ANANT R GAWANDE, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX, MUMBAI

ITA 5453/MUM/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7543 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 20-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Salary income
• Section: 54; 54F; 113

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI VIKAS AWASTHY (JUDICIAL MEMBER) AND SHRI GAGAN GOYAL (ACCOUNTANT MEMBER) I.T.A No.5453/Mum/2019 (Assessment year: 2013-14) Anant R Gawande vs Assistant Commissioner of Income-tax 801, Mahalaxmi Chambers Circle-20(1), Mumbai 22, Bhulabhai Desai Road Mumbai-400 026 PAN: AABPG3008P (Appellant) (Respondent) Assessee represented by : Shri Anil Sathe Department represented by : Shri Anoop Hiswase, DR Date of hearing : 10/06/2022 Date of pronouncement : 14/06/2022 O R D E R Per: Gagan Goyal (AM): This appeal has been filed by the assessee against the order dated 17/06/2019 passed by the Commissioner of Income-tax (Appeals)-55, Mumbai for the assessment year 2013-14. 2. The grounds raised by the assessee pertain to grant of deduction u/s 54F of the I.T. Act, 1961. 2 ITA 5453/Mum/2019-AY-2013-14 3 The facts governing the issue are that assessee, an individual, derives income from salary, business, LTCG and Income from other sources, has filed his return of income on 29/09/2013 declaring total income at Rs.45,03,410/-. The return of income filed by the assessee was selected for scrutiny under CASS. The assessee had claimed deduction under section 54F in respect of sale of land at Jambhe against purchase of residential property from India bulls Properties Ltd. Assessee also claimed deduction u/s 54 on Long Term Capital Gain (LTCG) of Rs.30, 46,299/- earned by selling Pune Kohinoor flat. During the course of scrutiny, assessing officer gathered information that assessee has purchased one more residential property after investment in property purchased from India bulls Properties Pvt Ltd. When confronted, assessee produced purchase agreement of Pune Abhimanshree CHS Ltd property. On going through the said agreement, the assessing officer noticed that this flat was purchased by assessee for a consideration of Rs.7.3 crore. The assessee explained that the assessee has purchased one more residential house other than the new asset on 04/05/2013 and that this transaction is within a period of one year after the date of transfer of original asset. Accordingly, applying proviso (a)(ii) to section 54F assessee was asked as to why his claim under section 54F should be allowed. In response, assessee explained that at the time of selling the land at Jambhe on 17/07/2012, the assessee held one property of India Bulls for which payment was made in the year 2009 and Pune property was purchased on 04/05/2013; therefore, as on 17/07/2012, the assessee had only one residential house at India bulls. This property was purchased within a period of two years from the date of sale of Jambhe land. Hence, the Pune property qualifies for deduction u/s 54F. The assessing officer, however, did not agree with the contentions of the assessee. 3 ITA 5453/Mum/2019-AY-2013-14 He observed that the assessee along with his wife signed the application form, which explicitly mentioned as below:- 'We have clearly understood that this application does not constitute a binding agreement to sell and we don't become entitled to the provisional and/or final allotment of an apartment despite the fact that the company may have issued a receipt in acknowledgment of the money tendered with this application. It is only after we sign and execute the apartment buyer’s agreement as per the company's standard format agreeing to abide by the terms and conditions laid down therein that the allotment shall become final.” The assessing officer further observed that there was no allotment letter issued to assessee; therefore, the claim of the assessee that India bulls property was purchased in 2009-10 was rejected. 3.1 The assessing officer further observed that had the claim of the assessee was India bulls property was purchased in FY 2009-10 was accepted, it would mean that as on the date of transfer of original asset, the assessee had the following two residential houses: 1. Pune Kohinoor flat which was sold on 07/08/2012 2. India bulls property which according to assessee was purchased during F.Y. 2009-10. On this, the assessee submitted that investment in India bulls property was made jointly with assessee’s wife, Mrs.Yamini Gawande. To avail exemption u/s 54F what is required is the assessee should not own more than one residential house on the date of sale and further assessee should not 4 ITA 5453/Mum/2019-AY-2013-14 purchase any other residential house other than the new asset within a period of one year after the date of transfer of the original asset. 3.2 The assessing officer, however, did not accept the submissions of the assessee. He observed, the assessee purchased India bulls property jointly along with his wife. Therefore, the assessee was not the full owner of the property which was required by section 54F. The assessing officer finally denied the claim of deduction u/s 54F to the assessee on the following basis:- “i) Assessee has cited Dr P K Vasanthi Rangrajan vs CIT case law to support his case. However facts of the case are different. In this case, assessee and her husband were co-owners to the extent of 50% share in a building that had a clinic and a residential house. It was held that since the entire property was not an exclusive residential property and 50% of the ownership was with reference to the clinic on the ground floor, the harshness of the proviso to Section 54 F cannot be applied. However in the case of our assessee, India bulls property is an exclusive residential property. Moreover, revenue did not accept the judgment in this case. ii). Assessee has cited CIT vs Kapil Nagpal case law to support his case. This judgment explicitly states that "unless there is a document to show that the assessee was a co-owner of the said building to the extent of even 15% there cannot be an inference in that regard." Delhi HC ruled in favour of assessee in this case stating that assessee was not even co-owner of the residential property, Moreover, language of the Delhi HC judgment in this case seems to suggest that in case of co-ownership in residential property, and assessee would have been denied the benefit of section 54F. In our case, as assessee is holding 50% share in India bulls property, said case law is not applicable. iii) Assessee has cited ITAT Mumbai in ITO vs Shri Rasiklal N Satra to support his case. However revenue has not accepted this judgment. In the case of CIT vs. Chandanben Madanlal (245 ITR 182) (Guj), it was held that' purchase of a share in the residential house is equivalent to purchase of residential house for the purpose of sec. 54. iv). Facts in the instant case are identical with those of ITO vs. Ms, Apsara Bhavana Sai case. In this case, ITAT Hyderabad gave a judgment denying benefit of section 54F' to assessee stating: 5 ITA 5453/Mum/2019-AY-2013-14 "This has been considered in the case of Smt. Bhavana Thanawala vs. ITO (15 SOT 377) (Mum). In the case of Ravinder K. Arora vs. ACIT (supra) it was held that even joint ownership of the property by the assessee along with his wife is construed as investment by the assessee and deduction u/s. 54F is allowable. In the case of Smt. V.K.S. Bawa vs. ACIT (53 ITD 232) wherein it was held that when an assessee has become owner of a share (fractional) in property bequeathed to her by her mother, by the time the assessee purchased another property, she could not claim exemption u/s. 54F of the Act. In the case of Ravinder Kumar Arora (supra) it was held that the assessee having invested the entire amount of long term capital gain in purchase of new residential house was entitled to exemption u/s. 54F in respect of the entire amount even though the new property was in the joint names of assessee and his wife. In view of the foregoing discussion, if an assessee jointly owns more than one property, then the assessee is not entitled for deduction u/s. 54F of the Act. v) If assessee's contention that 'part ownership is not the ownership' is accepted that in all cases wherein any assessee, anywhere in India, claims benefit u/s 54/54F/ or any other section of Income tax Act, 1961 by investing jointly in a residential property should be denied the benefit wherein relevant section of Income Tax Act, 1961 states 'assessee purchases/owns a residential house'. Accordingly it is decided that on the date of transfer of Jambhe land (original asset), assessee was owner of two residential property hence claim u/s 54F is denied to him u/s 54F proviso (a) (ii). Without prejudice to this. As assessee has already accepted vide his letter dated 22-02-2016 that on the date of transfer of Jambhe land on 17-07-2012 he had 1 residential house at India Bulls, his claim u/s 54F is denied u/s 54F proviso (a)(i).” 4. The appeal filed by the assessee did not find favour with the CIT (A). Therefore, the assessee has filed appeal before the Tribunal. 5. The learned authorized representative of the assessee submitted that the authorities below were not justified in denying the claim of exemption u/s 54F to the assessee. He submitted that the AO has erred in holding that the assessee was owner of two residential properties on the date of transfer of original asset and hence denying claim u/s 54F proviso (a) (ii). Without prejudice, the Ld.AR 6 ITA 5453/Mum/2019-AY-2013-14 submitted that the learned AO has erred in not accepting that, flat purchased by the assessee jointly with his wife cannot be considered as exclusive property for the purpose of section 54F as laid down by ITAT Mumbai in ITO v/s Rasiklal Satra (2006) 98 ITD 335 (Mum). The learned AR then furnished the details of the properties, which are as under:- 1. Flat in Kohinoor CHSL, Pune purchased on 17/03/1998 2. Land at Jambhe acquired on 05/06/2009; 3. Flat in IndiabulIs’ 'SKY' acquired on 17/12/2009 and was registered on 25/02/2013. 4. Bunglow at Pune acquired on 04/05/2013 Further, the assessee sold Jambhe Land on 17/07/2012, which is the original asset. The assessee sold Kohinoor flat on 06/07/2012 and registered on 07/08/2012. He submitted, pointing out a clause in application form of India bulls’ ‘SKY’, the assessing officer held that as on the date of sale of the land at Jambhe, the assessee was not the owner of the residential property at India bulls’. The Ld.AR further drawing our attention to the events of payments made by the assessee and submitted that the assessee paid 10% of the purchase price and another 5% by 18/02/2010. These payments of 15% of purchase price, clearly indicate the intent of the parties to the effect that assessee had agreed to purchase residential property at India Bulls on 17 th December, 2009, itself whereas the assessing officer held that this property was only acquired on 25.02.2013. The Ld.AR further drew our attention to a slew of judicial precedents to rebut the point that the assessee was, in fact, the owner of the property at India bulls, as on the date of sale of land at Jambhe. Some of them are – 1. Ashok G Chauhan v. ACIT (2019) 105 taxmann.com 204 (Mum) 2. ITO vs Rasiklal N Satra (2006) 98 ITD 335 (Mum) 3. DCIT vs Shri Dawood Abdulhussain (ITA No.3788/Mum/2016) 7 ITA 5453/Mum/2019-AY-2013-14 4. CIT vs Kapil Nagpal (2015) 63 taxmann.com 366 (Del) 5. Dr Smt. P.K. Vasanthi Rangrajan vs CIT (2012) 23 taxmann.com 299 (Mad) 6. Amit Gupta vs ACIT (2017) 81 taxmann.com 445 (Del- Trib.) 7. Ram Prakash Miyan Bazaz vs DCIT (2014) 45 taxmann.com 550 (Jaipur) 8. George Dominic (2013) 35 taxmann.com 547 (Cochin) 6. The learned departmental representative, on the other hand, relied upon the orders of the authorities below and submitted that applying the proviso (a) (i) & a (ii) to section 54F, exemption under section 54F cannot be allowed to the assessee. In fact, the assessee has hidden the fact of ownership of the property held at Pune. 7. We have considered the rival submissions and perused the materials placed on record. We have thoroughly analyzed the citations relied upon by the assessee and department during assessment proceedings and 1 st Appeal. 8. The Delhi Bench of ITAT in the case of Amit Gupta v. Asstt. CIT [IT Appeal Nos. 3292 & 3474 (Delhi) of 2013, dated 9-9-2015] wherein following the decision of the Hon’ble Madras High Court in the case of Dr. Smt. P .K. Vasanthi Rangarajan v. CIT [2012] 23 taxmann.com 299, the Tribunal held that joint ownership is not a bar for claiming exemption under section 54F of the Income- tax Act (the Act). The Hon’ble Madras High Court in this case has held that if a residential property is jointly owned by two persons that would not preclude the person (as an assessee) from claiming exemption under section 54F of the Act, as the assessee would not be hit by the proviso to section 54F of the Act - being not on exclusive owner of the residential property. But the Hon’ble Supreme Court in 8 ITA 5453/Mum/2019-AY-2013-14 the case of M.J. Siwani v. CIT [2015] 53 taxmann.com 318 [judgment dated 10th November, 2014] affirmed the views of the Hon’ble Karnataka High Court by observing that "We find no reason to entertain this Special Leave Petition, which is, accordingly , dismissed”. The Karnataka High Court had held in this case that in terms of provisions of section 54F of the Act, where assessee on date of sale of long-term capital asset owns a residential house even jointly with another person, and his claim for deduction of capital gain arising from sale of asset has to be rejected. 9. Decision of the Delhi Bench in Amit Gupta's case (supra). The assessee, in this case, was full owner of the first residential property and had 50% share in the second residential property on the date of transfer of original capital asset in the form of a plot. The assessment year concerned in this case was 2006-2007. The assessing authority disallowed the claim made by the assessee under section 54F of the Act as the assessee was legally owner of more than one residential property, thereby violating the proviso to section 54F of the Act according to which the assessee in order to claim exemption under this section should not have been owner of more than one residential property on the date of transfer of original capital asset in the form of a plot. The Commissioner of Income-tax (Appeals), being the first appellate authority, confirmed the order of the assessing authority on the same ground. It was argued on behalf of the assessee before the Tribunal that as per the judgment of the High Court of Madras in the case of Dr. Smt. P .K. Vasanthi Rangarajan (supra) unless and until there were materials to show that the assessee was the exclusive owner of the residential property, the harshness of the proviso could not be applied for denying exemption under 9 ITA 5453/Mum/2019-AY-2013-14 section 54F of the Act. It was also contended on behalf of the assessee that the Madras High Court in this case had also held that when it was clear that as on the date of transfer, the assessee did not own residential house in her/his name only and was the holder of only 50% of share, then the provisions of section 54F of the Act would not create a rider and the assessee could be held entitled to exemption under 54F of the Act. This argument found favour with the Tribunal and the Tribunal held at para 12 as under-"Hence, we are inclined to hold that the issue raised by the assessee is squarely covered in favour of the assessee by the judgment of the Hon'ble Madras High Court in the case of Dr. Smt. P .K Vasanthi Rangarajan (supra) and the assessee cannot be denied exemption under section 54F of the Act merely because he was the holder of 50% of the share jointly with Smt. Saroj Aggarwal of the property situated at Siddarth Extension Residential Scheme and the AO was not justified in denying claim of the assessee under section 54 of the Act and the first appellate authority was incorrect in upholding the action of the AO on this issue. Finally, in view of our foregoing discussion, we dismiss the action of the AO as well as impugned order pertaining to the claim of deduction under section 54F of the Act and the AO is directed to allow the same to the assessee. 10. Synopsis of facts and contentions Chronological events relevant for the claim of exemption u/s 54F: Date Event Remarks Consideration (Rs.) Relevant Page No. of the Paperbook. 17.07.2012 Sale of Jhambe Land Capital Gains accruing from sale is subject matter of appeal 10 ITA 5453/Mum/2019-AY-2013-14 07.08.2012 Sale of Flat in Kohinoor CHSL, Pune 25.02.2013 Execution and registration of agreement for sale of Indiabulls "SKY" Property Initially sec 54F exemption was claimed in respect of this property. Booking on 9 th October 2009, Payments of Rs. 2.40 crores prior to execution of agreement 12,08,81,000 Page No. 3 and 4 for "Joint Ownership" Page No. 11 for consideration 04.05.2013 Purchase of Bungalow in Pune in Abhimanshree CHSL Subsequently sec 54F exemption was claimed in respect of this property 7,30,00,000 Page No. 113 for Consideration “Appellant's contentions: The first proviso to section 54F which has been invoked to deny exemption to the appellant reads as under Provided that nothing contained in this sub-section shall apply where- (a) The assessee,- (i) Owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) Purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset: or (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 than the one residential house owned on the date: of transfer of the original asset, is chargeable under the head "Income from house property". Therefore the conditions in the proviso are cumulative and both have to be satisfied before the exemption can be denied. 1. The appellant has claimed exemption u/s 54F (1) in respect of Abhimanshree Property at Pune. He contends that India Bulls Property was purchased on 11 ITA 5453/Mum/2019-AY-2013-14 09.10.2009 (Ref letter dated 26.02.2016-recorded in assessment order on page no. 3 and 4 of the Assessment Order). Therefore, there is no violation of condition under clause (a)(ii) of proviso to sec. 54F(1) that the assessee should not purchase any residential house other than the new asset within one year from the date of transfer. The Appellant further contends that The India bulls property was owned jointly by the appellant along with his wife. The ownership in the property is fractional ownership or joint ownership and not an exclusive ownership of the appellant. As such the condition provided in clause (a)(1) of proviso to sec. 54F(1) that on the date of transfer of capital asset, the assessee should not own more than one house, other than new asset, is not breached since the appellant was owner of only Kohinoor flat at Pune as on the date of sale of Jambhe Land.” 11. We find from the records that the Indiabulls property was under construction and the possession was handed over to the assessee only on 28.12.2016, till such time income from the said property was not chargeable under the head "Income from house property" and hence the condition stipulated in clause (b) of proviso to sec. 54F (1) disentitling claim u/s 54F is not satisfied. 12. Facts of the case and applicable law with various decisions relevant to the subject are discussed and deliberated in detail; we find force in the arguments of the assessee. 13. In the result, appeal of the assessee is allowed and AO is directed to give consequential relief. Order pronounced in the open court on 14/06/2022 Sd/- Sd/- (VIKAS AWASTHY) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER 12 ITA 5453/Mum/2019-AY-2013-14 Mumbai, Dt: 14 th June, 2022 SK, Sr.PS /True copy/ Assistant Registrar / Senior Private Secretary ITAT, Mumbai Benches