ACIT 18(1), MUMBAI V. DINESH A VORA, MUMBAI

ITA 5547/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62667 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 27-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KIRITI S SANGHAVI
• Keywords: Capital asset
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI G E VEERABHADRAPPA, PRESIDENT & SHRI VI JAY PAL RAO, JM ITA NO. 5547/MUM/2011 (ASSESSMENT YEAR 2007-08) THE ASST COMMR OF INCOME TAX 18(1), MUMBAI VS SH DINESH A VORA A-601 STANROSE APARTMENTS VEER SAVARKAR MARG PRABHADEVI MUMBAI 400 025 (APPELLANT ) (RESPONDENT) PAN NO. AABPV3817B ASSESSEE BY SHRI KIRITI S SANGHAVI REVENUE BY SH C G K NAIR DT.OF HEARING 14 TH JUNE 2012 DT OF PRONOUNCEMENT 29 TH , JUNE 2012 ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 5/5/2011 OF COMMISSIONER OF INCOME TAX(APPEALS) FOR THE ASSES SMENT YEAR 2007-08. 2 THE REVENUE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL: I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR RE LIEF OF RS.21,30,127/- U/S. 54 OF THE INCOME TAX ACT 1961. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED AND FAILED TO APPRECIATE THAT THE ASSESSEE PU RCHASED FOUR SEPARATE FLATS BY SEPARATE AGREEMENTS AND SOLD BY A SINGLE AGR EEMENT AND IS THEREFORE INELIGIBLE FOR EXEMPTION U/S. 54 OF THE IN COME TAX ACT, 1961. III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT IN SIMILAR FACTS OF THE CA SE THE HONBLE ITAT, MUMBAI BENCH IN THE CASE OF DR. P. S. PASHRICHA (20 SOT 46 8) HAS HELD OTHERWISE. THE JUDGMENT HAS BEEN SUBSEQUENTLY AFFIRMED BY THE HON BLE BOMBAY HIGH COURT VIDE THEIR ORDER DATED 07/10/2009 IN APPEAL NO. 1825 OF 2009. SH DINESH A VORA ITA NO. 5547/MUM/2011 2 3 THE ASSESSEE SOLD FOUR FLATS BEARING NUMBERS 301, 302, 401 AND 402 IN BUILDING SAND PEBBLE AT VILLIAGE AMBLOI, ANDHERI (W) MUMBA I VIDE A SINGLE SALE AGREEMENT DATED 17.5.2006. THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 54 OF THE IT ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT ACCORDIN G TO SEC.54, SUBJECT MATTER OF SALE SHOULD BE A RESIDENTIAL HOUSE AND THEREFORE, O NLY ONE HOUSE USED FOR RESIDENCE IS SOLD OR TRANSFERRED, GIVING RISE TO CAPITAL GAIN WILL BE EXEMPTED UNDER SECTION 54. AS THE ASSESSEE HAS SOLD FOUR FLATS; THEREFORE, THE ASSESSING OFFICER DENIED THE EXEMPTION UNDER SECTION 54. 3.1 ON APPEAL, THE COMMISSIONER OF INCOME TAX(APPE ALS) ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE CBDT INSTRUCTIONS VID E LETTER NUMBER 207/24/76-IT(A I I) DATED 25.3.1977 AS WELL AS THE DECISION OF THIS TRI BUNAL IN CASE OF HAMAYAN S RANGILA IN ITA NO. 1239/MUM/2010. 4 BEFORE US THE LD DR HAS SUBMITTED THAT THE ASSESS EE PURCHASED THESE FOUR FLATS BY SEPARATE AGREEMENTS AND THEREFORE, THESE WERE SE PARATE AND INDEPENDENT UNITS HOWEVER, THE ASSESSEE SOLD ALL THESE 4 FLATS BY A S INGLE AGREEMENT. HE HAS FURTHER SUBMITTED THAT SEC 54 HAS CLEARLY STIPULATED THAT T HE CAPITAL GAIN ARISING FROM TRANSFER OF A LONG TERM CAPITAL ASSET BEING THE RESIDENTIAL HOUSE; THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 54 OF THE INCO ME TAX ACT. HE HAS RELIED UPON THE ORDER OF ASSESSING OFFICER AS WELL AS THE DECIS ION OF THIS TRIBUNAL IN CASE OF ACIT VS DR P S PASRICHA REPORTED IN 20 SOT 468 ( MUM). 4.1 ON THE OTHER HAND THE LEARNED AND AR OF THE ASS ESSEE HAS SUBMITTED THAT THE ASSESSEE OWN 50% SHARE IN THE RESIDENTIAL HOUSE IN QUESTION. THE SAID HOUSE COMPRISING OF FOUR RESIDENTIAL UNITS AND ALL ARE AD JACENT AND USABLE AS ONE UNIT. THUS, THE FOUR RESIDENTIAL UNITS WERE USED AS ONE RESIDEN TIAL HOUSE AND THEREFORE, THE SH DINESH A VORA ITA NO. 5547/MUM/2011 3 CAPITAL GAIN, ON SALE OF THE RESIDENTIAL HOUSE COMP RISING FOUR ADJACENT FLATS, IS ELIGIBLE FOR DEDUCTION UNDER SECTION 54 OF THE I T ACT. HE HAS FURTHER SUBMITTED THAT THE ISSUE IS COVERED BY THE CBDT CIRCULAR NUMBER 207/24/76 I T (II) DATED 25.3.1997 AS WELL AS BY THE DECISION OF THIS TRIBUNAL IN CASE OF HAMAYAN S RANGILA (SUPRA). 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE P ARTIES AS WELL AS RELEVANT MATERIAL ON RECORD. THE EXPRESSION USED IN SECTION 54 IS 'TRANSFER OF A LONG TERM CAPITAL ASSET BEING THE RESIDENTIAL HOUSE' REFERS TO A RESIDENTIAL HOUSE WHICH MAY COMPRISE MORE THAN ONE BUILDING OR BUILDINGS STRUCT URE; BUT THE SAME ARE USED AS A SINGLE RESIDENTIAL HOUSE. FURTHER, THE TERMS BUILD INGS OR LANDS AS USED IN THE EARLIER PART OF SECTION 54 MAKES IT CLEAR THAT A RESIDENTIA L HOUSE MAY COMPRISES OF MORE THAN ONE LAND AND BUILDINGS. THUS, EVEN IF MORE THA N ONE UNIT ARE ADJACENT TO EACH OTHER AND ARE BEING USED AS A SINGLE RESIDENTIAL HO USE BY THE ASSESSEE AND HIS FAMILY MEMBERS. THE SAME WOULD BE CONSIDERED AS RESIDENTIA L HOUSE U/S 54 OF THE I T ACT. THE ASSESSING OFFICER HAS NOT DISPUTED THE FACT THA T ALL THESE FLATS WERE USED BY THE ASSESSEE AS RESIDENTIAL HOUSE; THEREFORE, THE REQUI REMENT OF SECTION 54 IS THE CAPITAL GAIN ARISING FROM TRANSFER OF A RESIDENTIAL HOUSE I S FULFILLED. 5.1 TO CLARIFY SUCH A SITUATION, THE CBDT HAS EXPLA INED THE EXPRESSION RESIDENTIAL HOUSE; VIDE CIRCULAR DATED 25.3.1977 (SUPRA). THE C OORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF HAMAYAN S RANGILA IN ITA NO. 1239/M UM/2010 VIDE ORDER DATED 23.2.2011 HAS CONSIDERED AND DECIDED AN IDENTICAL I SSUE IN PARA 6.1 AS UNDER: 6.1 THE FIRST ISSUE IS WHETHER THE PROVISIONS OF S ECTION 54 CAN BE APPLIED TO CAPITAL GAIN ARISING FROM SALE OF MORE THAN ONE RESIDE NTIAL HOUSE. IN OUR VIEW THE SECTION 54 EXEMPTS CAPITAL GAIN ARISING FROM SALE OF A LONG TERM CAPITAL ASSET BEING A RESIDENTIAL HOUSE AND THEREFORE IT WILL APPLY TO SALE OF ANY RESIDENTIAL HOUSE PROVIDED OTHER CONDITIONS ARE FULFI LLED. THIS POSITION HAS ALSO BEEN CLARIFIED BY CBDT VIDE CIRCULAR F.NO.207/24/76 IT(II) DATED 25.3.97 IN WHICH IT HAS BEEN CLEARLY MENTIONED THAT CAPITAL GA IN ARISING ON TRANSFER OF EACH HOUSE WILL QUALIFY FOR EXEMPTION IN CASE THE A SSESSEE HAD SOLD MORE SH DINESH A VORA ITA NO. 5547/MUM/2011 4 THAN ONE RESIDENTIAL HOUSES. THE OTHER ISSUE IS WHET HER CAPITAL GAIN ARISING FROM SALE OF TWO FLATS CAN BE EXEMPTED UNDER SECTION 54 IF THE GAINS ARE INVESTED IN ONE RESIDENTIAL HOUSE. IN OUR VIEW THIS ISSUE IS ALSO TO BE ANSWERED IN FAVOUR OF THE ASSESSEE BECAUSE THE REQUIREMENT OF SECTION 54 IS THAT THE CAPITAL GAIN ARISING FROM TRANSFER OF A RESIDENTIAL HOU SE SHOULD BE INVESTED IN A RESIDENTIAL HOUSE. THE REQUIREMENT IS THAT THE INVESTM ENT SHOULD BE IN ONE RESIDENTIAL HOUSE. THERE IS NO BAR ON INVESTING THE CA PITAL GAIN ARISING FROM SALE OF MORE ONE RESIDENTIAL HOUSE IN ONE RESIDENTIAL HOU SE. THEREFORE IN OUR VIEW, THE CAPITAL GAINS ARISING FROM SALE OF MORE THAN ONE RE SIDENTIAL HOUSE WILL BE ELIGIBLE FOR EXEMPTION UNDER SECTION 54 IF GAINS FROM BOTH THE HOUSES ARE INVESTED IN THE SAME RESIDENTIAL HOUSE. THIS VIEW IS ALSO SUPPORTED BY THE DECISION OF TRIBUNAL IN CASE OF RABINDRA K.MERCHANT V S JCIT (SUPRA) IN WHICH CASE EXEMPTION UNDER SECTION 54 AND 54F BOTH WERE FO UND ALLOWABLE IN RESPECT OF INVESTMENT IN THE SAME RESIDENTIAL HOUSE. WE THEREFORE SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE APPEAL OF THE ASSE SSEE. 5.2 THE DECISION IN CASE OF DR P S PASRICHA (SUPRA) AS RELIED UPON BY THE LD DR IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE WHE N ALL THE 4 FLATS WERE USED BY THE ASSESSEE AND HIS FAMILY AS ONE RESIDENTIAL HOUSE. F URTHER, THE SAID CASE IS ON THE POINT OF PURCHASE OF MORE THAN ONE RESIDENTIAL HOUSE AND THEREFORE, THE FACTS AND ISSUE IN THE SAID CASE ARE ENTIRELY DIFFERENT. 6 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CAS E AND FOLLOWING THE ORDER OF COORDINATE BENCH OF THIS TRIBUNAL (SUPRA), WE FIND NO ERROR OR ILLEGALITY IN THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING TH E CLAIM OF EXEMPTION UNDER SECTION 54 OF THE I T ACT. 7 IN THE RESULT THE APPEAL OF THE REVENUE IS DISMIS SED ORDER PRONOUNCED ON THIS 29 TH , DAY OF JUNE 2012 SD/- SD/- ( G E VEERABHADRAPPA ) PRESIDENT ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 29 TH , JUNE 2012 RAJ* SH DINESH A VORA ITA NO. 5547/MUM/2011 5 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI