Dr. Parimal J. Kansagra, RAJKOT-GUJARAT V. The Income Tax Officer, (Inter. Taxa.), RAJKOT-GUJARAT

ITA 374/RJT/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6658 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 24-08-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: KEYUR PARMAR
• Keywords: Capital asset; Wrong claim
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AHMEDABAD] BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA NO. 374/RJT/2015 ASSESSMENT YEAR : 2011-12 DR. PARIMAL J. KANSAGRA, C/O. KANSAGRA HOSPITAL, OPP. ASTRON CINEMA, SARDAR NAGAR, RAJKOT PAN : AQXPK 0098 H VS THE ITO ( INTL. TAXATION), RAJKOT / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI KEYUR PARMAR, AR REVENUE BY : SHRI PRAVEEN VERMA, SR DR / DATE OF HEARING : 22/02/2017 / DATE OF PRONOUNCEMENT: 15/03/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-13, AHM EDABAD DATED 28.05.2015 PASSED FOR ASSESSMENT YEAR 2011-12. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER:- 1. THE HONBLE CIT(A)-13, AHMEDABAD ERRED IN PASSING T HE ORDER FOR AY 2011-12. 2. THE HONBLE CIT(A) HAVE NOT CONSIDERED THE FACTS OF THE CASE AND HAVE PASSED THE ORDER WITHOUT CONSIDERING THE FACTS THAT OUT OF TOTAL 6 ROOMS,4 ROOMS WHICH ARE FURNISHED ARE GIVEN ON RENT AND 2 ARE VACANT, HOWEVER VACANT ROOMS ARE NOT SAME IN AMENITIES AND HENCE RENTS CANNOT BE CONSIDERED ON SAME GROUND FOR VACANT OFFI CES AND RENTED OFFICES AND THE FACT IS REGARDING PURCHASE OF RESID ENTIAL HOUSE AND ITA NO. 37/ RJT/2015 DR. PARIMAL J. KANSAGRA VS. ITO (INTL TXN.) AY: 2011-12 2 EXEMPTION CLAIMED U/S 54F IS NOT ALLOWED ON THE BAS IS OF TECHNICAL FAULT CAUSED AT REGISTRARS OFFICE (GOVT.) AND THEREFORE THE ORDER OF CIT(A)- 13 SHOULD BE CANCELLED. 3. YOUR APPELLANT RESERVE THEIR RIGHTS TO ADD, AMEND A ND ALTER THE ABOVE GROUNDS OF APPEALS AND STATEMENT OF FACTS AS AND WH EN THE OCCASION ARISES AND WILL BE ENTITLED TO SUBMIT FURTHER DOCUM ENTS. 3. BRIEFLY STATED, THE ASSESSEE IS A NON-RESIDENT I NDIAN (NRI) AND STAYING AT USA. THE ASSESSEE FILED RETURN OF INCOM E DECLARING TOTAL INCOME ATRS.1,13,970/-. THE INCOME OF THE ASSESSEE COMPRISES OF INTEREST INCOME FROM BANKS AND INTEREST FROM HOUSE PROPERTIE S. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. IN THE COURSE OF SCRUTINY ASSESSMENT, IT WAS FOUND BY THE ASSESSING OFFICER THAT THE ASSE SSEE SOLD CERTAIN COMMERCIAL PROPERTIES AND CLAIMED EXEMPTION UNDER S ECTION 54 OF THE ACT TOWARDS REINVESTMENT OF THE SALE PROCEEDS IN TW O RESIDENTIAL PROPERTIES. THE ASSESSEE SOLD THE COMMERCIAL PROPER TIES FOR A SALE CONSIDERATION OF RS.69,75,000/-. THE LONG TERM CAPI TAL GAINS OF RS.31,11,566/- WAS DECLARED THEREON, WHICH WAS CLAI MED AS DEDUCTION UNDER SECTION 54 OF THE ACT. IT WAS OBSERVED BY TH E ASSESSING OFFICER THAT THE CLAIM OF DEDUCTION UNDER SECTION 54 IS NOT AVAILABLE TO THE ASSESSEE AGAINST THE LONG TERM CAPITAL GAINS ARISIN G ON TRANSFER OF A COMMERCIAL PROPERTY. THE CLAIM FOR DEDUCTION WAS, HOWEVER, RECONSIDERED UNDER THE PROVISIONS OF SECTION 54F OF THE ACT. THE ASSESSING OFFICER, HOWEVER, OBSERVED THAT THE ASSES SEE HAS PURCHASED TWO RESIDENTIAL PROPERTIES AGAINST THE SALE CONSIDE RATION OF THE AFORESAID CAPITAL ASSETS. ONE PROPERTY WAS PURCHASED AT STAR REGENCY FOR RS.16,00,000/- AND ANOTHER PROPERTY AT SHILPAN REGA LIA FOR RS.21,25,000 /- . THE ASSESSING OFFICER OBSERVED THAT BOTH THE RESIDE NTIAL HOUSES ARE COMPLETELY SEPARATE AND INDEPENDENT RESIDENTIAL HOU SES AND NOT ITA NO. 37/ RJT/2015 DR. PARIMAL J. KANSAGRA VS. ITO (INTL TXN.) AY: 2011-12 3 ADJOINING TO EACH OTHER. THEREFORE, HE ALLOWED DED UCTION IN RESPECT OF ONE ELIGIBLE HOUSE AND DENIED EXEMPTION IN RESPECT OF ANOTHER HOUSE. THE ASSESSING OFFICER THUS HELD THAT THE ASSESSEE I S LIABLE TO PAY CAPITAL GAIN TAX ON LONG TERM CAPITAL GAINS DETERMINED AT R S.23,97,802/- INSTEAD OF NIL LONG TERM CAPITAL GAINS DISCLOSED BY THE ASS ESSEE. 4. THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSE SSEE WAS OWNER OF SIX CONSULTING ROOMS AT A HOSPITAL BUILDING. IT WA S CLAIMED BY THE ASSESSEE THAT THE ASSESSEE HAS GIVEN TWO CONSULTING ROOMS TO A DOCTOR FOR A ANNUAL RENT OF RS.2,58,000/-. THE ASSESSEE FURTH ER CLAIMS THAT ANOTHER CONSULTING ROOM HAS BEEN GIVEN TO A MEDICAL STORE F OR ANNUAL RENT OF RS.18,000/-. IT WAS ALSO OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE IS OWNER OF SIX CONSULTING ROOMS, WHEREAS HE HAS SHOWN ANNUAL LETTING VALUE (ALV) OF THREE CONSULTING ROOMS ONLY TOTALING TO RS.2,76,000/-. THE ASSESSEE IS LIABLE FOR TAX ON AN NUAL LETTING VALUE OF REMAINING THREE CONSULTING ROOMS IN TERMS OF SECTIO N 23(4) OF THE ACT. IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT REMAINING THREE ROOMS ARE USED FOR WAITING PLACE OF PATIENTS AND THEREFORE, RENT RECEIVED INCLUDES ALV FOR ALL THE S IX CONSULTING ROOMS FOR TAXATION. THE ASSESSING OFFICER OBSERVED THAT THE LEAVE AND LICENSE AGREEMENT DEPICTS THAT ONLY THREE ROOMS ARE PROVIDE D ON RENTAL BASIS. THEREFORE, IN VIEW OF THE PROVISIONS OF SECTION 23 OF THE ACT, ALV OF THE REMAINING PROPERTIES ARE REQUIRED TO BE DETERMINED AS PER EXPECTED LET OUT VALUE IN THE OPEN MARKET. THE ASSESSING OFFI CER FURTHER NOTED THAT THE MUNICIPAL TAX BILLS IN RESPECT OF ALL SIX CONSU LTING ROOMS SHOW THAT THESE ARE OF SIMILAR SIZE. THE INCIDENCE OF MUNICIP AL TAX FOR ALL THE PROPERTIES IS SIMILAR. THEREFORE, THE ASSESSING OFF ICER ASSUMED THAT ALL ITA NO. 37/ RJT/2015 DR. PARIMAL J. KANSAGRA VS. ITO (INTL TXN.) AY: 2011-12 4 THE SIX COMMERCIAL ROOMS ARE CAPABLE OF FETCHING ID ENTICAL RENT. THE ASSESSING OFFICER ACCORDINGLY APPLIED THE RENT FETC HED IN RESPECT OF OTHER CONSULTING ROOMS AND DETERMINED ALV FOR ALL THE SIX CONSULTING ROOMS AT RS.7,20,000/- AS PER PROVISIONS OF SECTION 23 OF TH E ACT. DEDUCTION AT 30% OF THE ALV WAS ALSO ALLOWED AS PER PROVISIONS O F SECTION 24 OF THE ACT. THE ASSESSING OFFICER ACCORDINGLY MADE ADDITI ON OF RS.3,46,800/- TOWARDS ALV OF VACANT OFFICES. 5. THE ASSESSEE CHALLENGED THE ORDER OF THE ASSESSI NG OFFICER BEFORE THE CIT(A). THE CIT(A) ALSO DID NOT FIND MERIT IN T HE APPEAL OF THE ASSESSEE. IT WILL BE APT TO REPRODUCE THE RELEVANT OPERATIVE PART OF THE ORDER OF THE CIT(A) ON BOTH THE ISSUES, WHICH READS AS UNDER:- I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER A ND SUBMISSIONS OF THE APPELLANT FILED DURING THE APPELLATE PROCEEDINGS. THE FIRST GROUND OF APPEAL RELATES TO THE ADDITION MADE BY THE AO ON ACCOUNT OF VACANT OFFICES WHICH IS NOT JUSTIFIED . THE AO HAS MADE ADDITION ON ACCOUNT OF ALV CALCULATED ON BASIS OF R ENTAL RECEIVED @ RS. 10,000 PER MONTH FOR SIX CONSULTING ROOMS OWNED BY THE APPELLANT GIVEN DEDUCTION OF 30% ON THE SAME AND THEREAFTER THE DEC LARED ALV AMOUNTING RS. 2,58,000 HAS FURTHER BEEN REDUCED, BEFORE MAKIN G ADDITION OF RS. 3,46,000/- TO THE INCOME OF THE APPELLANT. THE ADDI TION MADE BY THE AO IS AS PER LAW. THE APPELLANT HAS ALSO CONTENDED THAT E H AO HAS TAKEN THE VALUE OF ALV AS PER HIS OWN MIND INSTEAD OF ALV FIX ED BY THE RAJKOT MUNICIPAL CORPORATION. THIS CONTENTION OF THE APPEL LANT CANNOT BE ACCEPTED AS THE AO HAS TAKEN THE VALUE OF ALV ON TH E BASIS OF ACTUAL RENT RECEIVED AND NOT AS PER HIS OWN MIND. FURTHER, NO D ETAILS REGARDING THE ALV FIXED BY RAJKOT MUNICIPAL CORPORATION REFERRED TO HAS BEEN GIVEN. IN VIEW OF THE ABOVE DISCUSSION, THE ADDITION MADE BY THE AO IS AS PER LAW AND IN ORDER AND HENCE CONFIRMED. THE SECOND GROUND RELATES TO ADDITION OF RS. 23,97, 801/- MADE BY THE AO BY DISALLOWING PART OF DEDUCTION CLAIMED U/S . 54 OF THE ACT BY THE AO. ITA NO. 37/ RJT/2015 DR. PARIMAL J. KANSAGRA VS. ITO (INTL TXN.) AY: 2011-12 5 AS SEEN FROM THE ORDER, THIS ISSUE HAS BEEN DISCUSS ED IN DETAIL BY THE AO AND HE HAS BEEN DISCUSSED IN DETAIL BY THE A O AND HE HAS RESTRICTED THE CLAIM OF DEDUCTION U/S. 54F OF THE A CT TO INVESTMENT IN ONLY ONE RESIDENTIAL HOUSE AS AGAINST TWO RESIDENTIAL HO USES CLAIMED BY THE APPELLANT. THE AO HAS ELABORATELY DISCUSSED THE PRO VISIONS OF THE ACT AND JUDICIAL PRONOUNCEMENTS THIS REGARD WHILE RESTRICTI NG THE CLAIM OF DEDUCTION OF THE APPELLANT. DURING THE APPELLATE PROCEEDINGS, THE AR OF THE APP ELLANT HAS NOT BEEN ABLE TO REBUT THE STAND TAKEN BY THE AO IN VIE W OF THE FACTS OF THE CASE AND PREVALENT LAW. IT HAS BEEN HELD BY THE HON'BLE KERALA HIGH COURT I N THE CASE OF CIT V/S. JOHAY JOSEPH (KER) 241 ITR 423 THAT: IF T HE RENT RECEIVED OR RECEIVABLE IS HIGHER THAN THE SUM FOR WHICH PROPERT Y RIGHT REASONABLY BE EXPECTED TO LET, THE AMOUNT RECEIVED OR RECEIVABLE SHALL BE ANNUAL VALUE OF PROPERTY.' IN VIEW OF THE ABOVE DISCUSSION, THE ADDITION MADE BY THE AO ON THIS ACCOUNT IS CONFIRMED. 6. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL. 7. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE A SSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S 54F AS AGAINST WRONG CLAIM MADE UNDER SECTION 54 OF THE ACT. THE LD. AR FURTHER SUBMITTED THAT THE ALV DETERMINED FOR VACANT COMMERCIAL SPACE CANNOT BE TREATED AT PAR WI TH OTHER COMMERCIAL SPACE GIVEN ON RENT. HE REFERRED TO A COPY OF BUIL DING PLAN SHOWING SIX COMMERCIAL SPACES OWNED BY THE ASSESSEE AND SUBMITT ED THAT WHILE THREE COMMERCIAL SPACES OCCUPIED HAS SPECIAL EQUIPMENTS, THE OTHER THREE COMMERCIAL SPACES REMAINING VACANT ARE EMPTY AND, T HEREFORE, THE RENT OF THE VACANT PREMISES CANNOT BE EQUATED WITH THE COMM ERCIAL SPACES LICENSED. HE, THEREFORE, SOUGHT SUITABLE RELIEF IN ESTIMATION OF ALV. ITA NO. 37/ RJT/2015 DR. PARIMAL J. KANSAGRA VS. ITO (INTL TXN.) AY: 2011-12 6 8. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDER OF THE CIT(A). 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. TWO ISSUES ARE INVOLVED IN THE PRESENT CASE. FIRSTLY, THE ASSESSE E HAS SOUGHT RELIEF UNDER SECTION 54F IN PLACE OF SECTION 54 ORIGINALLY CLAIM ED IN RESPECT OF TWO RESIDENTIAL PROPERTIES. THE ASSESSING OFFICER HAS GRANTED RELIEF UNDER SECTION 54F IN RESPECT OF ONE RESIDENTIAL PROPERTY. WE FIND THE RESIDENTIAL PROPERTIES ARE SITUATED AT DIFFERENT PLACES AND THE ASSESSING OFFICER HAS DEMONSTRATED THAT THE RESIDENTIAL HOUSES ARE COMPLE TELY SEPARATE AND UNCONNECTED AND NOT ADJOINING EACH OTHER. THEREFOR E, IN TERMS OF SECTION 54F OF THE ACT, THE ASSESSEE CANNOT BE SAID TO BE H OLDING THESE TWO RESIDENTIAL UNITS AS ONE RESIDENTIAL PROPERTY. THER EFORE, WE FIND THAT THE ASSESSING OFFICER HAS RIGHTLY DETERMINED THE ISSUE AND RESTRICTED THE RELIEF AS PER LAW. WE DO NOT SEE ANY REASON TO INT ERFERE WITH THE ORDER OF THE CIT(A) SUSTAINING THE ACTION OF THE ASSESSING O FFICER. THEREFORE, THE FIRST ISSUE RAISED BY THE ASSESSEE IS DECIDED AGAIN ST HIM. 10. THE SECOND ISSUE INVOLVED IS DETERMINATION OF A LV ON VACANT COMMERCIAL PREMISES QUA THE OTHER COMMERCIAL PREMIS ES SITUATED IN THE SAME BUILDING AND ADJOINING TO EACH OTHER WHICH ARE EQUIPPED WITH SOME AMENITIES. WE FIND FROM THE BUILDING PLAN THA T ALL THE COMMERCIAL SPACES ARE SITUATED ADJOINING TO EACH OTHER AND THE REFORE, THERE IS SOUND BASIS FOR ESTIMATION OF ALV OF THE VACANT PREMISES. THE ASSESSEE HAS NOT SHOWN BEFORE US AS TO WHAT AMENITIES HAVE BEEN PROV IDED AND WHAT VALUE THEREOF HAS BEEN DETERMINED WITH REFERENCE TO ANY RENT AGREEMENT. IN ABSENCE OF ANY DOCUMENT THAT SHOW THAT THE AMENI TIES WERE PART OF THE COMMERCIAL PREMISES RENTED OUT AND THE RENT WAS DET ERMINED FACTORING ITA NO. 37/ RJT/2015 DR. PARIMAL J. KANSAGRA VS. ITO (INTL TXN.) AY: 2011-12 7 SUCH SPECIAL AMENITIES, WE ARE NOT IN A POSITION TO ASCERTAIN THE FACT. IN THE ABSENCE OF ANY CORROBORATION FROM THE ASSESSEE TO SHOW DIFFERENTIAL RENT OWING TO PURPORTED EQUIPMENTS, WE DO NOT CONS IDER IT EXPEDIENT TO INTERFERE WITH THE ORDER OF THE CIT(A) SUSTAINING T HE ACTION OF THE ASSESSING OFFICER. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE COURT ON 15 TH MARCH, 2017 AT AHMEDABAD SD/- SD/- (RAJPAL YADAV) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED 15/03/2017 *BT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! / CONCERNED CIT 4. ! ( ) / THE CIT(A) 5. , / DR, ITAT, RAJKOT 6. & / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) ' #, / ITAT, RAJKOT