GEORGE KURIEN, MUMBAI V. ITO-11(20(3), MUMBAI

ITA 6050/MUM/2011

• Counselvise Citation: 605019914 RSA 2011
• Duration Of Justice: 3 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 09-05-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 30-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Assessee Lawyers: B V JHAVERI
• Keywords: Fair market value
• Section: 54; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI , BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 6050/MUM/2011 (ASSESSMENT YEAR: 2006-06) SHRI GEORGE KURIEN, 511, JOLLY BHAVAN NO.1, 10, NEW MARINE LINES, MUMBAI -400 020 .: PAN: AAKPK 3644 A VS INCOME TAX OFFICER -11(2)(3), AAYAKAR BHAVAN, M K ROAD, MUMBAI -400 020 (APPELLANT) ! (RESPONDENT) ' # APPELLANT BY : $ %$& SHRI B V JHAVERI ! ' # RESPONDENT BY : SHRI PAVAN KUMAR BEERLA '$ ( )& /DATE OF HEARING : 19-11-2014 *+, ( )& / DATE OF PRONOUNCEMENT : 16-01-2015 ORDER , , , , PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) 3, MUMBAI, DATED 06.07.2011, WHEREIN, THE FOLLOWING GROUNDS HAVE BEEN TAKEN: I. DENIAL OF EXEMPTION UNDER SECTION. 54 OF THE ACT RS.62,04,350/-: 1. THE COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE DENIAL OF EXEMPTION UNDER SECTION. 54 OF THE I. T. ACT, 1961 OF RS. 62,04,350/- BEING THE INVESTMENT MADE B Y THE ASSESSEE IN PURCHASING THE NEW RESIDENTIAL HOUS E IN ARIHANT TOWER OUT OF THE SALE PROCEEDS OF THE OLD RESIDENTIAL HOUSE OF THE ASSESSEE IN M/S. SEA GLIMP SE CO-OPERATIVE HOUSING SOCIETY LTD. 2. THE COMMISSIONER (APPEALS) ERRED IN HOLDING THAT THREE ADJACENT FLATS ON 13TH FLOOR OF THE BUILDING PURCHASED BY THE ASSESSEE AND USED AS ONE RESIDENTI AL HOUSE BY ENCLOSING THE PASSAGE LEADING TO THREE FLA TS AS A PART OF THE RESIDENCE WITH THE PERMISSION OF THE BUILDER, IS NOT ONE RESIDENTIAL HOUSE BUT THEY ARE THREE DIF FERENT FLATS. 3. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT ALL THE THREE FLATS ARE INTER-CONNECTED AND T HEY ARE SHRI GEORGE KURIEN ITA 6050/M/2011 2 USED AS ONE RESIDENTIAL HOUSE BY THE ASSESSEE AND THEREFORE, THE ASSESSEE IS ENTITLED TO DEDUCTION U NDER SECTION. 54 OF THE ACT AS ALL THE CONDITIONS ARE SA TISFIED. 4. THE COMMISSIONER (APPEALS) ERRED IN HOLDING THAT THE ASSESSEE HAD PARTED WITH HIS SHARE IN THE PURCHASE OF THREE FLATS TO HIS FAMILY MEMBERS AS TH ESE THREE FLATS ARE PURCHASED IN THE JOINT NAMES. 5. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT THE ASSESSEE PURCHASED THREE FLATS JOINTLY WIT H THE MEMBERS OF HIS FAMILY FOR THE SAKE OF CONVENIENCE A ND THE ASSESSEE'S NAME IS FIRST IN ALL THE THREE FLATS WHICH SHOWS THAT THE ASSESSEE IS THE OWNER OF THE THREE F LATS AND THE ASSESSEE HAS INVESTED THE FULL CONSIDERATIO N--AN OF THE SALE PROCEEDS RECEIVED BY HIM ON SALE OF HIS OLD RESIDENTIAL HOUSE AND THE FAMILY MEMBERS HAVE NOT CONTRIBUTED ANY PART OF THE CONSIDERATION FOR WHICH THE SAID FAMILY MEMBERS HAVE FILED THEIR RESPECTIVE AFFIDAVITS BEFORE THE ASSESSING OFFICER. II. ADDITION OF RS.26,29,300/- UNDER SECTION. 69B O F THE ACT: 6. THE COMMISSIONER (APPEALS) ERRED IN HOLDING THA T THE ADDITION BY INVOKING SECTION 69B WOULD BE THE DIFFERENCE BETWEEN THE VALUE OF THREE FLATS ADOPTED BY THE DVO AND AS SHOWN IN THE PURCHASE AGREEMENTS AND THUS THE DIFFERENCE WOULD BE CONSIDERED AS UNEXPLAI NED INVESTMENT OF THE ASSESSEE. 7. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT THERE IS NO EVIDENCE IN POSSESSION OF THE ASSE SSING OFFICER TO HOLD THAT THE ASSESSEE HAS MADE INVESTME NT IN PURCHASING THREE FLATS IN ADDITION TO WHAT IS RECOR DED IN THE AGREEMENTS FOR PURCHASE, WHICH ARE REGISTERED, AND THEREFORE, THERE IS NO INVESTMENT MADE BY THE ASSES SEE WHICH IS UNEXPLAINED. 8. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT SECTION 69B OF THE ACT CAN BE INVOKED ONLY IN THE CASE WHERE IN ANY FINANCIAL YEAR THE ASSESSEE HAS M ADE INVESTMENT OR IS FOUND TO BE THE OWNER OF ANY MONEY , BULLION, JEWELLERY OR ANY VALUABLE ARTICLES WHEREAS IN THE PRESENT CASE THERE IS NO EVIDENCE ON RECORD TO PROV E THAT THE ASSESSEE HAS MADE INVESTMENT OF RS. 26.29.300/- OVER AND ABOVE RS. 67,50,060/- IN PURCHASE OF THE S AID FLATS. 9. THE ORDER OF THE COMMISSIONER (APPEALS) IS BAD IN LAW AND WITHOUT JURISDICTION. 10 YOUR APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AMEND OR DELETE ANY OF THE FOREGOING GROUNDS OF APP EAL. 2. THE FACTS ARE THAT THE ASSESSEE PURCHASED A FLAT IN SEA GLIMPSE BUILDING AT WORLI IN 1968. THIS FLAT WAS SOLD BY THE ASSESSEE VIDE AGREEMENT DATED 18.10.2004 FOR RS. 1.45 CRO RES. FOR COMPUTING THE CAPITAL GAINS, THE ASSESSEE TOOK THE F MV AS ON 01.04.1981 AT RS. 17,83,060/-, WHICH WAS INDEXED AT RS. 85,58,688/- AS IN 2004, THEREBY THE CAPITAL GAIN WAS COMPU TED AT RS. 59,41,312/-. THE ISSUE OF FMV AS ON 01.04.1981 WAS SHRI GEORGE KURIEN ITA 6050/M/2011 3 TAKEN UP BY THE CIT IN PROCEEDINGS UNDER SECTION 263 A ND AS PER THE DIRECTION, THE AO TOOK THE VALUE AT RS 13,97,000/ - AGAINST RS. 17,83,060/- AND COMPUTED THE LTCG ON THE AD OPTED FIGURE. THE DIFFERENCE IN FMV, AS EXPLAINED TO THE AO WAS, TH AT THE AVO HAD ADOPTED THE VALUE OF RS. 1,080 PER SQ. FT. W HICH WAS RS. 880/- AS PER READY RECKONER AND RS. 200/- FOR THE TWO LIFTS IN THE BUILDING, THUS CAME TO THE FIGURE OF RS. 1,080/- AND AT RS. 17,83,060/-. THE AO ADOPTED RS. 910 PER SQ. FT. A ND ACCORDINGLY CAME TO THE FIGURE OF RS. 13,97,000/-. 3. IN THE RETURN, THE ASSESSEE CLAIMED THE DEDUCTION UN DER SECTION 54, AS THE ASSESSEE PURCHASED THREE ADJACENT FLATS AT PAREL IN THE JOINT NAMES OF HIMSELF AND HIS TWO SONS. 4. THE ASSESSEE BEFORE THE AO SHOWED THAT THE FLATS WE RE ADJACENT AND CONTIGUOUS, FOR WHICH AN AGGREGATE SUM OF R S. 62,04,350/-, INCLUSIVE OF STAMP DUTY AND REGISTRATION WAS PA ID, AND THEREFORE THE LTCG WAS TAKEN AT NIL. 5. THE AO DENIED THE EXEMPTION AND ALSO REJECTED THE R ATIOS LAID DOWN IN THE CASE OF ITO VS SUSHILA M JHAVERI, REPORTED IN 107 ITD 327 (MUM-SB) & OTHER DECISIONS. 6. THE AO, BESIDES DENYING THE DEDUCTION UNDER SECTION 5 4 ALSO MADE AN ADDITION UNDER SECTION 69B ON THE DIFFERENCE CREATED BETWEEN THE VALUES AS TAKEN BY THE ASSESSEE AND AS ADOPTED BY THE AO. 7. THE ASSESSEE APPROACHED THE CIT(A), BEFORE WHOM THE ASSESSEE REITERATED HIS SUBMISSIONS MADE BEFORE THE AO A ND PLEADED THAT THE ASSESSEE HAD MADE CORRECT CLAIM AND A LSO NO ADDITION WAS JUSTIFIED UNDER SECTION 69B. 8. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE SUSTAINED THE ADDITIONS AS MADE BY THE AO. SHRI GEORGE KURIEN ITA 6050/M/2011 4 9. AGAINST THIS ORDER OF THE CIT(A), THE ASSESSEE IS NOW BEFORE THE ITAT. 10. BEFORE US, THE AR SUBMITTED THAT THE REVENUE AUTHO RITIES WENT AGAINST THE PROVISIONS OF LAW AS WELL AS AGAINST THE JUDICIAL PRONOUNCEMENTS AND ALSO AGAINST FACTS. 11. THE FACT THAT THE ASSESSEE SOLD HIS OLD FLAT PURCHASE D IN 1968 AND PURCHASED THREE ADJACENT FLATS ON THE SAME FLO OR IS NOT DISPUTED. THE DISPUTE ON ALLOWANCE OF DEDUCTION UNDER SECT ION 54 WAS RESOLVED BY THE DECISION OF HONBLE SPECIAL BENCH IN THE CASE OF ITO VS SUSHILA M JHAVERI, REPORTED IN 107 ITD 327 (MUM), WHEREIN IT WAS HELD, HOWEVER, WHERE MORE THAN ONE UNIT ARE PURCHASED WHICH ARE ADJACENT TO EACH OTHER AND ARE CONVERTED INTO ONE HOUSE FOR THE PURPOSE OF RESIDENCE BY HAVING COMMON PASSAGE, COMMON KITCHEN, ETC., THEN IT WOULD BE A CASE OF INVESTMENT IN ONE RESIDENTIAL HOUSE AND CONSEQUENTLY, THE ASSESSEE WOULD BE ENTITLED TO EXEMPTION. 12. THE ISSUE ALSO CAME UP BEFORE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS GITA DUGGAL, REPORTED IN 30 TAXMAN.COM 230 (DEL), WHERE IT WAS HELD, A PERSON MAY CONSTRUCT A HOUSE ACCORDING TO HIS PL ANS AND REQUIREMENTS. MOST OF THE HOUSES ARE CONSTRUCTE D ACCORDING TO THE NEEDS AND REQUIREMENTS AND EVEN COMPULSIONS. FOR INSTANCE, A PERSON MAY CONSTRUCT A RESIDENTIAL HOUSE IN SUCH A MANNER THAT HE MAY USE THE GROUND FLOOR FOR HIS OWN RESIDENCE AND LET OUT THE FIRST FLOOR HAVING AN INDEPENDENT ENTRY SO THAT HIS INCOM E IS AUGMENTED. IT IS QUITE COMMON TO FIND SUCH ARRANGEMENTS, PARTICULARLY POST-RETIREMENT. ONE MAY BUILD A HOUSE CONSISTING OF FOUR BEDROOMS (ALL IN T HE SAME OR DIFFERENT FLOORS) IN SUCH A MANNER THAT AN INDEPENDENT RESIDENTIAL UNIT CONSISTING OF TWO OR T HREE BEDROOMS MAY BE CARVED OUT WITH AN INDEPENDENT ENTRANCE SO THAT IT CAN BE LET OUT. HE MAY EVEN ARR ANGE FOR HIS CHILDREN AND FAMILY TO STAY THERE, SO THAT THEY ARE NEARBY, AN ARRANGEMENT WHICH CAN BE MUTUALLY SUPPORTIVE. HE MAY CONSTRUCT HIS RESIDENCE IN SUCH A MANNER THAT IN CASE OF A FUTURE NEED HE MAY BE ABLE TO DISPOSE OF A PART THEREOF AS AN INDEPENDENT HOUSE. THERE MAY BE SEVERAL SUCH CONSIDERATIONS FOR A PERSON WHI LE CONSTRUCTING A RESIDENTIAL HOUSE. THEREFORE, ONE CA NNOT SEE HOW OR WHY THE PHYSICAL STRUCTURING OF THE NEW SHRI GEORGE KURIEN ITA 6050/M/2011 5 RESIDENTIAL HOUSE, WHETHER IT IS LATERAL OR VERTICA L, SHOULD COME IN THE WAY OF CONSIDERING THE BUILDING AS A RESIDENTIAL HOUSE. THE FACT THAT THE RESIDENTIAL HOUSE CONSISTS OF SEV ERAL INDEPENDENT UNIT CANNOT BE PERMITTED TO ACT AS AN IMPEDIMENT TO THE ALLOWANCE OF THE DEDUCTION UNDER SECTION 54154F. IT IS NEITHER EXPRESSLY NOR BY NECE SSARY IMPLICATION PROHIBITED. FOR THE ABOVE REASONS THE TRIBUNAL TOOK THE CORRECT VIEW. 13. THE ISSUE HAS BEEN FOLLOWED CONSISTENTLY BY THE VARIOU S DECISIONS OF THE COORDINATE BENCHES OF THE ITAT, WHICH AR E AS FOLLOWS (COPIES ATTACHED) S.NO CASE LAW CITATION 1 ACIT VS LEELA P NANDA 102 ITD 281(MUM) 2 ACIT VS BHUPENDRA SALLA ITA NO. 2003/MUM/2007 3 ACIT VS DEEPAK S BHEDA ITA NO. 5011/MUM/2010 4 ACIT VS JENNIFER BHINDE 252 CTR 444 (KAR) 5 DCIT VS RAVINDRA KUMAR ARORA 342 ITR 38 (DEL) 6 DCIT VS VIKAS OBEROI ITA 4495/MUM/2011 14. RESPECTFULLY, THEREFORE, FOLLOWING THE DECISIONS, AS CITED B Y THE AR, DIRECTLY ON THE ISSUE OF CLAIM OF DEDUCTION UNDER SECTION 54/54F, WE ARE OF THE OPINION THAT THE ASSESSEE HAD MAD E A CORRECT CLAIM AND THEREFORE, THERE WAS NO INFIRMITY IN HIS CLAIM. 15. WE THEREFORE, DIRECT THE REVENUE AUTHORITIES TO ALLOW T HE DEDUCTION AS CLAIMED BY THE ASSESSEE. GROUNDS NO. 1 TO 5 ARE THEREFORE ALLOWED. 16. GROUNDS 6 TO 8 PERTAIN TO ADDITION MADE UNDER SECT ION 69B. THE REVENUE AUTHORITIES HAVE MADE AN ADDITION UNDER SECTION 69B ON THE DIFFERENCE OF THE VALUE OF THE FLAT TAKE N AS ON 01.04.1981. 17. AS PER THE ORDER OF THE REVENUE AUTHORITIES, THE AS SESSEE AND THE AVO HAVE ADOPTED THE VALUE AS PER READY RECK ONER FIGURES GIVEN BY THE MUNICIPAL AUTHORITIES, WHICH GIVE FIGURES OF COST OF CONSTRUCTION AND AMENITIES LIKE LIFTS AND GARAGE HA S BEEN ADDED THERETO, WHEREAS THE AO AND THE DVO HAVE ADOPT ED THE VALUE WHICH SHOW CONSOLIDATED FIGURES OF AMENITIES, I.E. LIFTS AND SHRI GEORGE KURIEN ITA 6050/M/2011 6 CAR GARAGE. THE DIFFERENCE IN VALUE WAS PRESUMED TO BE T HE MONEY PAID IN CASH FOR PURCHASE OF THE PROPERTY. 18. THE ISSUE BEFORE US IS THE VALUATION TO BE ADOPTED A S ON 01.04.1981, BECAUSE NEITHER THE SALE VALUE OF WORLI PROPERTY IS DISPUTED NOR IS THE AGGREGATE PURCHASE VALUE OF THE THR EE ADJACENT FLATS AT PAREL. IT IS THE VALUE AS ON 01.04.1981, WHICH HAS TO BE FIXED, AS THE DIFFERENCE EMANATE ON THIS VALUE A ND CONCLUDES INTO THE DEEMED ADDITION UNDER SECTION 69B. 19. SINCE BOTH THE VALUES ARE BEFORE THE REVENUE AUTHO RITIES ALONG WITH THE CERTAIN JUDICIAL PRONOUNCEMENTS, WE DEEM IT FIT TO SET ASIDE THE ORDER OF THE CIT(A) ON THE ISSUE OF ADDITION UNDER SECTION 69B AND DIRECT THE AO TO COMPUTE THE VALUATION OF WORLI PROPERTY AS PER FIGURES GIVEN BY THE MUNICIPAL AUTHORITIES AND ITS ANNEXURES WITH REGARD TO LIFTS AND GARAGE, I.E. WHETHER TO BE INCLUDED AS A CONSOLIDATED FIGURE OR TO BE TAKEN SEPARATELY. 20. SINCE GROUNDS NO. 6 TO 9, AS TAKEN BY THE ASSESSEE ARE CONNECTED TO EACH OTHER, THE GROUNDS ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 21. GROUNDS NO. 9 & 10 ARE GENERAL. 22. IN THE RESULT, THE APPEAL AS FILED BY THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JANUARY, 2015. SD/- SD/- ( ) ( ) 0 0 0 0 0 0 0 0 (R C SHARMA) ( VIVEK VARMA ) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 16 TH JANUARY, 2015 SHRI GEORGE KURIEN ITA 6050/M/2011 7 )/ COPY TO:- 1) / THE APPELLANT. 2) ! / THE RESPONDENT. 3) THE CIT(A)-3, MUMBAI. 4) THE CIT- 11, MUMBAI. 5) 1$23 )' , , / THE D.R. G BENCH, MUMBAI. 6) 345 6 COPY TO GUARD FILE. 07' / BY ORDER / / TRUE COPY / / 8 / 9 , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * *CHAVAN, SR.PS