ACIT 18(1), MUMBAI V. DIVYAA KUMAR, MUMBAI

ITA 4/MUM/2011

• Counselvise Citation: 419914 RSA 2011
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 16-05-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 03-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J K GARG
• Assessee Lawyers: KETAN L VAJANI
• Keywords: Capital asset; Cost of acquisition; Benefit of exemption
• Section: 54; 54F

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - D BENCH. . .. . , !' !' !' !' # # # # $%&' $%&' $%&' $%&' , % % % % () () () () BEFORE S/SH.D.MANMOHAN,VICE-PRESIDENT & RAJENDR A,ACCOUNTANT MEMBER ./ ././ ./ ITA NO.04/MUM/2011 , + + + +/ // / ASSESSMENT YEAR-2007-08 ACIT 18(1) 1 ST FLOOR, PIRMAL CHAMBERS, LALBAUG, MUMBAI- 400018 VS. DIVYAA KUMAR 2 ESHA EKTA APARTMENTS, B.G. KHER ROAD, WORLI, MUMBAI- 400018 PAN: AFVPK8794D ( ,- / // / APPELLANT ) ( ./,- / RESPONDENT ) ,- ,- ,- ,- 0 0 0 0 % %% % / APPELLANT BY : MR. J.K.GARG ./,- 1 0 % / RESPONDENT BY : MR. KETAN L.VAJANI 1 11 1 2 2 2 2 / DATE OF HEARING : 10/09/2013 3+ 1 2 / DATE OF PRONOUNCEMENT : 04/10/2013 , 1961 1 11 1 254(1) % %% % &242 &242 &242 &242 (%5 (%5 (%5 (%5 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M: CHALLENGING THE ORDER DATED 18.10.2010 OF THE CIT(A )-29,MUMBAI ASSESSING OFFICER(AO) HAS FILED FOLLOWING GROUND OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW , THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO ALLOW DEDUCTION U/S. 54F OF I.T. ACT 1961, ON THE LONG TERM CAPITAL GAINS OF RS.1,19,82,600/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO FULFILL THE CO NDITIONS THAT THE ASSESSEE SHOULD NOT HAVE IN POSSESSION OF MORE THAN THE ONE RESIDENTIAL FLAT AT THE T IME OF TRANSFER OF ORIGINAL ASSET AND THAT IN ORDER TO QUALIFY THE EXEMPTION, IT IS NECESSARY TO HAVE THE INVESTM ENT MADE IN FOR RESIDENTIAL HOUSE IN THE NAME OF THE ASSESSEE ONLY. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. ASSESSEE,AN INDIVIDUAL FILED HER RETURN OF INCOME O N 30.08.2007 DECLARING TOTAL INCOME OF RS. 63,13,459/-.ASSESSMENT WAS FINALISED BY THE AO ON 2 4.12.2009 DETERMINING THE INCOME OF THE ASSESSEE AT RS. 1.82 CRORES. 2.1. DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT ASS ESSEE HAD CLAIMED EXEMPTION U/S. 54F OF THE ACT, THAT SHE HAD SOLD 1140 SHARES OF DEHRAD OON TEA COMPANY PVT. LTD.(DTCPL)ON 15. 01.2007 FOR RS.1,77,96,540/-, THAT SHE HAD SHOWN TH E COST OF ACQUISITION AT RS. 4731,THAT SHE CLAIMED TO HAVE MADE AN INVESTMENT IN PURCHASING 2/ 3 RD UNDIVIDED SHARE IN FLAT NO. 202,69 POCHK -ANWALA ROAD,WORLI, MUMBAI VIDE AGREEMENT DATED 26. 06.2007,THAT SHE HAD CLAIMED THAT RS. 58, 09,209/-WAS TAXABLE AS LONG TERM CAPITAL GAIN(LTCG) .AFTER REFERRING THE PROVISIONS OF SECTION 54F OF THE ACT,AO HELD THAT BENEFIT OF EXEMPTION UN DER THE SAID SECTION WAS NOT AVAILABLE IN THE CASES WHERE ASSESSEE OWNED TWO OR MORE RESIDENTIAL HOUSES AS ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET OTHER THAN THE NEW ASSET,THAT ASSESS EE WAS OWNING TWORESIDENCES NAMELY SHIKHAR KUNJ FLAT AND FLAT AT WORLI AS ON THE DATE OF TRANS FER OF THE ORIGINAL ASSET,THAT ASSESSEE HAD FOR THE RELEVANT ASSESSMENT YEAR HAD USED THE NOMENCLATURE RIGHT IN SHIKHAR KUNJ FLAT, THAT IN THE BALANCE-SHEET PRIOR TO YEAR ENDING ON 31.03.2007 IT HAD BEEN STATED AS ONLY SHIKHAR KUNJ FLAT. AO,VIDE ORDER-SHEET ENTRY DATED 09.12.2009,ASKED TH E ASSESSEE AS TO WHY CLAIM OF EXEMPTION U/S.54F SHOULD NOT BE DENIED.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,AO HELD THAT SUBMISSION MADE BY HER WERE BEREFT OF ANY LOGIC/LEG AL TENABILITY,THAT SAME WERE SELF-SERVING EXPLANATION.REFERRING TO THE CASE OF PRADEEP KUMAR (153 TAXMAN 138),HE HELD THAT ASSESSEE HAD FAILED TO FULFILL THE CONDITION THAT WERE NEEDED TO BE SATISFIED TO CLAIM BENEFIT OF SECTION 54F OF 2 ITA NO. 04/MUM/2011(AY-2007-08) DIVYAA KUMAR THE ACT.FINALLY,HE DENIED THE ASSESSEE BENEFIT CLAI MED UNDER THE SAID SECTION AMOUNTING TO RS. 1,19,82,600/- AND ADDED THE SAME TO THE TOTAL INCOM E OF THE ASSESSEE. 2.2. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER,HE HELD THAT FACTS OF THE CASE REVEALED THAT AT THE TIME OF TRANSFER OF CAPITAL ASSET ASSES SEE WAS NOT IN POSSESSION OF MORE THAN TWO HOUSE PROPERTIES,THAT DEDUCTION U/S.54F COULD NOT BE DENI ED TO THE HER,THAT SHE HAD ONLY A CONTINGENT INTEREST IN THE HOUSE MENTIONED IN THE WILL OF HER FATHER-DATED 17.3.1997,THAT HER MOTHER HAD LIFE INTEREST IN THE FLAT,THAT FLAT WAS IN EXCLUSIVE OCC UPATION OF HER MOTHER,THAT HER MOTHER WAS PAYING TAXES AND MAINTENANCE CHARGES,THAT HER MOTHER WAS E NTITLED TO ENJOY THE RIGHTS OF THE FLAT WITHOUT ANY INTERFERENCE FROM THE ASSESSEE,THAT FLAT WAS NO T OWNED BY ASSESSEE AS SHE COULD NOT GIVE IT ON RENT NOR COULD TRANSFER/OCCUPY DURING THE LIFETI ME OF HER MOTHER,THAT ONLY THING THAT ASSESSEE OWNED WAS A RIGHT TO SUCCESSION ONLY AFTER HER MOTH ERS DEMISE,THAT SAID RIGHT IN NO WAY COULD BE TERMED AS OWNERSHIP RIGHT.HE FURTHER HELD THAT A S THE ASSESSEE COULD NEITHER RECEIVE THE INCOME FROM THE PROPERTY NOR ENJOY OR OCCUPY NOR AL IENATE THE PROPERTY SO SHE COULD NEVER BE CALLED THE OWNER OF THE PROPERTY FOR THE PURPOSES O F SECTION 54F OF THE ACT.AS REGARDS THE OTHER PROPERTY AT WORLI, HE HELD THAT ASSESSEE WAS HOLDIN G SHARE IN THE FLAT ALREADY,THAT SHE ACQUIRED REST 2/3RD SHARE OF THE PROPERTY IN WORLI FLAT BY A N AGREEMENT DATED 26.06.2007 FOR A CONSIDERA - TION OF RS.1,10,00,000/-, THAT WITH THE ACQUISITIO N OF SAID SHARE ASSESSEE OWNED ONLY ONE FLAT IN HER NAME,THAT SHE SATISFIED THE CONDITIONS OF 54F.R ELYING ON THE DECISIONS OF MUMBAI TRIBUNAL DELIVERED IN THE MATTERS OF RASIKLAL SATARA(100 TTJ 1039) AND KAIWANTI D ALREJA (54TTJ593),HE HELD THAT DEDUCTION U/S.54F HAS TO BE ALLOWED TO THE ASSESSEE. 2.3 .BEFORE US,AUTHORISED REPRESENTATIVE(AR)SUBMITTED T HAT ASSESSEE HAD NO RIGHT OVER THE WORLI FLAT,THAT FATHER OF THE ASSESSEE HAD EXECUTED A WIL L ON17.3.1997,THAT AS PER THE WILL ASSESSEE WAS TO GET THE FLAT AFTER THE DEMISE OF HER MOTHER,THAT SHE HAD NO CONTROL OVER THE FLAT,THAT SHE HAD ONLY INTEREST IN THE FLAT ON HAPPENING OF SOMETHING ,THAT HER MOTHER WAS PAYING THE RENT AND TAXES FOR THE FLAT, THAT SHE HAD NO RIGHT TO RENT IT OUT, THAT SHE WAS NOT OWNER OF THE FLAT,WORDS USED IN SECTION54FWERE ABOUT PURCHASING OF PROPERTY NOT OWN ING A PROPERTY,THAT OWNING AND PURCHASING WERE TWO DIFFERENT CONCEPTS,THAT PROVISO TO THE SEC TION DEALT WITH OWNERSHIP,THAT PARTIAL OWNING WAS NOT OWNING,THAT SECTION 54F CONTEMPLATED INVEST MENT TO BE MADE IN HOUSE PROPERTY,THAT TWO CONDITIONS HAD TO BE FULFILLED FOR CLAIMING DEDUCTI ON U/S. 54F,THAT THE FIRST CONDITION WAS PURCHA -SE OF A PROPERTY,THAT THE SECOND CONDITION WAS ABO UT PURCHASING OF RESIDENTIAL PROPERTY, THAT LIBERAL VIEW HAD TO BE TAKEN WHERE EXEMPTIONS ARE T O BE ALLOWED TO AN ASSESSEE.HE REFERRED TO CASES OF R.SURESHKUMAR(99-TTJ-997-CHENNAI),SMT.KALA WANTID.ALREJA(SUPRA.),BALVANTRAM U. CHIMNA(72-TTJ-451-AHD.),RASIKLALN.SATRA(98-ITD-335- MUMBAI),DR.P. K.VASANTHI RANGARAJAN 75-DTR-56-MAD.).HE ALSO RELIED UPON THE JUDGMENTS O F T.N.ARVINDA REDDY(120 ITR46), CHANDANBEN MAGANLAL(245ITR182),SHEKHAR SOOD(93TTJ9 09).HE FURTHER SUBMITTED THAT SECTION 54 AND 54F OF THE ACT ALLOWED DEDUCTIONS,THAT ONE W AS FOR RESIDENTIAL PROPERTY AND THE OTHER WAS FOR MAKING INVESTMENT OF OTHER ASSETS,THAT COURTS,W HILE DECIDING THE CASES U/S.54 OF THE ACT,HAVE HELD THAT PURCHASE OF A PART OF ANY PROPERTY CONSTI TUTED INVESTMENT MADE UNDER THAT SECTION. DEPARTMENTAL REPRESENTATIVE(DR)SUBMITTED THAT PROVI SO TO SECTION 54F WAS APPLICABLE IN THE CASE UNDER CONSIDERATION 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.UNDISPUTED FACTS OF THE CASE UNDER CONSIDERATION ARE THAT ASSESSEE HAD A CONTINGENT RIGHT IN THE FLAT THAT WAS OWNED BY HER MOTHER AS PER THE WILL OF HER FATHER AND THA T SHE HAD INVESTED SALE PROCEEDS OF SHARES OF DTCPL FOR PURCHASING 2/3 SHARE OF WORLI FLAT.THERE IS NO DOUBT THAT TILL HER MOTHER WAS ALIVE, SHE HAD NO RIGHT OVER THE FLAT.IN THE FLAT,AT WORLI ,INITIALLY SHE HAD ONLY ONE THIRD SHARE AND SHE PURCHASED REMAINING 2/3 SHARE OF THE SAID FLAT AFTE R SELLING SHARES OF DTCPL.AO HAD DENIED THE BENEFIT TO THE ASSESSEE ON THE GROUND THAT SHE OWNE D TWO OR MORE RESIDENTIAL HOUSES AS ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET OTHER THAN T HE NEW ASSET.WE ARE OF THE OPINION THAT ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET-SHARES OF DT CPL-SHE WAS NOT THE OWNER OF THE SHIKHAR KUNJ FLAT.HER MOTHER WAS ABSOLUTE OWNER OF THAT FLAT AS PER THE WILL OF HER HUSBAND.SIMILARLY,SHE WAS 3 ITA NO. 04/MUM/2011(AY-2007-08) DIVYAA KUMAR NOT THE OWNER OF THE WORLI PROPERTY ON THE DATE OF SALE OF SHARES.AFTER SELLING THE SHARES SHE PURCHASED THE REMAINING 2/3 SHARE OF THE PROPERTY A ND THUS BECAME THE ABSOLUTE OWNER OF THE PROPERTY.IN OUR OPINION MATTER UNDER CONSIDERATION IS EXCEPTION AND CONSIDERING THE PECULIAR FACTS OF THE CASE WE ARE DECIDING THE MATTER IN FAV OUR OF THE ASSESSE.AFTER SELLING A LONG TERM ASSET-SHARES-SHE INVESTED THE SHARE PROCEEDS IN A F LAT IN A MANNER THAT SHE HAD UNRESTRICTED RIGHTS OVER IT.IN OTHER WORDS,HER OWNERSHIP OF THE RESIDEN TIAL HOUSE WAS EXCLUSIVE-SHE HAD POSSESSION AND CONTROL OVER IMMOVABLE PROPERTY.SO,IN OUR OPINI ON ,FAA WAS RIGHT IN HOLDING THAT BENEFIT OF SECTION 54FCOULD NOT DENIED TO HER ON THE GROUND TH AT SHE OWNED TWO RESIDENTIAL PROPERTIES WHEN SHE HAD SOLD THE SHARES OF DTCPL. IT IS SAID THAT SECTION 54,INCLUDING THE SECTION 54 F,OF THE ACT IS PART OF BENEVOLENT LEGISLATION AND WAS INCORPORATED IN THE ACT FOR GIVING IMPETUS OF H OUSING ACTIVITY.CONSIDERING THE BACKGROUND OF THE LEGISLATION,CASES RELIED UPON BY THE ASSESSE E AND THE PECULIAR FACTS OF THE CASE UNDER CONSIDERATION,WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY.THEREFORE,UPHOLDING THE ORDER OF THE FAA ,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FI LED BY THE AO STANDS DISMISSED. 6 )7 62 8 ( 9 6$ 1 $ 2 :. ORDER PRONOUNCED IN THE OPE N COURT ON 4 TH OCTOBER,2013. (%5 1 3+ % & ; <( 4, => ? 2013 1 4 @ SD/- SD/- ( . / D. MANMOHAN ) ( $%&' $%&' $%&' $%&' / RAJENDRA) !' !' !' !' / VICE-PRESIDENT % % % % () () () () /ACCOUNTANT MEMBER / MUMBAI, <( /DATE: 04.10. . 2013 SK (%5 (%5 (%5 (%5 1 11 1 .2A .2A .2A .2A B%A+2 B%A+2 B%A+2 B%A+2 / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / ,- 2. RESPONDENT / ./,- 3. THE CONCERNED CIT(A)/ C D , 4. THE CONCERNED CIT / C D 5. DR D BENCH, ITAT, MUMBAI / AE 4 .2 . , . . & . 6. GUARD FILE/ 4 F / A2 .2 //TRUE COPY// (%5 / BY ORDER, / $ DY./ASST. REGISTRAR , /ITAT, MUMBAI