SUSHIL S. DESHPANDE, MUMBAI V. ITO 16(1)(4), MUMBAI

ITA 3601/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7687 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 25-05-2016
• Court: TRIBUNAL
• Department Lawyers: PURUSHOTTAM KUMAR SR
• Assessee Lawyers: DR PANIEL
• Section: 143(3); 54F; 54; 6; 12; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI DT GARASIA, JM AND SHRI RAJESH KUMAR, AM I.T.A. NO. 3601/MUM/2016 ASSESSMENT YEAR: 2011 - 12 MR. SUSHIL S. DESHPANDE A/701, VALLABHA DARSHAN COOP. HSG. SOCIETY TEJPAL SCHEME, ROAD NO.2, VILE PARLE (E), MUMBAI - 400057 VS. ITO 16(1)(4), 438, 4 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400020 PAN: A BCPD4548H (APPELLANT) : (RESPONDENT) APPELLANT BY : DR. PANIEL RESPONDENT BY : SHRI PURUSHOTTAM KUMAR (SR. AR) DATE OF HEARING : 09 /03/2017 DATE OF PRONOUNCEMENT : 30 /03/2017 O R D E R PER D. T. GARASIA, JM: THIS APPEAL IS FILED BY THE ASSESS EE AGAINST THE ORDER OF CIT(A) - 4 MUMBAI, DATED 03/03/2014 ARISING OUT OF ORDER OF ITO - 11(1)(4) MUMBAI PASSED U/S 143(3) OF THE INCOME TAX ACT, 1 961 FOR THE ASSESSMENT YEAR 2011 - 12 . 2 MR. SUSHIL S. DESHPANDE ITA NO. 3601/M/2016 2. ALL THE THREE GROUNDS WHICH ARE INTERCONNECTED, THEREFORE, THIS GROUN D DISPOSED BY THIS COMMON ORDER, READS AS UNDER: - 1. THE LD . ASSESSING OFFICER ERRED IN NOT ALLOWING THE COST OF THE FURNITURE/INTERIORS OF RS.40 LAKHS AND ELECTRICITY DEPOSIT OF RS.1.5 LAKHS FOR THE COMPUTATION OF LONG TERM CAPITAL GAIN ON SALE OF THE PUNE SHOPS. 2. THE LD. ASSESSING OFFICER ERRED IN NOT ALLOWIN G THE CLAIM U/S 54F OF THE I.T. ACT, 1961 AGAINST THE CAPITAL GAIN EARNED IN THE SALE OF PUNE SHOPS FOR THE INVESTMENT IN THE RESIDENTIAL FLAT AT VALLABHA DARSHAN, VILE PARLE(EAST). 3. THE LD. ASSESSING OFFICER ERRED IN NOT ALLOWING THE SHORT - TERM LOSS OF RS.21,00,776/ - AGAINST THE LONG - TERM CAPITAL GAIN COMPUTED DUE TO DISALLOWANCE OF DEDUCTION U/S 54F OF THE I.T. ACT. 3. THE SHORT FACTS OF THE CASE ARE AS UNDER: - THE ASSESSEE, A RESIDENT INDIVIDUAL, WAS A DIRECTOR AND SHAREHOLDER OF M/S WASSUP MEDIA PVT . LTD. HE RETURN OF INCOME FOR A.Y. 2011 - 12DISCLSING TOTAL INCOME OF RS.7,72,000/ - WAS FURNISHED BY THE ASSESSEE. THE ASSESSEE HAD PURCHASED TWO SHOPS AT PUNE FOR RS.95,12,500/ - IN THE F.Y 2004 - 05. HE LEASED THESE TWO SHOPS ON LEAVE AND LICENSE BASIS TO M/ S PRATAP PARELKAR FOR FIVE YEARS TO RUN A RESTAURANT AND BAR. THE SAID M/S PRATAP PARELKAR HAD INCURRED RENOVATION/ALTERATION/REPAIR EXPENSES OF RS.40,00,000/ - . THE ASSESSEE SOLD THE SHOPS TO M/S PANKAJ PARLEKAR ON 20.03.2010 FOR SALE CONSIDERATION OF RS.2 ,43,11,924/ - . THE ASSESSEE HAD CLAIMED RELIEF OF RS.40,00,000/ - AND RS.1.50 LACS ON ACCOUNT OF FURNITURE AND FIXTURES AND ELECTRICITY DEPOSITS RESPECTIVELY, WHILE COMPUTING THE LONG TERM CAPITAL GAIN. THE ASSESSEE HAS ALSO CLAIMED EXEMPTION U/S 54F OF THE ACT BECAUSE THE ASSESSEE HAD CLAIMED INVESTMENT ON A RESIDENTIAL FLAT AT RS.75,07,100/ - AND COMPUTED LONG TERM CAPITAL GAIN (LTCG) AT RS.NIL. THE A.O. OBSERVED THAT THE ASSESSEE WAS HAVING ASSETS BALANCE - SHEETS AS ON 31.03.2010 AND 31.03.2011. THEREFORE, T HE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE WAS HAVING OWNED MORE THAN ONE RESIDENTIAL HOUSE, OTHER 3 MR. SUSHIL S. DESHPANDE ITA NO. 3601/M/2016 THAN THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET AND THEREFORE, THE APPELLANT WAS NOT ELIGIBLE FOR EXEMPTION U/S 54 OF THE I.T. ACT. SECONDLY, HE HELD THAT THE PAYMENT WAS RS.40,00,000/ - WAS MADE TO M/S PRATAP PARELKAR FOR RENOVATION/ALTERATION/REPAIR EXPENSES. HE HAD RELIED ON SOME CORRECTION DEED FOR CLAIMING SUCH EXPENSES. THEREFORE, PAYMENT OF RS.40,00,000/ - MADE BY M/S PRATAP PARELKAR CANNOT BE CLAIMED AS DEDUCTION BY THE ASSESSEE WHILE SELLING PROPERTY TO M/S PANKAJ PARLEKAR. THE SAID CORRECTION DEED WAS A SELF - SERVING DOCUMENT AND WAS NEVER REGISTER ANYWHERE. THEREFORE, THE A.O.S ACTION OF DISALLOWANCE OF RS.40,00,000 / - . TH E MATTER CARRIED TO CIT(A) AND CIT(A) HAS NOT ALLOWED THE CLAIM THEREFORE, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS SOLD TWO SHOPS AND HE PURCHASED THE SHOP ON 25/11/2005. HE LEASE THIS SHOP TO PRATAP PARELKAR FOR 60 MONTHS FOR CONDUCTING A FAMILY RESTAURANT AND BAR, COPY OF THE LEAVE AND LICENSE AGREEMENT WAS EXECUTED BETWEEN THE PARTY. IT WAS AGREED THAT THE LICENSEE WAS CARRY OUT ALL THE NECESSARY FURNITURE AND FIXTURES REQUIRED FOR HIS BUSINESS, AT HIS OWN COST. ACCORDINGLY, THE LICENSEE MADE ALL FURNITURE AND FIXTURES AND WAS DOING HIS BUSINESS. WITHIN 14 MONTHS OF THE LEAVE AND LICENSE PERIOD THE ASSESSEE WISH TO SELL THE SHOPS AND ENTERED INTO SALE AGREEMENT, COPIES OF THE SALE AGRE EMENT ENCLOSED. SINCE THIS S ALE AGREEMENT W AS MADE JUST WITHIN 14 MONTHS. HE WANTED TO REIMBURSEMENT OF ALL HIS FURNITURE AND FIXTURE COST AND ACCORDING TO THIS SALE CONSIDERATION OF SHOPS WAS FIXED, RS.40,00,000/ - WAS DIRECTLY PAID TO PRATAP PARELKAR AND WHO HAS CONFIRM THE SAME. TH EREFORE, WHILE CALCULATING THE COST OF FURNITURE IS ON INCLUDED IN TOTAL CONSIDERATION FOR AGREEMENT BUT SAME WAS GIVEN BACK TO LICENSEE WHO INCURRED THE COST OF THE ASSESSEE. THE CAPITAL GAIN WAS COMPUTED THE ASSESSEE HAS REDUCED THE COST OF FURNITURE. MO REOVER, THE LONG TERM CAPITAL GAIN ON SHOP WAS RE - INVESTMENT IN 4 MR. SUSHIL S. DESHPANDE ITA NO. 3601/M/2016 RESIDENTIAL FLAT AT VALLABHA DARSHAN, VILE PARLE. THE ASSESSEE WAS JOINT OWNER OF FLAT NO. E/705 AND 706 ALONG WITH HIS WIFE. THUS, HE WAS NOT THE FULL OWNER OF THE FLAT. A SHARE IN THE JOINT PROPERTY SHOULD BE REGARDED AS A SHARE ONLY AND NOT AS AN OWNERSHIP CO - OWNER IS A PART OWNER AND A PART OF A HOUSE CANNOT BE TREATED AS ONE HOUSE AND OWNERSHIP OF PART HOUSE CANNOT BE CONSIDERED AS THE OWNERSHIP OF THE ONE HOUSE. THE ASSESSEE HAD A FLAT ON MEGHDOOT, VILE PARLE, BUT THE SAME WAS DEMOLISHED AND WAS UNDER RE - DEVELOPMENT PROCESS. AFTER RE - DEVELOPMENT NEW FLATS RECEIVED BACK. THERE WAS A RIGHT IN THIS FLAT BUT NOT EXIST DURING THE YEAR. THEREFORE, IF A FLAT WAS DEMOLISHED THE ASSESSEE HAS ONLY RIGHT AND ASSESSEE PAID TO RECEIVE THE PURCHASE. THEREFORE, THE ASSESSEES CLAIMED MAY BE ALLOWED. 5. THE LD. DR RELIED UPON THE ORDER OF REVENUE AUTHORITIES. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT DURING THE YEAR THE ASSESSEE HAS P URCHASED TWO SHOPS COPY OF THE PRATAP PARELKAR FOR 60 MONTHS FOR CONDUCTING FAMILY RESTAURANT AND BAR. AS PER THE LEAVE AND LICENSE AGREEMENT IT WAS AGREED THAT THE LICENSEE WAS CARRIED OUT ALL THE NECESSARY FURNITURE FIXTURES REQUIRED FOR HIS BUSINESS A T HIS OWN COST. THE LICENSE WAS FOR 60 MONTHS BUT WITHIN 14 MONTHS THE ASSESSEE SOLD THIS SHOP ENTERED INTO SALE AGREEMENT HAS TO REIMBURSEMENT ALL THE FURNITURE AND FIXTURES COST AND THE ORIGINAL SALE AGREEMENT SPECIFICALLY MENTION THAT THE SHOP INCLUDES TH E FURNITURE AND FIXTURE AND ACCORDING TO THAT THE SHOPS SALE CONSIDERATION OF THE SHOPS WAS FIXED WHICH READS AS UNDER: SHOP NO. CONSIDERATION FOR SHOP (RS.) CONSIDERATION FOR FURNITURE & FIXTURES (RS.) TOTAL CONSIDERATION (RS.) I 98,55,000/ - 19,70,000/ - 1,18,25,000/ - II 1,01,45,000/ - 20,30,000/ - 1,21,75,000/ - TOTAL 2,00,00,000/ - 40,00,000/ - 2,40,00,000/ - 5 MR. SUSHIL S. DESHPANDE ITA NO. 3601/M/2016 6. THEREFORE, IT IS ALSO FACT AND RECORD THAT 40,00,000/ - WAS DIRECTLY PAID TO PRATAP PARELKAR AND SAME WAS CONFIRM BY HIM. THEREFORE, ABOVE COST OF FURNITURE IS INCLUDED IN TOTAL CONSIDERATION OF AGREEMENT BUT SAME WAS GIVEN BACK TO LICENSEE WHO HAS INCURRED THE COST OF ASSETS. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLE OR RS.40,00,000/ - CONSIDERATION FOR CALCULATING THE LONG TERM CAP ITAL GAIN. THEREFORE, THE ASSESSEE ENTITLED FOR THE SAME. IN RESPECT OF SECTION 54F OF THE I.T. ACT THE ASSESSEE HAD TAKEN CONTENTION BEFORE US THAT DURING THE YEAR THE ASSESSEE WAS JOINT OWNER OF FLAT NO. E/705 AND 706 ALONG WITH HIS WIFE HE WAS NOT FULL OWNER OF THE FLAT AND SHARE IN JOINT PROPERTY WAS REGARDED AS SHARE ONLY AND NOT THE OWNERSHIP. A PART OF HOUSE CANNOT BE TREATED AS ONE HOUSE AND OWNERSHIP OF PART HOUSE CANNOT BE CONSIDERED AS OWNERSHIP OF ONE HOUSE. THIS FACT IS ACCEPTED BY THE HONBLE MUMBAI TRIBUNAL IN THE CASE OF RASIKLAL N SATRA, 98 ITD 335 READS AS UNDER: SECTION 54F OF THE INCOME - TAX ACT, 1961 CAPITAL GAINS EXEMPTION OF, IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE ASSESSMENT YEAR 1998 - 99 WHETHER WORD OWN APPEARING IN SECT ION 54F INCLUDES ONLY SUCH RESIDENTIAL HOUSE WHICH IS FULLY AND WHOLLY OWNED BY ONE PERSON AND NOT A RESIDENTIAL HOUSE OWNED BY MORE THAN ONE PERSON HELD, YES ASSESSEE CLAIMED EXEMPTION UNDER SCTION 54F BY INVESTING CAPITAL GAINS IN PURCHASE OF RESIDEN TIAL FLAT ASSESSING OFFICER DENIED ASSESSEES CLAIM ON GROUND THAT ASSESSEE WAS ALREADY A CO - OWNER OF ANOTHER FLAT WHETHER ASSESSEE NOT BEING ABSOLUTE OWNER OF ANOTHER RESIDENTIAL FLAT, EXEMPTION UNDER SECTION 54F COULD BE DENIED HELD, NO. THIS VIE W IS STARTED BY THE DECISION OF RASIKLAL N SATRA 98 ITD 335. WE ALSO FIND THAT THE ASSESSEE HAD FLAT IT MEGHDOOT BUT THE SAME WAS DEMOLISHED AND IT WAS UNDER RE - DEVELOPMENT PROCESS AND THAT FLAT WAS NEVER EXIST AND IT WAS ONLY RIGHT. THEREFORE, WE ARE OF T HE VIEW THAT THE ASSESSEE WAS NOT HAVING ANY HOUSE THE ASSESSEE HAD TO ACQUIRE THE CONSTRUCTION HOUSE WHICH DOES NOT MEAN 6 MR. SUSHIL S. DESHPANDE ITA NO. 3601/M/2016 THAT THE ASSESSEE IS OWNER OF ANOTHER HOUSE. THEREFORE, THE ASSESSEE IS ENTITLED IN DEDUCTION U/S 54 OF THE I.T. ACT. IN THE RESULT AP PEAL OF THE ASSESSEE IS ALLOWED. JUDGMENT PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH 2017. SD/ - SD/ - (RAJESH KUMAR) ACCOUNTANT MEMBER (D.T. GARASIA) JUDICIAL MEMBER MUMBAI, DATED: 30 TH MARCH , 2017 *RAHUL SHARMA* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, D BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI