ITO, Ward-6(1), Hyderabad V. Sri Syed Irfan Jaffer, Hyderabad

ITA 465/HYD/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4853 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 05-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P HARITHA
• Assessee Lawyers: K K GUPTA
• Keywords: Capital asset; Cost of acquisition
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.465/HYD/2013 ASSESSMENT YEAR 2009-2010 THE ITO, WARD 6 (1) HYDERABAD. VS. SRI SYED IRFAN JAFFER, HYDERABAD PAN ACEPJ2156N (A PPELLANT ) (RESPONDENT) C.O. NO. 28/HYD/2013 ARISING OUT OF ITA.NO.465/HYD/2013 - ASSESSMENT YEAR 2009-2010 SRI SYED IRFAN JAFFER, HYDERABAD PAN ACEPJ2156N VS. THE ITO, WARD 6 (1) HYDERABAD. ( CROSS OBJECTOR ) (RESPONDENT) ITA.NO.530/HYD/2013 ASSESSMENT YEAR 2009-2010 SRI SYED IRFAN JAFFER, HYDERABAD PAN ACEPJ2156N VS. THE ITO, WARD 6 (1) HYDERABAD. (A PPELLANT ) (RESPONDENT) FOR REVENUE : SMT. P. HARITHA FOR ASSESSEE : SHRI K.K. GUPTA DATE OF HEARING : 28.10.2013 DATE OF PRONOUNCEMENT : 31.10.2013 2 ORDER PER SMT. ASHA VIJAYARAGHAVAN, J.M. THESE CROSS-APPEALS ARE FILED BY THE REVENUE A ND ASSESSEE AGAINST THE COMMON ORDER OF THE CIT(A)-IV, HYDERABAD DATED 11 TH JANUARY, 2013 FOR THE ASSESSMENT YEAR 2009-2010. SINCE, COMMON ISSUES ARE INVOLVED IN BOTH THE APPEA LS, THESE APPEALS WERE CLUBBED AND HEARD TOGETHER AND ARE BEI NG DISPOSED OF BY THE SINGLE CONSOLIDATED ORDER. ITA.NO.465/HYD/2013 A.Y. 2009-2010 : 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE FILED ITS RETURN OF INCOME ON 30.7.2009 DECLARING NIL INC OME. THE ASSESSEE HAD ENTERED INTO A DEVELOPMENT AGREEMENT F OR LAND OWNED BY HIM AND CLAIMED DEDUCTION UNDER SECTION 54 OF THE ACT AGAINST THE CAPITAL GAINS ON THE TRANSFER OF LAND T O THE DEVELOPER. THE ASSESSING OFFICER RECOMPUTED THE CAPITAL GAINS BY MAKING ADJUSTMENTS TO THE VALUE OF THE CONSIDERATION RECEIV ED AND TO THE COST OF ACQUISITION CLAIMED BY THE ASSESSEE AND ALSO RESTRICTING THE DEDUCTION UNDER SECTION 54. THE ASSESSING OFFIC ER ASSESSED THE TOTAL INCOME AT RS.52,05,530/- OF LONG TERM CAP ITAL GAINS. 3. AGGRIEVED, BY THE SAID COMPUTATION OF LONG TERM CAPITAL GAINS BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) CONTENDING THAT THE ASSESS EES CLAIM OF EXEMPTION U/S. 54 FOR FOUR FLATS AS AGAINST ONE FLAT WAS ALLOWED BY THE ASSESSING OFFICER. THE ASSESSEE HAD CLAIMED T HAT THE CONSIDERATION HAVING BEEN RECEIVED IN THE FORM OF B UILT UP AREA FROM THE DEVELOPER WAS DEEMED TO HAVE BEEN INVESTED IN RESIDENTIAL HOUSE U/S. 54. THE ASSESSEE HAD RECEIVE D FLAT NOS. 203, 302 AND SHARES IN FLAT NOS. 502 AND 301. BEFOR E THE CIT(A), THE LEARNED A.R. RELIED ON THE DECISIONS IN THE CAS E OF CIT VS. D. 3 ANAND BASAPPA [2009] 309 ITR 329 (KAR.) AND CIT VS. K G RUKMINAMMA [2011] 331 ITR 211 (KAR.) IN SUPPORT OF HIS CLAIM THAT FOUR RESIDENTIAL FLATS CONSTITUTED A RESIDENTIAL HOUSE FOR PURPOSES OF EXEMPTION U/S, 54. THE A.R. SUBMITTED BEFORE THE CIT(A) THAT THE ASSESSING OFFICER HAD RE LIED ON THE DECISION OF THE ITAT MUMBAI IN THE CASE OF ITO VS. SUSHILA M. LHAVERI (ITAT-MUM-SB) 107 ITD 327 AND HAD RESTRICTED THE EXEMPTION U/S. 54 TO ONE RESIDENTIAL HOUSE AND THE REMAINING BALANCE TAXED UNDER THE HEAD CAPITAL GAIN S. THE LEARNED A.R. POINTED OUT BEFORE CIT(A) THAT ASSESSI NG OFFICER RELIED ON THE DECISION OF THE ITAT, WHEN THERE WAS A CONTRADICTORY DECISION OF A HIGH COURT WITHOUT CONSIDERING THE JUD ICIAL DECISIONS/PRINCIPLE WHEN THERE WAS NO OTHER DECISIO N OF ANY HIGH COURT CONTRADICTORY TO THE DECISION OF THE KARNATAKA HIGH COURT, THE KARNATAKA HIGH COURT DECISIONS IN THE CASE OF C IT VS. D. ANAND BASAPPA (2009) 309 ITR 329 (KAR.) AND CIT VS. K.G. RUKMINAMMA (2011) 331 ITR 211 (KAR.) (SUPRA) ARE TO BE FOLLOWED. THE LEARNED A.R. HOWEVER ADMITTED BEFORE THE CIT(A) THAT THE FOUR FLATS WERE TOTALLY INDEPENDENT AND WER E NOT INTERCONNECTED WITH COMMON PASSAGE, COMMON KITCHEN ETC. THE AR SUBMITTED THAT SINCE ALL FOUR FLATS WERE IN THE SAME BUILDING AND HAVE BEEN ACQUIRED AT THE SAME TIME, THE REQUIR EMENT OF COMMON PASSAGE, COMMON KITCHEN ETC. WAS NOT APPLICA BLE IN THE LIGHT OF THE DECISIONS IN THE CASES OF RUKMINAMMA A ND ANAND BASAPPA. 4. AFTER PERUSING THE RECORDS AND AFTER HEARING TH E SUBMISSIONS OF THE LEARNED A.R. THE CIT(A) OBSERVED AT PARA 7.3 OF HIS ORDER THAT THE DECISION CITED BY THE ASSESSI NG OFFICER IS OF THE ITAT, ALBEIT A SPECIAL BENCH. HOWEVER, THE DECI SION CITED BY THE ASSESSEE, BEING OF A HIGH COURT, HAS STRONGER P RECEDENT VALUE, PARTICULARLY WHEN THERE ARE NO CONTRADICTORY D ECISIONS OF ANY OTHER HIGH COURT, LEAVE ALONE OF THE JURISDICTION AL HIGH 4 COURT. THE DECISIONS CITED BY THE LEARNED A.R. ARE C ATEGORICAL ON THE ISSUE AND BASED ON FACTS SIMILAR TO THE FACTS I N THE ASSESSEES CASE. RESPECTFULLY FOLLOWING THE DECISIONS OF THE KA RNATAKA HIGH COURT IN THE CASES OF CIT VS. D. ANAND BASAPPA (200 9) 309 ITR 329 (KAR.) AND CIT VS. K.G. RUKMINAMMA (2011) 331 I TR 211 (KAR.) (SUPRA), THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE MADE UNDER SECTION 54 OF THE ACT. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US AND THE LEARNED D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS COULD BE SEEN FROM THE ORDER OF THE LOWER AUTHORITIES, WE HAVE NOTICED THAT THE CIT(A) UPHELD THE CLAIM OF THE ASSESSEE UNDER SECTION 54 OF THE A CT IN RESPECT OF ALL THE FOUR FLATS, AS AGAINST ONLY ONE FLAT ALLOWED BY THE ASSESSING OFFICER, DULY FOLLOWING THE DECISIONS OF THE KARNATAKA HIGH COURT (SUPRA), IN PREFERENCE TO THE SPECIAL BE NCH DECISION OF THE TRIBUNAL RELIED UPON BY THE ASSESSING OFFICER. T HE DECISION OF A HIGH COURT IS A BINDING PRECEDENT TO FOLLOW, AND IN THE ABSENCE OF ANY OTHER DECISION TO THE CONTRARY, BROUGHT TO OUR NOTICE BY THE REVENUE, WE ARE BOUND TO FOLLOW THE SAME. THE C OORDINATE BENCH OF THIS TRIBUNAL IN ITA.NO.422 TO 424/HYD/2013 DATED 10.07.2013 IN THE CASES OF VITTAL KRISHNA CONJEEVARA M, SECUNDERABAD AND OTHERS VS. ITO, WARD 10(4), HYDERAB AD HAVE ALSO FOLLOWED THE DECISIONS OF HONBLE KARNATAKA HIG H COURT IN THE CASES OF CIT VS. D. ANAND BASAPPA (2009) 309 IT R 329 (KAR.) AND CIT VS. K.G. RUKMINAMMA (2011) 331 ITR 211 (KAR .) (SUPRA) AND THE RELEVANT OBSERVATIONS OF THE COORDINATE BEN CH OF THIS TRIBUNAL ARE AS UNDER : 5 8. . . . . .HOWEVER, THE HONBLE KARNATAKA HIGH COU RT WHILE INTERPRETING THE WORDS A RESIDENTIAL HOUSE AS APPEARS IN SECTION 54 OF THE ACT IN CASE OF CIT VS. SMT. K.G. RUKMINI AMMA 331 ITR 211 FOLLOWING ITS EARLIER DECISION IN CASE OF CIT VS. D.ANAND BASAPPA 309 ITR 329 HAVE HELD THAT THE EXPRESSION A RESIDENTIAL HOUSE AS APPEARS IN SECTION 54 OF THE ACT, CANNOT BE INTERPRETED IN A MANNER TO SUGGEST THAT THE EXEMPTI ON WOULD BE RESTRICTED TO A SINGLE RESIDENTIAL UNIT. T HE HONBLE KARNATAKA HIGH COURT HELD THAT A RESIDENTI AL HOUSE AS MENTIONED IN SECTION 54(1) OF THE ACT, HA S TO BE UNDERSTOOD IN A SENSE THAT THE BUILDING SHOULD B E OF A RESIDENTIAL NATURE AND THE WORD A SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NUMBER. THE HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. V. SYED ALI ADIL (2013) 352 ITR 418, WHILE AGREEING WITH THE AFORESAID VIEW OF THE HONBLE KARNATAKA HIGH COURT HELD AS UNDER : . . . . AS HELD IN D. ANANDA BASAPPA'S CASE [2009} 309 ITR 329 (KARN) BY THE KARNATAKA HIGH COURT, THE EXPRESSION 'A RESIDENTIAL HOUSE' IN SECTION 54(1} OF THE ACT HAS TO BE UNDERSTOOD IN A SENSE THAT THE BUILDING SHOULD BE OF RESIDENTIAL NATURE AND 'A' SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NUMBER AND WHERE AN ASSESSEE HAD PURCHASED TWO RESIDENTIAL FLATS, HE IS ENTITLED TO EXEMPTION UNDER SECTION 54 IN RESPECT OF CAPITAL GAINS ON SALE OF ITS PROPERTY ON PURCHASE OF BOTH THE FLATS, MORE SO, WHEN THE FLATS ARE SITUATED SIDE BY SIDE AND THE BUILDER HAS EFFECTED MODIFICATION OF THE FLATS TO MAKE IT AS ONE UNIT, DESPITE THE FACT THAT THE FLATS WERE PURCHASED BY SEPARATE SALE DEEDS. THIS DECISION WAS FOLLOWED BY THE KARNATAKA HIGH COURT IN C1T V. SMT. K. G. RUKMINIAMMA [2011} 331 ITR 211 (KARN) WHERE A RESIDENTIAL HOUSE WAS TRANSFERRED AND FOUR FLATS IN A SINGLE RESIDENTIAL COMPLEX WERE PURCHASED BY THE ASSESSEE, IT WAS HELD THAT ALL THE FOUR RESIDENTIAL FLATS CONSTITUTED 'A RESIDENTIAL HOUSE' FOR THE PURPOSE OF SECTION 54 AND THAT THE FOUR RESIDENTIAL FLATS CANNOT BE CONSTRUED AS FOUR RESIDENTIAL HOUSES FOR THE PURPOSE OF SECTION 54. ADMITTEDLY, THE TWO FLATS PURCHASED BY THE ASSESSEE ARE 6 ADJACENT TO ONE ANOTHER AND HAVE A COMMON MEETING POINT. IN THE IMPUGNED ORDER, THE TRIBUNAL HAS ALSO RELIED UPON THE DECISIONS IN K. G. VYAS' CASE (SUPRA), P.E. RAMAKRISHNA, HUF'S CASE (SUPRA) AND PREM PRAKASH BHUTANI'S CASE (SUPRA) WHEREIN IT WAS HELD THAT EXEMPTION UNDER SECTION 54 ONLY REQUIRES THAT THE PROPERTY SHOULD BE OF RESIDENTIAL NATURE AND THE FACT THAT THE RESIDENTIAL HOUSE CONSISTS OF SEVERAL INDEPENDENT UNITS CANNOT BE AN IMPEDIMENT TO GRANT RELIEF UNDER SECTION 54 EVEN IF SUCH INDEPENDENT UNITS WERE ON DIFFERENT FLOORS. THE DECISION IN MS. SUSHILA M. JHAVERI'S CASE [2007 ] 292 ITR (A T) 1 (MUMBAI) [SB} HOLDING THAT ONLY ONE RESIDENTIAL HOUSE SHOULD BE GIVEN THE RELIEF UNDER SECTION 54 DOES NOT APPEAR TO BE CORRECT AND WE DISAPPRAVE OF IT. WE AGREE WITH THE INTERPRETATION PLACED ON SECTION 54 BY THE HIGH COURT OF KARNATAKA IN D.ANANDA BASSAPPAS CASE (2009) 309 ITR 329 (KARN) AND SMT. K.G.RUKMINIAMMAS CASE (2011) 331 ITR 211 (KARN.) AND THE DECISIONS OF THE MUMBAI, CHENNAI AND DELHI BENCHES OF THE TRIBUNAL IN K.G.VYAS (SUPRA), P.C.RAMAKRISHNA, HUF (SUPRA) AND PREM PRAKASH BHUTANI (SUPRA). WE, THEREFORE, HOLD THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS CORRECT IN SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER AND THE TRIBUNAL RIGHTLY CONFIRMED THE DECISION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ..... ' 9. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. GITA DUGGAL WHILE INTERPRETING THE WORDS A RESIDENTIAL HOUSE AS APPEARED IN SECTION 54 AND 54 F OF THE ACT ALSO EXPRESSED THE SAME VIEW BY FOLLOWIN G THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT (SUPRA). SO FAR AS THE DECISION OF THE ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF ITO VS. SUSEEL A M. ZHAVERI (SUPRA) IS CONCERNED, A PERUSAL OF THE DECISION OF THE ITAT, SPECIAL BENCH DOES REVEAL THE FACT THAT THE SPECIAL BENCH HAS HELD THAT THE EXPRESSION A RESIDENTIAL HOUSE APPEARING IN SECTI ONS 54 AND 54F OF THE ACT, WOULD MEAN THAT EXEMPTION WOULD BE ALLOWABLE IN RESPECT OF INVESTMENT IN A SINGLE RESIDENTIAL HOUSE ONLY. HOWEVER, IT IS TO BE SEEN THAT THE AFORESAID DECISION OF THE ITAT, MUMBAI 7 SPECIAL BENCH HAS BEEN DISAPPROVED BY THE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. SYED ALI (SUPRA). HENCE, THE DECISION OF THE ITAT, MUMBAI SPECIAL BENCH NO LONGER CAN BE CONSIDERED TO BE A GOOD LAW. THEREFORE, CONSIDERING THE TOTALITY OF TH E FACTS AND CIRCUMSTANCES IN THE LIGHT OF CONSISTENT VIEW OF DIFFERENT HIGH COURTS INCLUDING THE JURISDICTION AL HIGH COURT, WE ARE OF THE VIEW THAT THE LOWER AUTHORITIES WERE NOT CORRECT IN RESTRICTING THE EXEMPTION UNDER SECTION 54F OF THE ACT TO ONLY ONE FLAT BY INTERPRETING THE WORDS A RESIDENTIAL HOUSE IN A MANNER WHICH HAS BEEN HELD TO BE AN INCORRECT INTERPRETATION IN VARIOUS JUDICIAL PRECEDENTS AS REFERRED TO HEREINABOVE. IN THE AFORESAID VIEW OF T HE MATTER, IN OUR CONSIDERED OPINION, THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 54F OF THE AC T IN RESPECT OF ALL THE SEVEN FLATS. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO COMPUTE CAPITAL GAIN, IF ANY, AFTER ALLO WING EXEMPTION UNDER SECTION 54F OF THE ACT IN RESPECT O F ALL THE SEVEN FLATS WHICH WERE RECEIVED BY THE ASSESSEE UNDER THE DEVELOPMENT AGREEMENT. 7. ACCORDINGLY, THE ASSESSEES CLAIM FOR EXEMPTION IN RESPECT OF LONG TERM CAPITAL GAINS UNDER SECTION 54 OF THE ACT IS RIGHTLY ALLOWED BY THE CIT(A) AND WE CONFIRM THE SAME . WE, THEREFORE, DISMISS THE APPEAL OF THE REVENUE. 8. WE FIND THAT C.O.NO.28/HYD/2013 IN ITA.NO. 465/HYD/2013 FILED BY THE ASSESSEE IS MERELY IN SUPPOR T OF THE ORDER OF CIT(A). SINCE, WE HAVE DISMISSED THE REVE NUES APPEAL AND CONFIRMED THE ORDER OF THE CIT(A), THE CROSS-OB JECTION OF THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. 9. IN THE RESULT, ITA.NO.465/HYD/2013 OF THE REVENUE IS DISMISSED AND C.O.NO.28/HYD/2013 IN ITA.NO.465/HYD/2013 OF THE ASSESSEE IS DISMISSED. 10. SINCE WE HAVE DISMISSED THE APPEAL OF THE REVE NUE BEING ITA.NO.465/HYD/2013, THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA.NO.530/HYD/2013 ARE ACADEMIC IN NATURE 8 AND HENCE, WE ARE NOT INCLINED TO GO INTO THE MERIT S OF THE SAME. CONSEQUENTLY, ASSESSEES APPEAL, BEING OF ACADEMIC NA TURE, IS ALSO TREATED AS DISMISSED. 11 IN THE RESULT, ITA.NO.530/HYD/2013 OF THE ASSESS EE IS DISMISSED. 12. TO SUM -UP, ITA.NO.465/HYD/2013 OF THE REVENUE IS DISMISSED AND C.O.NO.28/HYD/2013 IN ITA.NO.465/HYD/2013 OF THE ASSESSEE IS DISMISSED AN D ITA.NO.530/HYD/2013 OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.10.2013. SD/- SD/- (B. RAMAKOTAIAH) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD DATE OCTOBER, 2013. VBP/- COPY TO 1. THE INCOME TAX OFFICER, WARD 6 (1), 7 TH FLOOR, D BLOCK, I.T. TOWERS, MASAB TANK, HYDERABAD. 2. S RI SYED IRFAN JAFFER, 8 - 2 - 468/1/2, FLAT NO. 203, ROAD NO.5, BANJARA HILLS, HYDERABAD PAN ACEPJ2156N 3. CIT(A)-IV, HYDERABAD 4. CIT-III, HYDERABAD 5. D.R. A BENCH, ITAT HYDERABAD