETS), THE ABOVE TWO RESIDENTIAL PROPERTIES [PURCHASED FROM BALAJI PREMRAJ AND D. MAHESWARAN & UMA MAHESWARAN) CONSISTING OF LAND AND BUILDING WERE HELD BY THE ASSESSEE IN HIS NAME. THUS, AS ON THE DATE OF SALE [20.02.2009] OF THE PROPERTY AT PLOT NO. 9, JANAKI NAGAR, A.R. ST., VALASARAVAKKAM, CHENNAI, THE ASSESSEE OWNS THE FOLLOWING RESIDENTIAL PROPERTIES IN HIS NAME: (A) NO. 10, RAGAVIAH ROAD, T. NAGAR, CHENNAI 17. (B) BALAJI PREMRAJ HOUSE PROPERTYLAND 2400 SQ.FT. BUILDING 1290 SQ.FT. (C) D. MAHESWARAN & UMA MAHESWARAN-LAND 2400 SQ.FT. BUILDING 2900 SQ.FT. 4.5 IN VIEW OF THE ABOVE SAID FACTS, WE FIND THAT SINCE THE ASSESSEE OWNED MORE THAN ONE RESIDENTIAL PROPERTY AS ON THE DATE OF TRANSFER OF CAPITAL ASSET AT JANAKI NAGAR, VALASARAVAKKAM, CHENNAI, THE ASSESSING OFFICER HAS RIGHTLY DENIED THE BENEFIT OF EXEMPTION UNDER SECTION 54F OF THE ACT WITH REGARD TO BOTH THE PROPERTIES LOCATED AT VALASARAVAKKAM, WHICH WAS CONFIRMED BY THE LD. CIT(A). HOWEVER, THE CONTENTION OF THE ASSESSEE IS THAT HE DEMOLISHED THE EXISTING BUILDING AND SHOWN THE SAME AS STOCK-IN-TRADE AND THE INCOME ON SALE IN SUBSEQUENT ASSESSMENT YEARS I.E., 2010-11 AND 2012-13 AS BUSINESS INCOME AND THEREFORE, THESE TWO PROPERTIES CONSIST OF I.T.A. NO.3338/CHNY/18 7 LAND AND BUILDING SHOULD NOT BE TREATED AS RESIDENTIAL UNITS. WE ARE UNABLE TO ACCEPT THE SUBMISSIONS OF THE ASSESSEE SINCE TREATING THE PROPERTIES AS STOCK-IN-TRADE IN SUBSEQUENT ASSESSMENT YEARS SHALL NOT CHANGE THE TILE OF THE PROPERTIES AS ON THE DATE OF SALE OF THE PROPERTIES (BY 20.02.2009). THE ABOVE TREATMENT OF THE ASSESSEE ITSELF IS NOT SUFFICIENT TO SAY THAT THE ASSESSEE IS ELIGIBLE TO CLAIM EXEMPTION UNDER SECTION 54F OF THE ACT BECAUSE, AS ON THE DATE OF SALE OF PROPERTY AT JANAKI NAGAR ON 20.02.2009, THE ASSESSEE OWNS THREE PROPERTIES IN HIS NAME AS STATED ABOVE. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS PASSED BY BOTH THE ASSESSING OFFICER AS WELL AS LD. CIT(A). THUS, THE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THE 02 ND JULY, 2019 AT CHENNAI. SD/- SD/- (M. BALAGANESH) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, THE 02.07.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.