ACIT, CHENNAI V. Thotta Bhanujee, CHENNAI

ITA 505/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8161 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 21-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 04-03-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: N VIJAYAKUMAR
• Keywords: Question of law; Tax effect
• Section: 143(3); 54F; 54

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU R L REDDY , JUDICIAL MEMBER ./ I T.A. NO. 5 05 /MDS/201 6 / ASSESSMENT YEAR :20 11 - 12 THE ASSISTANT COMMISSIONER OF INCOME TAX, NON - C ORPORATE CIRCLE 20 ( 1 ) , CHENNAI 600 034 . VS. SHRI THOTTA BHANUJEE, NO. 56, KANAGADHARA NAGAR, VALASAR AVAKKAM, CHENNAI 60 0 087 . [PAN:AA E PT1711F ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI A.V. SREEKANTH , JCIT / RESPONDENT BY : SHRI N. VIJAYA KUMAR, C.A. / DATE OF HEARING : 2 1 . 0 9 .201 6 / DATE OF P RONOUNCEMENT : 28 . 1 0 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX ( APPEAL S ) 1 4 , CHENNAI , DATED 18 . 1 2 .201 5 RELEVANT TO THE ASSESSMENT YEAR 20 11 - 12 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN GRANTING RELIEF TO THE ASSESSEE UNDER SECTION 54 OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT]. I.T.A. NO . 505 /M/ 16 2 2. BRIE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND AN INTERIOR DECORATOR. HE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011 - 12 ON 22.09.2012 ADMITTING AN INCOME OF .1,17,27,961/ - . THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 29.03.2014 BY ASSESSING THE INCOME OF THE ASSESSEE AT .1,52,34,626/ - AFTER DISALLOWING 5% OF LABOUR PAYMENT TO THE EXTENT OF .9,87,800/ - ON THE GROUND THAT THE VOUCHERS PRODUCED BY THE ASSESSEE ARE SELF - MADE VOUCHERS AND LONG TERM CAPITAL GAINS AT .25,18,865/ - ON THE GROUND THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION IN THE RETURN OF INCOME AND MORE THE INVESTMENT IN THE NEW PROPERTY WAS NOT IN THE NAME OF THE ASSESSEE AND INSTEAD IT WAS IN THE NAME OF HIS WIFE. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WITH REGARD TO THE ADDITION MADE TOWARDS LONG TERM CAPITAL GAINS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING VARIOUS DECISIONS INCLUDING THE DECISION IN THE CASE OF CIT V. V. NATARAJAN 154 TAXMAN 399 (MAD) AND ALLOWED THE APPEAL OF THE ASSESSEE BY DIRECTING THE ASSESSING OFFICER TO GRANT THE RELIEF UNDER SECTION 54 OF THE ACT. I.T.A. NO . 505 /M/ 16 3 4. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. BY RELYING ON THE DECISION IN THE CASE OF PRAKASH V ITO 173 TAXMAN 311), THE LD. DR HAS STRONGLY CONTENDED THAT IT IS NECESSARY AND OBLIGATORY TO HAVE THE INVESTMENT MADE IN RESIDENTIAL HOUSE IN THE NAME OF AS SESSEE ONLY. MOREOVER, THE ASSESSEE HAS MADE ANY CLAIM IN THE RETURN FILED BY THE ASSESSEE AND ONLY DURING THE COURSE OF ASSESSMENT, HE HAS CLAIMED, WHICH CANNOT BE ADMITTED AND PLEADED THAT THE ORDER PASSED BY THE LD. CIT(A) SHOULD BE REVERTED. 5. PER CONTRA, BY RELYING ON THE DECISION IN THE CASE OF CIT V. V. NATARAJAN (SUPRA), THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT IN VIEW OF THE ABOVE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT, THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION UNDER SEC TION 54 OF THE ACT. MOREOVER, WITH REGARD TO THE DENIAL OF CLAIM OF LONG TERM CAPITAL GAINS, HE HAS CONTENDED THAT EVEN THOUGH THE ASSESSEE HAS MADE THE CLAIM IN THE RETURN OF INCOME BUT CLAIMED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE DEPARTMENT S HOULD NOT HAVE TAKEN THE BENEFIT OF ASSESSEE S IGNORANCE DESPITE SUITABLE DIRECTIONS HAVE BEEN ISSUED BY THE CBDT VIDE ITS CIRCULAR DATED 11.04.1955. ACCORDINGLY, HE PLEADED THAT THE APPEAL FILED BY THE REVENUE SHOULD BE DISMISSED. I.T.A. NO . 505 /M/ 16 4 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CASE, THE ASSESSEE HAS NOT MADE ANY CLAIM OF DEDUCTION OF CAPITAL GAINS IN THE RETURN OF INCOME AND MOREOVER, THE INVESTMENT IN THE NEW PROPERTY WAS NOT IN THE NAME OF THE ASSESSEE AND INSTEAD IT WAS IN THE NAME OF ASSESSEE S WIFE, THE ASSESSING OFFICER MADE ADDITION TOWARDS LONG TERM CAPITAL GAINS AND REJECTED GRANT OF RELIEF UNDER SECTION 54 OF THE ACT. WITH REGARD TO THE CLAIM OF DEDUCTION OF LONG TERM CAPITAL GAINS, THOUGH THE ASSESSEE HAS NOT CLAIMED IN THE RETURN OF INCOME BUT CLAIMED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. SINCE THE ASSESSEE IS LEGALLY ENTITLED TO CLAIM IN VIEW OF THE DIRECTIONS GIVEN BY THE CBDT VIDE ITS CIRCULAR NO. 14 [X L - 35] OF 1955 DATE 11.04.1955, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO GRANT THE ASSESSEE THE RELIEF WHICH HE IS LEGALLY ENTITLED TO. 7. WITH REGARD TO THE CLAIM OF DEDUCTION UNDER SECTION 54 OF THE ACT MADE BY THE ASSESSEE STATING THAT THE INV ESTMENT IN THE PROPERTY WAS IN THE NAME OF ASSESSEE S WIFE, THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE. BY FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. V. NATARAJAN 287 ITR 271, WHEREIN IT WAS HELD THA T EVEN IF THE PROPERTY WAS PURCHASED IN THE I.T.A. NO . 505 /M/ 16 5 NAME OF THE WIFE OF THE ASSESSEE, THE ASSESSEE IS ENTITLED TO CLAIM EXEMPTION UNDER SECTION 54 OF THE ACT. AGAINST THE ABOVE FINDINGS OF THE LD. CIT(A), THE LD. DR HAS STRONGLY CONTENDED THAT IN THE CASE OF PRAKA SH V ITO (173 TAXMAN 311), THE HON BLE BOMBAY HIGH COURT HAS HELD THAT IT IS NECESSARY AND OBLIGATORY TO HAVE THE INVESTMENT MADE IN RESIDENTIAL HOUSE IN THE NAME OF ASSESSEE ONLY. 8. FACTUALLY, THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IS CO NTRARY TO THE VIEWS TAKEN BY THE HON BLE BOMBAY HIGH COURT. ON SIMILAR FACTS AND CIRCUMSTANCES, IN THE CASE OF CIT V. KAMAL WAHAL [2013] 86 DTR (DEL) 37, THE HON BLE DELHI HIGH COURT HAS OBSERVED AND HELD AS UNDER: 3. THE ASSESSEE IS AN INDIVIDUAL. HE R ETIRED FROM IOCL. HIS INCOME CONSISTS OF INCOME BY WAY OF SALARY, FROM HOUSE PROPERTY AND OTHER SOURCES. HE INHERITED 50 PERCENT SHARE IN A RESIDENTIAL HOUSE IN E - 2/13, VASANT VIHAR, DELHI IN 2003 FROM HIS FATHER. THIS WAS IN JULY 1968. THE OTHER HALF SHAR E WAS INHERITED BY HIS BROTHER. IN THE YEAR WHICH ENDED ON 31.03.2008, BOTH THE BROTHERS JOINTLY SOLD THE PROPERTY WHICH GAVE RISE TO PROPORTIONATE CAPITAL GAINS IN THE ASSESSEE S HANDS. IN COMPUTING THE CAPITAL GAINS, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 54F ON THE GROUND THAT THE SALE PROCEEDS WERE INVESTED IN THE ACQUISITION OF A VACANT PLOT FOR RS.31,25,100/ - AND THE PURCHASE OF A RESIDENTIAL HOUSE FOR RS.34,35,700/ - IN THE NAME OF HIS WIFE. 4. THE ASSESSING OFFICER WHILE COMPLETING THE ASSES SMENT, TOOK THE VIEW THAT UNDER SECTION 54F, THE INVESTMENT IN THE RESIDENTIAL HOUSE SHOULD BE MADE IN THE ASSESSEE S NAME AND IN AS MUCH AS THE RESIDENTIAL HOUSE WAS PURCHASED BY THE ASSESSEE IN THE NAME OF HIS WIFE, THE DEDUCTION WAS NOT ALLOWABLE. HE RE DUCED THE DEDUCTION AND COMPUTED THE CAPITAL GAINS ACCORDINGLY. I.T.A. NO . 505 /M/ 16 6 5. ON APPEAL, THE CIT (APPEAL) ACCEPTED THE ASSESSEE S CONTENTION BASED ON THE JUDGMENT OF THE MADRAS HIGH COURT IN COMMISSIONER OF INCOME TAX VS. V. NATARAJAN : (2006) 287 ITR 271 AND THAT OF THE ANDHRA PRADESH HIGH COURT IN LATE GULAM ALI KHAN VS. COMMISSIONER OF INCOME TAX : (1987) 165 ITR 228. 6. THE REVENUE PREFERRED AN APPEAL BEFORE THE TRIBUNAL QUESTIONING THE DECISION OF THE CIT (APPEALS). THE TRIBUNAL, HOWEVER, BY THE IMPUGNED OR DER, AGREED WITH THE DECISION OF THE CIT (APPEALS) AND IN DOING SO FOLLOWED THE JUDGMENT OF THE MADRAS AND ANDHRA PRADESH HIGH COURTS CITED SUPRA AND ALSO ANOTHER JUDGMENT OF THE KARNATAKA HIGH COURT IN DIRECTOR OF INCOME - TAX, INTERNATIONAL TAXATION, BANGA LORE : (2011) 203 TAXMAN 208. IT ALSO NOTED THE JUDGMENT OF THE BOMBAY HIGH COURT IN PRAKASH VS. ITO : (2008) 173 TAXMAN 311 IN WHICH A CONTRARY VIEW WAS TAKEN BUT PREFERRED THE VIEW TAKEN BY THE MADRAS AND KARNATAKA HIGH COURTS ADOPTING THE RULE LAID DOWN BY THE SUPREME COURT IN CIT VS. VEGETABLE PRODUCTS LTD : 88 ITR 192 WHICH SAYS THAT IF A STATUTORY PROVISION IS CAPABLE OF MORE THAN ONE VIEW, THEN THE VIEW WHICH FAVOURS THE TAX PAYER SHOULD BE PREFERRED. THE TRIBUNAL ALSO OBSERVED THAT SECTION 54F BEING A BENEFICIAL PROVISION ENACTED FOR ENCOURAGING INVESTMENT IN RESIDENTIAL HOUSES SHOULD BE LIBERALLY INTERPRETED. 7. WE HAVE NO HESITATION IN AGREEING WITH THE VIEW TAKEN BY THE TRIBUNAL. APART FROM THE FACT THAT THE JUDGMENTS OF THE MADRAS AND KARNATAK A HIGH COURTS (SUPRA) ARE IN FAVOUR OF THE ASSESSEE, THE REVENUE FAIRLY BROUGHT TO OUR NOTICE A SIMILAR VIEW OF THIS COURT IN CIT VS. RAVINDER KUMAR ARORA : (2012) 342 ITR 38 (DEL.). THAT WAS ALSO A CASE WHICH AROSE UNDER SECTION 54F OF THE ACT. THE NEW RE SIDENTIAL PROPERTY WAS ACQUIRED IN THE JOINT NAMES OF THE ASSESSEE AND HIS WIFE. THE INCOME TAX AUTHORITIES RESTRICTED THE DEDUCTION UNDER SECTION 54F TO 50 PERCENT ON THE FOOTING THAT THE DEDUCTION WAS NOT AVAILABLE ON THE PORTION OF THE INVESTMENT WHICH STANDS IN THE NAME OF THE ASSESSEE S WIFE. THIS VIEW WAS DISAPPROVED BY THIS COURT. IT NOTED THAT THE ENTIRE PURCHASE CONSIDERATION WAS PAID ONLY BY THE ASSESSEE AND NOT A SINGLE PENNY WAS CONTRIBUTED BY THE ASSESSEE S WIFE. IT ALSO NOTED THAT A PURPOSIVE CONSTRUCTION IS TO BE PREFERRED AS AGAINST A LITERAL CONSTRUCTION, MORE SO WHEN EVEN APPLYING THE LITERAL CONSTRUCTION, THERE IS NOTHING IN THE SECTION TO SHOW THAT THE HOUSE SHOULD BE PURCHASED IN THE NAME OF THE ASSESSEE ONLY. AS A MATTER OF FACT, SECTIO N 54F IN TERMS DOES NOT REQUIRE THAT THE NEW RESIDENTIAL PROPERTY SHALL BE I.T.A. NO . 505 /M/ 16 7 PURCHASED IN THE NAME OF THE ASSESSEE; IT MERELY SAYS THAT THE ASSESSEE SHOULD HAVE PURCHASED/CONSTRUCTED 'A RESIDENTIAL HOUSE'. THIS COURT IN THE DECISION CITED ALONE ALSO NOTICE D THE JUDGMENT OF THE MADRAS HIGH COURT (SUPRA) AND AGREED WITH THE SAME, OBSERVING THAT THOUGH THE MADRAS CASE WAS DECIDED IN RELATION TO SECTION 54 OF THE ACT, THAT SECTION WAS IN PARI MATERIA WITH SECTION 54F. THE JUDGMENT OF THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. GURNAM SINGH : (2014) 327 ITR 278 IN WHICH THE SAME VIEW WAS TAKEN WITH REFERENCE TO SECTION 54F WAS ALSO NOTICED BY THIS COURT. IT THUS APPEARS TO US THAT THE PREDOMINANT JUDICIAL VIEW, INCLUDING THAT OF THIS COURT, IS THAT FOR THE PURPOSES OF SECTION 54F, THE NEW RESIDENTIAL HOUSE NEED NOT BE PURCHASED BY THE ASSESSEE IN HIS OWN NAME NOR IS IT NECESSARY THAT IT SHOULD BE PURCHASED EXCLUSIVELY IN HIS NAME. IT IS MOREOVER TO BE NOTED THAT THE ASSESSEE IN THE PRESENT CASE HAS NOT PURCHASED THE NEW HOUSE IN THE NAME OF A STRANGER OR SOMEBODY WHO IS UNCONNECTED WITH HIM. HE HAS PURCHASED IT ONLY IN THE NAME OF HIS WIFE. THERE IS ALSO NO DISPUTE THAT THE ENTIRE INVESTMENT HAS COME OUT OF THE SALE PROCEEDS AND THAT THERE WAS NO CON TRIBUTION FROM THE ASSESSEE S WIFE. HAVING REGARD TO THE RULE OF PURPOSIVE CONSTRUCTION AND THE OBJECT WHICH SECTION 54F SEEKS TO ACHIEVE AND RESPECTFULLY AGREEING WITH THE JUDGMENT OF THIS COURT, WE ANSWER THE SUBSTANTIAL QUESTION OF LAW FRAMED BY US IN THE AFFIRMATIVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 9. UNDER THE ABOVE FACTS AND CIRCUMSTANCES OF CONTRARY VIEWS OF TWO HIGH COURT DECISIONS, BY RESPECTFULLY ADOPTING THE RULE LAID DOWN BY THE HON BLE SUPREME COURT IN CIT VS. VEGETABLE PRODUCTS LTD : 88 ITR 192 WHICH SAYS THAT IF A STATUTORY PROVISION IS CAPABLE OF MORE THAN ONE VIEW, THEN THE VIEW WHICH FAVOURS THE TAX PAYER SHOULD BE PREFERRED , WE HAVE NO HESITATION IN AGREEING WITH THE FINDINGS OF TH E LD. CIT(A) BY FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. V. I.T.A. NO . 505 /M/ 16 8 NATARAJAN (SUPRA) . WHETHER THE TAX EFFECT IN THE CASE DECIDED BY THE HON BLE MADRAS HIGH COURT IS LESS OR MORE IS NOT THE CRITERIA TO PREFER FURTHER AP PEAL BEFORE HIGHER FORUM RATHER THAN THE PREPOSITION LAID DOWN WAS CORRECT. ONCE THE DEPARTMENT HAS NOT PREFERRED FURTHER APPEAL BEFORE THE HON BLE SUPREME COURT AND ACCEPTED THE JUDGEMENT OF THE HON BLE HIGH COURT, WE ARE UNABLE TO TAKE A DIFFERENT VIEW O N THIS ACCOUNT. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 10 . IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED . ORDER PRONOUNCED ON THE 28 TH OCTOBER , 2016 AT CHENNAI. SD/ - SD/ - (A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( DUVVURU RL RE DDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 28 . 1 0 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.