ITO, CHENNAI V. Gumanmal Jain, CHENNAI

ITA 414/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9366 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 25-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: N ANANDAN ADVOCATR
• Keywords: Business income
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBE R AND SHRI. G. PAVAN KUMAR, JUDICIAL MEMBER ./I.T.A. NO.414/MDS/2016 / ASSESSMENT YEAR : 2012-2013. INCOME TAX OFFICER, NON-CORPORATE WARD 10(2) CHENNAI 600 034 VS. SHRI. GUMANMAL JAIN, FLAT NO.A-2, RAIN FOREST, NO.57, NEW NO.26,TAYLORS ROAD, REMS STREET, KILPAUK, CHENNAI 600 010. [PAN AABPJ 0558P] ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : SHRI. A.V.SREEKANTH, IRS, JCIT. $% ! ' # /RESPONDENT BY : SHRI. N. ANANDAN, ADVOCATR & ' ' ( /DATE OF HEARING : 28-04-2016 ) ' ' ( /DATE OF PRONOUNCEMENT : 11-05-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AG AINST ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-12, CHENNA I IN ITA NO.10/2012-13/CIT(A)-12, DT 18.12.2015 FOR THE ASSE SSMENT YEAR 2012- ITA NO.414/MDS/2016. :- 2 -: 2013 PASSED U/S.143(3) AND 250 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 2.1 THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF CLAIM U/S 54F BY HOLDING THE ASSESS EE IS ELIGIBLE FOR THE SAID CLAIM EVEN IF THE INVESTMENT IS MADE IN MORE THAN ONE RESIDENTIAL UNIT AS THE SAME IS SI TUATING IN THE SAME DOOR NUMBER RELYING ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. V.R.KARPAGAM (2014) 50 TAXMANN.COM 55 (MAD.). 2.2 THE LEARNED CIT(A) OUGHT TO HAVE SEEN THE FACT THE ASSESSEE HAS INVESTED IN FLATS SITUATING IN DIF FERENT BLOCKS WHICH ARE SEPARATE FROM EACH OTHER AND THE CIT(A) OUGHT TO HAVE INVOKED THE PROVISIONS OF SECT ION 54F(2) OF THE INCOME TAX ACT. 2.3 THE LEARNED CIT(A) FAILED TO NOTE THE FACT THA T EVEN THOUGH THE RESIDENTIAL UNITS ARE SITUATING IN THE SAME DOOR NUMBER, THE UNITS ARE HAVING SEPARATE KITCHEN, ELECTRICITY CONNECTION AND PROPERTY TAX ASSESSMENTS AND SEPARATE AND DISTINCT DOORS AND SEPARATE FLAT/DOOR NUMBERS WITHIN THE RESIDENTIAL COMPLEX. 2.4 THE LEARNED CIT(A) FAILED TO VERIFY THE ABOVE F ACTS WHILE ALLOWING THE ASSESSEE'S APPEAL. 2.5 IT IS HEREBY INFORMED THAT THE DECISION RELIED ON BY THE LEARNED CIT(A) IN THE CASE OF CIT VS. V.R. KARPAGAM (2014) 50 TAXMANN.COM 55 (MAD.) IS NOT ACCEPTED BY THE DEPARTMENT ON MERIT AND NO FURTHER APPEAL WAS PREFERRED ONLY ON ACCOUNT OF LOW TAX EFF ECT. 3. THE BRIEF FACTS OF THE CASE THE ASSESSEE IS AN INDI VIDUAL DERIVING INCOME FROM HOUSE PROPERTY, BUSINESS INCOME, LONG TERM CAPITAL GAINS AND INCOME FROM OTHER SOURCES AND E-FILED RETURN OF INCOME ON 01.07.2013 ADMITTING TOTAL INCOME OF ?2,49,980/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) AND U/S.142(1) OF THE ACT ITA NO.414/MDS/2016. :- 3 -: WAS ISSUED ALONGWITH QUESTIONNAIRE. IN COMPLIANCE TO NOTICES AND QUESTIONARIE THE LD. AUTHORISED REPRESENTATIVE FIL ED INFORMATION AND APPEARED FROM TIME TO TIME AND GAVE CLARIFICATIONS ON THE ISSUE. IN THE PRESENT FINANCIAL YEAR, THE ASSESSEE ALONGWITH HIS TWO SONS ENTERED IN TO JOINT VENTURE AGREEMENT WITH M/S. AKASH HOUSING PR OPRIETOR SMT. RATAN BAI, AND OTHERS ON 15.07.2010. THE RESIDENTIAL PROPERTY PROPOSED FOR DEVELOPMENT AT NO.57, TAYLORS ROAD, CHENNAI. THE TERM AND CONDITION DETERMINED AND SHARING RATIO OF DEVELOPMENT BETWEEN ASSESSEE AND HIS TWO SONS AS THE ONE PARTY AND M/S. AKASH HOUSING P ROPERTY (BUILDER) AS OTHER PARTY AGREED TO 70:30 SHARE SUBJECT TO OVERAL L CONSTRUCTED AREA NOT EXCEEDING 50600 SQ.FT. IN THE EVENT OF PERMISSION GRANTED FOR CONSTRUCTION BEYOND 50600 SQ.FT. THE RATIO WILL BE REVISED TO 55:45 ON PER SUPPLEMENTARY AGREEMENT DATED 03.05.2011. THE ASSES SEE IN THE RETURN OF INCOME CLAIMED LONG TERM CAPITAL GAINS ARISING O N RELINQUISHMENT OF 31.056% SHARE IN THE PROPERTY AS NIL AFTER AVAILING EXEMPTION U/S.54 OF THE ACT. THE LONG TERM CAPITAL GAINS COMPUTED AS ?2,02,21,146/- AFTER REDUCING INDEXED COST OF LAND & BUILDING & DEMOLITI ON CHARGES AND WAS REVISED TO ?1,94,85,385/- ON THE BASIS OF DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. MANJULA J. SHAL IN I.T. APPEAL NO.3378 OF 2 010. THE ASSESSING OFFICER HAS DENIED EXEMPTION WITH ELABORA TE FINDINGS AND RELIED ON THE AGREEMENT AND PROVISIONS OF ACT. THE LD. A SSESSING OFFICER ACCEPTED JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT VS. V.R. ITA NO.414/MDS/2016. :- 4 -: KARPAGAM 50 TAXMANN.COM 55 (MAD) AS APPLICABLE TO THE FACT OF THE ASSESSEES CASE BUT ON PRINCIPLE THE DECISION WAS NOT ACCEPTED BY THE REVENUE. SINCE THE ISSUE HAS NOT ATTAINED FINALITY IN THE HIGHER FORUM, THE LD. ASSESSING OFFICER HAS DEFERRED THE RATIO DESCEN D OF JURISDICTIONAL HIGH COURT DECISION AND DENIED EXEMPTION CLAIMED BY THE ASSESSEE WITH OTHER DISALLOWANCES AND ASSESSED THE INCOME AND RAISED R EMAND. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE COMM ISSIONER OF INCOME TAX (APPEALS). 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED RE PRESENTATIVE OF ASSESSEE ARGUED THE GROUNDS WITH SUPPORTING JUDI CIAL DECISIONS AND DEMONSTRATED THE RESIDUAL CLAUSES OF DEVELOPMENT AG REEMENT AND SUPPLEMENTARY AGREEMENT DATED 03.05.2011 AND EMPHA SIZED ON THE PROVISIONS OF SEC. 54 AND 54F OF THE ACT WERE THE A SSESSEE WAS ALLOWED EXEMPTION U/S.54F OF THE ACT ON INVESTMENT IN RESI DENTIAL HOUSE AND FILED WRITTEN SUBMISSIONS ALONGWITH EXTRACTS OF THE JOINT DEVELOPMENT AGREEMENTS. THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) BASED ON THE MATERIAL EVIDENCE AND SUBJECTIVE FINDINGS OF THE A SSESSING OFFICER MADE A EXHAUSTIVE OBSERVATION IN THE ORDER REFERRED AT PAGE NO. 9 TO 17 EXPLAINING TERMS AND CONDITIONS OF AGREEMENT ENTERE D WITH DEVELOPER AND THE JUDICIAL DECISIONS ON THE DEFINITION OF RESIDEN TIAL HOUSE, WHICH WAS SUBSEQUENTLY AMENDED FROM 1 ST APRIL 2015 BY FINANCE ACT, 2014 WERE THE WORDS ONE RESIDENTIAL HOUSE CANNOT BE EQUATED WITH A RESIDENTIAL ITA NO.414/MDS/2016. :- 5 -: HOUSE FOR EARLIER ASSESSMENTS AND PLURALITY OF RE SIDENTIAL UNITS CAN QUALIFY FOR EARLIER ASSESSMENT YEARS. THE LAW APPLICABLE T O ASSESSEE ARE PRE- AMENDED PROVISIONS. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GAVE MACRO VIEW ON THE INTERPRETATION OF PROVISIONS AND LEGAL OPINION WITH DICTIONARY MEANING OF ONE RESIDENTIAL HOUSE HA S ALLOWED THE APPEAL OF THE ASSESSEE WITH REALISTIC FINDINGS AT PAGE NO. 18 AND 19 OF HIS ORDER AS UNDER:- CONSIDERING THE FACTS OF THE INSTANT CASE WHICH A RE SIMILAR TO THE CASE DECIDED AS REFERRED ABOVE, I COME TO THE CONCLUSION THAT ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 54 F OF I.T ACT 1961. IN THE ASSESSMENT ORDER ASSESSING OFFICER HAS ALSO ARRIVED AT THE SAME CONCLUSION THAT ASSESSEE IS ELI GIBLE FOR EXEMPTION UNDER SECTION 54-F. THE ONLY ISSUE IS THA T ASSESSEE RELYING ON THE DESCRIPTION OF PROPERTY GIVEN AT SCH EDULE A AND HAS CAME TO A CONCLUSION THAT THE RESIDENTIAL PROPE RTY SO CONSTRUCTED CONSIST OF MORE THAN ONE RESIDENTIAL UN IT. THEREFORE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION UN DER SECTION 54F OF THE INCOME TAX ACT, 1961. HOWEVER, AS PER T HE ALLOTMENT LETTER DATED 14.03.2014 WHICH WAS ARRIVED CONSEQUENTIAL TO THE SUPPLEMENTARY AGREEMENT DATED 03.05.2011, THE PROPERTY IN SCHEDULE B WAS ALLOTTED TO SHRI. GUMANMAL JAIN AND HIS SONS AS UNDER:- S.NO FLOOR FLAT BUILT UP . TOTA ALLOTTED 1 FIRST A 4015 2 B 3365 1 A 3960 2 SECOND B 3360 3 C 3355 GUMANMAL 1 THIRD B 1122 JAIN 2 C 3360 1 B 1120 FOURTH 2 C 3355 27012 ITA NO.414/MDS/2016. :- 6 -: S.'NO FLOOR FLAT BUILT UP TOTA ALLOTTED 1 THIRD B 1122 1 A 3855. DEEPAK FOURTH JAIN 2 , B 1120 6097 S.NO FLOOR FLAT BUILT UP' TOTA ALLOTTED 1 THIRD A 3910 2 B 1122 VARUN JAIN 1 FOURTH B 1120 6152 ~ I TOTAL BUILT UP AREA ALLOTED 39260. THEREFORE RELYING ON THE JUDGEMENT OF THE HONORABLE MADRAS HIGH COURT IN THE CASE LAWS OF SMT. V.R. KARPAGAM V. ITO NO. 301 OF 2004 AGAINST THE ORDER DT.7.3.2013 MADE IN I TA NO.1082/MAD/2010 OF THE FILE OF ITAT CHERINAI B ENEH,: CIT VS SMT. V.R. KARPAGAM (2014) 50 TAXMANN.COM 55 HC MADR AS BRIEF GIST ' SECTION 54F OF THE INCOME-TAX. ACT, 1961 - CAPITAL GAINS ,- EXEMPTION OF IN CASE OF ' INVESTMENT IN RESIDEN TIAL HOUSE (MEANING OF RESIDENTIAL HOUSE) - ASSESSMENT YEAR 2007-0.8 - AS PER A DEVELOPMENT AGREEMENT, ASSESSEE-LAND OWNER PARTED F ROM LAND AND SHE .WAS TO RECEIVE 43.75 PER CENT OF BUILT UP AREA, WHICH WAS TRANSLATED. TO 5 FLATS - WHETHER A RESIDENTIAL HOUS E WOULD INCLUDE MULTIPLE FLATS/ RESIDENTIAL UNITS ALSO, AND, THEREF ORE, ASSESSEE. WAS ELIGIBLE FOR EXEMPTION UNDER SECTION 54F IN RESPECT OF ALL FIVE FLATS - HELD, YES [PARA 10J [IN FAVOUR OF ASSESSEE' I THEREFORE ARRIVE TO A CONCLUSION THAT RESIDENTIAL PROPERTY SO CONSTRUCTED WHICH CONSISTS OF MORE. THAN ONE RESIDENTIAL UNIT IN CASE OF SH. GUMANMAL JAIN DESCRIBED ABOVE IS HELD TO BE ONE RESIDENTIAL UNIT AND THEREFORE ASSESSING OFFICER IS DIRECTED TO GRANT EXEMPTION ELIGIBLE TO THE ASSESSEE UNDER SECTION S4F OF THE IT ACT 1961. AGGRIEVED BY THE ORDER OF COMMISSIONER OF INCOME T AX (APPEALS), THE REVENUE HAS ASSAILED AN APPEAL BEFORE TRIBUNAL. 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE VEH EMENTLY ARGUED THE GROUNDS AND THE PROVISIONS OF SEC. 54F OF THE ACT WERE THE ITA NO.414/MDS/2016. :- 7 -: COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN D ELETING DISALLOWANCE OF CLAIM U/S.54F OF THE ACT THAT THE ASSESSEE IS EL IGIBLE FOR INVESTMENT IN MORE THAN ONE RESIDENTIAL UNIT BASED ON THE JURISDI CTIONAL HIGH COURT DECISION. FURTHER, DEPARTMENT HAS NOT ACCEPTED TH E DECISION AND CONTESTING AT HIGHER FORUM AND REITERATED THE AMEND ED PROVISIONS U/SEC. 54 AND 54F ON INVESTMENT IN ANY RESIDENTIAL HOUSE A S PER FINANCE ACT, 2014. THE ASSESSEE HAS INVESTED LONG TERM CAPITAL G AINS IN MORE THAN ONE RESIDENTIAL FLAT IN THE SAME BLOCK AS PER JOINT DEV ELOPMENT AGREEMENT WHICH IS NOT IN ACCORDANCE WITH THE PROVISIONS OF LAW AND PRAYED FOR SET ASIDE THE ORDER OF COMMISSIONER OF INCOME TAX (APP EALS). 6. CONTRA, THE LD. AUTHORISED REPRESENTATIVE RELIED ON THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND SU PPORTED HIS ARGUMENTS WITH JURISDICTIONAL HIGH COURT DECISIONS AND PRAYED FOR DISMISSING THE APPEAL. 7. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L ON RECORD AND JUDICIAL DECISIONS. THE LD. DEPARTMENTAL REPRE SENTATIVE MAIN CONTENTION THAT ASSESSEE IS NOT ELIGIBLE FOR EXEMPT ION U/S. 54F OF THE ACT DUE TO INVESTMENT IN MORE THAN ONE RESIDENTIAL PROP ERTY IN THE SAME BLOCK. THE FACT THAT THE ASSESSEE HAS ENTERED IN TO DEVELOPMENT AGREEMENT ALONGWITH HIS SONS WITH BUILDER ON CERTA IN TERMS AND CONDITIONS AS PER AGREEMENTS AND CONSIDERING THE RA TIO OF SHARING OF AREAS ITA NO.414/MDS/2016. :- 8 -: BETWEEN BOTH THE PARTIES THE ASSESSEE WAS ALLOTTED FLATE ALONGWITH HIS SONS IN THE SAME BLOCK OF BUILDING ON DIFFERENT FLO ORS. THE ASSESSEE COMPLIED THE CONDITIONS FOR CLAIM OF EXEMPTION U/SE C. 54 OF THE ACT BY INVESTMENT IN MORE THAN ONE RESIDENTIAL PROPERTY AND APPROVED BY COMMISSIONER OF INCOME TAX (APPEALS) IN APPELLATE P ROCEEDINGS. ON PERUSAL OF PROVISIONS OF SEC. 54F OF THE ACT IS A A INCLUSIVE DEFINITION ON INVESTMENT IN RESIDENTIAL HOUSE AND THE PROVISIONS OF SEC. 54F ARE AS UNDER:- 54F. (1) [SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDE D FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPI TAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERR ED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR B EFORE OR [TWO YEARS] AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED , OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE [ CONSTRUCTED, A RESIDENTIAL HOUSE ] (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SE CTION, THAT IS TO SAY, (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN THE N ET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE NET C ONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPIT AL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTIO N AS THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 45 : [ PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL A PPLY WHERE (A) THE ASSESSEE, (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THA N THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR (II) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN TH E NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANS FER OF THE ORIGINAL ASSET; OR ITA NO.414/MDS/2016. :- 9 -: (III) CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET; AND (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER T HAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET, IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY.] SUBSEQUENTLY, THERE WAS A AMENDMENT BY FINANCE ACT , 2014 WERE THE DEFINITION OF ANY RESIDENTIAL HOUSE HAS BEEN CH ANGED TO ONE RESIDENTIAL HOUSE IN INDIA, AND APPLICABLE FROM ASSESSMENT Y EAR 2015-16 EFFECTIVE FROM 01.04.2015. WORDS CONSTRUCTED, ONE RESIDENTIAL HOUSE IN IND IA SHALL BE SUBSTITUTED FOR CONSTRUCTED, A RESIDENTI AL HOUSE BY THE FINANCE (NO.2) ACT, 2014, WITH EFFEC T FROM 01.04.2015. THE PRE AND POST AMENDED PROVISIONS ARE CONSIDERED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF V.R. KARPAGAM (SUPRA ) AND GRANTED RELIEF EVEN THOUGH DIFFERENT FLATS WERE ALLOTTED TO THE ASSESSE E AS ANY RESIDENTIAL HOUSE. THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS DEALT EXHAUSTIVELY ON THE LAW AND JUDICIAL DECISION OF H IGH COURT AND TRIBUNAL AND EXPLANATIONS FILED BY THE ASSESSEE VIZ-A-VIZ A ND HIGHLIGHTED PROVISIONS AND THE FACTUAL MATRIX OF THE CASE. CO NSIDERING THE APPARENT FACTS OF THE CASE AND PROVISIONS, WE ARE NOT INCLIN ED TO INTERFERE WITH THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND U PHOLD THE SAME AND ITA NO.414/MDS/2016. :- 10 -: DISMISS THE APPEAL OF THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED ON WEDNESDAY, THE 11TH DAY OF MAY, 2016 AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) # $% / ACCOUNTANT MEMBER ( & . ' ( ) (G. PAVAN KUMAR) ) $% / JUDICIAL MEMBER *& / CHENNAI + / DATED:11TH MAY, 2016. KV , ' $'./ 0/' / COPY TO: 1 . ! / APPELLANT 2. $% ! / RESPONDENT 3. 1' () / CIT(A) 4. 1' / CIT 5. /4 5 $'6 / DR 6. 5 7 8 & / GF