THE ITO, WARD - 2(4), VIJAYAWADA.., Vijayawada V. Sri Grandhi Kamaraj Mangaraj, Vijayawada

ITA 460/VIZ/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0246 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 14-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 54F; 54

Judgement Text

ITA NO.405&406/VIZAG/2012 GRANDHI KAMARAJ MANGARAJ, VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , ,, , . . . . , , , , % % % % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER . .. ./ // / I.T.A.NO.460/VIZAG/2012 ( / ASSESSMENT YEAR :2008-09) ITO WARD - 2(4) VIJAYAWADA VS. GRANDHI KAMARAJ MANGARAJ VIJAYAWADA [ PAN: AFEPG 8857J ] (1 1 1 1 / APPELLANT) (231 231 231 231 / RESPONDENT ) . .. ./ // / I.T.A.NO.405/VIZAG/2012 ( / ASSESSMENT YEAR :2008-09 ) GRANDHI KAMARAJ MANGARAJ VIJAYAWADA VS. ITO WARD - 2(4) VIJAYAWADA ( 1 1 1 1 / APPELLANT) ( 231 231 231 231 / RESPONDENT ) 1 4 / APPELLANT BY : SHRI G.V.N. HARI, AR 231 4 / RESPONDENT BY : SHRI M.N. MURTHY NAIK, DR 4 8 / DATE OF HEARING : 28.9.2015 4 8 / DATE OF PRONOUNCEMENT : 30.9.2015 ITA NO.405&406/VIZAG/2012 GRANDHI KAMARAJ MANGARAJ, VIJAYAWADA 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS THE REVENUE AGAINST THE ORDER OF THE CIT(A), VIJAYA WADA DATED 4.6.2012 FOR THE ASSESSMENT YEAR 2008-09. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS AN INDIV IDUAL AND FILED A RETURN OF INCOME OF RS.2,97,270/-. THE RETURN FILE D BY THE ASSESSEE WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (H EREINAFTER CALLED ACT). AFTER DUE PROCESS, ASSESSMENT WAS COMPLETE D U/S 143(3) OF THE ACT BY DETERMINING TOTAL INCOME OF RS.71,82,263/-. IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVED THAT THE ASSESSEE SOLD THE HOUSE PROPERTY DURING THE YEAR FOR A CONSIDERATION OF RS.1,13,21,0 00/- AND OUT OF THE PROCEEDS PURCHASED TWO FLATS I.E. FLAT NO.301 & 302 AT DAVIS ROAD, RICHARDS TOWN, BANGALORE IN THE NAME OF HIS WIFE SM T. SUMANT MANGARAJ AND IN HIS NAME ON 30.4.2007 AND 12.10.200 7 RESPECTIVELY. THE A.O. HAS CALLED THE EXPLANATION FROM THE ASSESS EE THAT WHY THE EXEMPTION SHOULD NOT BE DISALLOWED IN VIEW OF MORE THAN ONE FLAT HELD BY THE ASSESSEE. IN RESPONSE TO THE QUERY RAISED B Y THE A.O., THE ASSESSEE HAS FILED A LETTER DATED 30.9.2010 BY STAT ING THAT THE TWO FLATS ARE ADJACENT FLATS WHICH ARE COMBINED AND MADE AS A SINGLE HOUSE. ITA NO.405&406/VIZAG/2012 GRANDHI KAMARAJ MANGARAJ, VIJAYAWADA 3 THERE IS A SINGLE KITCHEN IN THE ENTIRE HOUSE AND T HEREFORE CLAIMED THE EXEMPTION TREATING THE TWO FLATS AS SINGLE HOUSE. FURTHER, ASSESSEE HAS FILED A CERTIFICATE FROM THE REGISTERED VALUER AS W ELL AS FLAT DEVELOPERS I.E. M/S. DORMATA DEVELOPERS IN WHICH IT WAS STATED THAT THE ASSESSEE HAS PURCHASED TWO FLATS TO BE USED AS A SINGLE FLAT. T HE SAME HAS BEEN DESIGNED TO HAVE SINGLE KITCHEN IN BOTH FLATS AS RE QUIRED BY THE ASSESSEE. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE REJECTED THE CLAIM ON THE GROUND THAT ASSE SSEE CLAIMED U/S 54 OF THE ACT CONVERTING THE TWO SEPARATE FLATS INTO S INGLE HOUSE CAN ONLY BE CONSIDERED IF THE ASSESSEE HAS USED THE FLATS AS SELF-OCCUPATION. IN THIS CASE, THE ASSESSEE HAS LET OUT SAID FLATS, SHO WN THE RENTAL INCOME AND DENIED THE CLAIM OF THE ASSESSEE. 3. ON APPEAL BY THE ASSESSEE, THE LD. CIT(A) DIRECT ED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE U/S 54 O F THE ACT BY OBSERVING THAT ASSESSEE HAD PURCHASED TWO ADJACENT FLATS IN B ANGALORE OUT OF SALE PROCEEDS RECEIVED FROM THE SALE PROPERTY AT VIJAYAW ADA. THE ASSESSEE HAS PURCHASED THE ADJACENT FLATS AND COMBINED THE S AME INTO ONE UNIT. THE PROPERTY FOR ALL PRACTICAL PURPOSE IS A SINGLE UNIT WHICH HAS BEEN SUBSEQUENTLY LET OUT AS SUCH. THE LD. CIT(A) ALSO FOLLOWED CERTAIN ITA NO.405&406/VIZAG/2012 GRANDHI KAMARAJ MANGARAJ, VIJAYAWADA 4 JUDICIAL PRECEDENTS AND ALLOWED THE CLAIM OF THE AS SESSEE. REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. THE LD. D.R. HAS SUBMITTED THAT THE SALE PROCEED S UTILIZED TO THE EXTENT OF INVESTMENTS MADE IN THE NAME OF THE HUSBA ND I.E. ASSESSEE ONLY ALLOWABLE AND INVESTMENTS MADE IN THE NAME OF THE WIFE CANNOT BE ALLOWED. HE RELIED ON THE JUDGEMENT OF THE PRAKASH VS. ITO 312 ITR 40. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESS EE HAS SUBMITTED THAT THE ASSESSEE HAS SOLD THE HOUSE PROPERTY AT VI JAYAWADA AND ENTIRE SALE PROCEEDS ARE UTILIZED FOR THE PURPOSE OF PURCH ASE OF TWO FLATS ONE IN THE NAME OF ASSESSEES WIFE AND ANOTHER IN THE NAME OF ASSESSEE AND SUBMITTED THAT ASSESSEE IS FULLY ELIGIBLE FOR CLAIM U/S 54 OF THE ACT. HE RELIED ON THE DECISION OF THE COMMISSIONER OF INCOM E TAX VS. R. ARORA 342 ITR 38. HE ALSO RELIED ON THE DECISION OF DIRE CTOR OF I.T. (INTERNATIONAL TAXATION) VS. MRS. JENNIFER BHIDE 34 9 ITR 80 AND STRONGLY SUPPORTED THE ORDER PASSED BY THE COMMISSIONER. 6. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORDS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE A SSESSEE HAS SOLD THE HOUSE PROPERTY AT VIJAYAWADA FOR A CONSIDERATION OF RS.1,13,21,000/- AND OUT OF ITS SALE PROCEEDS ASSESSEE HAS PURCHASED TWO FLATS I.E. FLAT ITA NO.405&406/VIZAG/2012 GRANDHI KAMARAJ MANGARAJ, VIJAYAWADA 5 NO.301 & 302 AT DAVIS ROAD, RICHARDS TOWN, BANGALOR E IN THE NAME OF HIS WIFE SMT. SUMANT MANGARAJ AND ANOTHER FLAT IN H IS NAME. THE A.O. HAS ALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF THE SALE PROCEEDS OR INVESTMENT TO THE EXTENT OF FLAT PURCHASED BY THE A SSESSEE IN HIS NAME AND REJECTED THE CLAIM OF THE ASSESSEE IN RESPECT O F THE WIFE OF ASSESSEE, ON THE GROUND THAT THE ASSESSEE IS ONLY E LIGIBLE TO CLAIM BENEFIT U/S 54 OF THE ACT IN RESPECT OF FLAT PURCHA SED BY HIM IN HIS NAME AND NOT ELIGIBLE FOR THE BENEFIT U/S 54 OF THE ACT IN RESPECT OF FLAT PURCHASED IN THE NAME OF THE WIFE. HOWEVER, THE LD . CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THA T THE ASSESSEE HAS PURCHASED TWO FLATS OUT OF SALE PROCEEDS RECEIVED F ROM THE SALE PROPERTY AND THE SAME SALE PROCEEDS WERE INVESTED IN TWO ADJ ACENT FLATS CONVERTED INTO ONE UNIT AND THE PROPERTY FOR ALL PR ACTICAL PURPOSE IS A SINGLE UNIT. BY ALLOWING THE CLAIM OF THE ASSESSEE HE ALSO RELIED ON THE SAME JUDICIAL PRECEDENTS. AFTER CONSIDERING THE EN TIRE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE SALE PR OCEEDS RECEIVED BY THE ASSESSEE BY SELLING THE PROPERTY AT VIJAYAWADA INVESTED IN A TWO ADJACENT FLATS BY CONVERTING INTO A SINGLE UNIT. T O THAT EFFECT ASSESSEE HAS PRODUCED A CERTIFICATE FROM THE REGISTERED VALU ER AS WELL AS FLAT DEVELOPER. THE ABOVE FACT WAS NOT DISPUTED BY THE DEPARTMENT. THEREFORE, THE ENTIRE SALE PROCEEDS INVESTED BY ASS ESSEE IN A SINGLE UNIT ITA NO.405&406/VIZAG/2012 GRANDHI KAMARAJ MANGARAJ, VIJAYAWADA 6 FOR INVESTMENT MADE IN HIS NAME AS WELL AS HIS WIFE S NAME. IN OUR OPINION, THE ASSESSEE IS FULLY ELIGIBLE FOR BENEFIT U/S 54 OF THE ACT. THE HONBLE DELHI HIGH COURT HAS CONSIDERED THE ELIGIBI LITY OF THE CLAIM U/S 54F OF THE ACT AND OBSERVED THAT NEW RESIDENTIAL PR OPERTY PURCHASED IN JOINT NAME OF THE ASSESSEE AND HIS WIFE, ASSESSEE H AVING INVESTED THE ENTIRE AMOUNT OF LONG TERM CAPITAL GAINS IN PURCHAS E OF NEW RESIDENTIAL HOUSE THOUGH IN THE JOINT NAMES OF HIMSELF AND HIS WIFE, ASSESSEE WAS ENTITLED TO FULL EXEMPTION U/S 54F OF THE ACT AND T HE A.O. WAS NOT JUSTIFIED IN RESTRICTING THE EXEMPTION TO THE EXTEN T OF 50%. WE FIND THAT THE ABOVE CASE LAW RELIED BY THE LD. COUNSEL FOR TH E ASSESSEE SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE. 7. IN SO FAR AS CASE LAW RELIED BY THE LD. D.R. IN THE CASE OF PRAKASH VS. ITO (SUPRA), THE HONBLE BOMBAY HIGH COURT HAS OBSERVED THAT THE INTENTION WAS VERY CLEAR FROM THE DAY ONE TO TRANSF ER THE PROPERTY EVEN BEFORE THE CONSTRUCTION OF THE RESIDENTIAL HOUSE TO THE ADOPTED SON. HE TRANSFERRED THE PROPERTY, BEFORE THE PRESCRIBED PER IOD AS PER THE SCHEME OF THE SECTION AND THE SON BECAME THE OWNER OF THE PROPERTY FOR ALL THE PURPOSES THE DECEASED/ASSESSEE ADMITTEDLY, HAD NO D EMAND AND/OR RIGHT WHATSOEVER IN THE SAID PROPERTY. THIS FACT I TSELF THEREFORE DISENTITLED HIM TO CLAIM EXEMPTION AS THERE WAS NON -COMPLIANCE OF THE ITA NO.405&406/VIZAG/2012 GRANDHI KAMARAJ MANGARAJ, VIJAYAWADA 7 CONDITIONS AS PER SECTION 54 & 54F OF THE ACT FOR Q UALIFYING THE EXEMPTION, IT IS NECESSARY AND APPLICABLE TO INVEST MENT MADE IN A RESIDENTIAL HOUSE IN THE NAME OF THE ASSESSEE ONLY. ACCORDINGLY, ASSESSEES APPEAL IS DISMISSED. 8. THE FACTS IN THE ABOVE CASE ARE ENTIRELY DIFFERE NT FROM THE FACTS OF THE PRESENT CASE. THEREFORE, THE CASE LAW RELIED B Y THE LD. D.R. HAS NO APPLICATION IN THE FACTS OF THE PRESENT CASE. 9. IN VIEW OF THE ABOVE WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). THUS WE DISMISS THE APPEAL OF THE REVENUE. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 11. IN SO FAR AS CROSS APPEAL FILED BY THE ASSESSEE IS CONCERNED, THOUGH HE HAS RAISED VARIOUS GROUNDS, THE LD. COUNS EL FOR THE ASSESSEE HAS ARGUED ONLY ONE GROUND RELATING TO DISALLOWANCE OF INTEREST OF RS.4,43,069/-. IN THE ASSESSMENT ORDER, THE A.O. H AS OBSERVED THAT THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS.4,68,580/- TOW ARDS INTEREST ON HOUSE PROPERTY HELD IN THE NAME OF HIS WIFE SMT. S. MANGARAJ. THE INTEREST CLAIMED AT RS.4,43,049/- ON FLAT NO.302 WH ICH WAS PURCHASED IN THE NAME OF ASSESSEES WIFE NOT ALLOWABLE AS PROPER TY DOES NOT STAND IN THE NAME OF THE ASSESSEE IF AT ALL ANY CLAIM TO BE MADE IT SHOULD BE ITA NO.405&406/VIZAG/2012 GRANDHI KAMARAJ MANGARAJ, VIJAYAWADA 8 MADE BY THE ASSESSEES WIFE IN HER RETURN OF INCOME AND ACCORDINGLY DISALLOWED THE CLAIM AS MADE BY THE ASSESSEE AND TH E SAME WAS CONFIRMED BY THE CIT(A). THE LD. COUNSEL FOR THE A SSESSEE HAS SUBMITTED THAT THE ENTIRE RENTAL INCOME RECEIVED FR OM THE FLATS PURCHASED IN THE NAME OF WIFE AS WELL AS ASSESSEE W AS OFFERED FOR TAXATION AND THEREFORE DENYING THE INTEREST CLAIM M ADE BY THE ASSESSEE IS NOT JUSTIFIED. 12. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPOR TED THE ORDER PASSED BY THE AUTHORITIES BELOW. 13. WE HAVE CONSIDERED THE ORDERS OF THE A.O. AS WEL L AS CIT(A) AND ARGUMENTS OF BOTH THE SIDES. IT IS NOT DISPUTED BY THE AUTHORITIES BELOW THAT RENTAL INCOME RECEIVED BY THE ASSESSEE IS OFFE RED FOR TAXATION BY THE ASSESSEE FROM BOTH THE FLATS OFFERED FOR TAXATI ON. THE INTEREST CLAIM MADE BY THE ASSESSEE WAS DENIED ON THE GROUND THAT THE ASSESSEES WIFE IS FILING A RETURN OF INCOME. THEREFORE, IT I S TO BE ALLOWED IN HER HANDS. ONCE RENTAL INCOME IS CLUBBED TOGETHER AND IF ANY EXPENSES INCURRED TO EARN THAT INCOME, IT IS TO BE ALLOWED. THEREFORE, THE CLAIM OF THE ASSESSEE IN RESPECT OF THE INTEREST ON HOUSE PR OPERTY HELD IN THE NAME OF THE WIFE IS TO BE ALLOWED. THUS, THIS GROU ND OF APPEAL RAISED BY ITA NO.405&406/VIZAG/2012 GRANDHI KAMARAJ MANGARAJ, VIJAYAWADA 9 THE ASSESSEE IS ALLOWED AND ADDITION MADE BY THE AS SESSING OFFICER IS DELETED. THUS, APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED. 14. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. T HE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON3 0 TH SEPT15. SD/- SD/- ( (( ( . . . . ) ( ) ( ) ( ) ( . .. . ) )) ) ( (( ( G. MANJUNATHA) ( (( ( V. DURGA RAO ) )) ) / // / ACCOUNTANT MEMBER / // / JUDICIAL MEMBER /VISAKHAPATNAM: ; / DATED : 30.09.2015 VG/SPS 4 2 < / COPY OF THE ORDER FORWARDED TO :- 1. 1 / THE APPELLANT GRANDHI KAMARAJ MANGARAJ, 26-2-66/A, GRANDHI THEATRES PVT. LTD., ANDHRA RATNA ROAD, GANDHINAGAR, VIJAYAWADA-3 2. 231 / THE RESPONDENT ITO WARD-2(4), VIJAYAWADA 3. > / THE CIT, VIJAYAWADA 4. > () / THE CIT(A), VIJAYAWADA 5. 2, , / // / DR, ITAT, VISAKHAPATNAM 6 . . . . / GUARD FILE / BY ORDER // TRUE COPY // DE ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM