HARISH M. AGGARWAL, THANE V. ACIT., CIR.-1, THANE

ITA 6361/MUM/2011

• Counselvise Citation: 636119914 RSA 2011
• Duration Of Justice: 3 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 23-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 15-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Opportunity of being heard
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE HONBLE S/SHRI JOGINDER SINGH ( JM ) , AND B.R.BASKARAN (AM) , . . , ./ I.T .A. NO. 6361 /MUM/ 20 1 1 ( / ASSESSMENT YEAR : 200 6 - 07 ) SHRI HARISH M AGGARWAL, AGGARWAL ESTATE S , CHITALSAR MANPADA, S V ROAD, THANE - 400610. / VS. THE ASSTT. COMMISSIONER OF INCOME TAX , CIRCLE - 1, VARDHAMAN BUILDING, MIDC, WAGLE INDUSTRIAL ESTATE, THANE ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAOPA2367G / APPELLANT BY SHRI VIMAL PUNAMIYA / RSPONDENT BY SHRI JEETENDRA KUMAR / DATE OF HEARING : 7.7 . 201 5 / DATE OF PRONOUNCEMENT: 26.8 . 201 5 / O R D E R PER B.R. BASKARAN (AM) THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 26.5.2011 PASSED BY LD CIT(A) - II, THANE FOR ASSESSMENT YEAR 2006 - 07 ON THE FOLLOWING ISSUES: - (A) REJECTION OF DEDUCTION CLAIMED U/S 54F OF THE ACT (B) ASSESSMENT OF RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF ASSESSING THE SAME AS BUSINESS INCOME. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD FOLLOWING ASSETS AND CLAIMED EXEMPTION U/S 54 OF THE ACT AS DETAILED BELOW: - I.T.A. NO .6361 /M/2011 2 2.2 DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD CERTAIN PROPERTIES AND CO MPUTED THE LONG TERM CAPITAL GAINS AS UNDER : 1. ON SALE OF FSI ` .2,31,69,247/ - 2. ON SALE OF RH NO/16 MADHUBAN CHS LTD ` .19 , 40,399/ - 3. ON SALE OF LAND AT INDORE RS.4,09,934/ - LONG TERM CAPITAL GAINS ` .2,55,19,581/ - LESS: INVESTMENT U/S 54 PURCHASE OF RESIDENTIAL HOUSE AT B - 3, STYANAND, THANE ` .42,13,760/ - ADD: COST OF IMPROVEMENT ` .9,59,270/ - LESS : EXEMPTION CLAIMED IN AY - 2005 - 06 ` .5,00,000 / - ` .46,73,030/ - INCOME FROM LONG TERM CAPITAL GAINS ` .2,08,46,551 / - 3. THE ASSESSEE CLAIMED DEDUCTION OF THE COST OF NEW RESIDENTIAL HOUSE PURCHASED AT B - 3, SATYANAND, THANE U/S 54 OF THE ACT. SINCE DEDUCTION U/S 54 IS AVAILABLE ON SALE OF RESIDENTIAL HOUSE PROP ERTY, THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO HOW HE COULD CLAIM DEDUCTION U/S 54 ON SALE PROCEEDS OF FSI AND LAND. THE ASSESSEE SUBMITTED THAT HE HAS ACTUALLY CLAIMED DEDUCTION U/S 54F OF THE ACT. THE DEDUCTION U/S 54F IS AVAILABLE ON THE CAPITAL GAIN ARISING ON TRANSFER OF ANY LONG TERM CAPITAL ASSET OTHER THAN A RESIDENTIAL HOUSE. HOWEVER, THE DEDUCTION U/S 54F IS NOT AVAILABLE IF THE ASSESSEE OWNS TWO RESIDENTIAL HOUSES ON THE DATE OF TRANSFER OF THE LONG TERM CAPITAL ASSET OTHER THAN THE RESIDENTI AL HOUSE. THE AO NOTICED THAT THE ASSESSEE IS HAVING TWO RESIDENTIAL HOUSES ON THE DATE OF TRANSFER OF FSI AND LAND, VIZ., ONE LOCATED AT CHEMBUR AND ANOTHER FARM HOUSE LOCATED AT THANE. HENCE HE HELD THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 5 4F OF THE ACT. 4. WE MAY NOTICE THAT THE ASSESSEE HAD ALSO SOLD A RESIDENTIAL HOUSE, VIZ., RH NO.16, MADHUBAN CHS LTD FOR A CONSIDERATION OF RS.19,40,399/ - . I.T.A. NO .6361 /M/2011 3 IT APPEARS THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.5.00 LAKHS IN THE IMMEDIATELY PRECEDI NG YEAR. ACCORDINGLY, THE AO ALLOWED DEDUCTION U/S 54 OF THE ACT ON THE AMOUNT OF RS.14,40,399/ - (RS.19,40,399 LESS RS.5.00 LAKHS) IN RESPECT OF THE RESIDENTIAL HOUSE PURCHASED AT B - 3 SATYANAND, THANE. THE LD CIT(A) ALSO CONFIRMED THE SAME AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. ON A CAREFUL PERUSAL OF THE ORDERS PASSED BY THE TAX AUTHORITIES, WE NOTICE THAT THE ASSESSEE AS WELL AS THE TAX AUTHORITIES HAS NOT PROPERLY APPLIED THE PROVISIONS OF SEC. 54 AND 54F. THE DISCREPANCIES/FA LLACIES NOTICED BY US ARE LISTED OUT BELOW: - (A) IN THE GROUNDS OF APPEAL, THE ASSESSEE IS CLAIMING THAT THE EXEMPTION U/S 54 OF THE ACT WAS DENIED, WHICH RESULTED IN AN ADDITION OF RS.2,40,79,181/ - . HOWEVER, IN THE RETURN OF INCOME, TOTAL DEDUCTION CLAI MED WAS ONLY RS.46,73,030/ - . (B) THE DEDUCTION ALLOWED U/S 54 AND 54F IS PROPERTY SPECIFIC. HENCE, WE ARE UNABLE TO UNDERSTAND AS TO HOW THE ASSESSEE AND AO COULD DEDUCT THE AMOUNT OF RS.5.00 LAKHS ON THE REASONING THAT THE DEDUCTION TO THAT EXTENT WAS A LLOWED IN THE IMMEDIATELY PRECEDING YEAR. WE ARE UNABLE TO UNDERSTAND AS TO THE PROVISIONS UNDER WHICH SUCH KIND OF REDUCTION IS ALLOWED. (C) THE DEDUCTION U/S 54F WAS DENIED ON THE REASONING THAT THE ASSESSEE OWNS A FARM HOUSE, WHICH WAS ALSO CONSIDERE D AS RESIDENTIAL HOUSE PROPERTY BY THE AO. THE ASSESSEE NOW CLAIMS BEFORE US THAT THE SAME WAS NOT A RESIDENTIAL HOUSE PROPERTY, BUT WAS ONLY A STORE HOUSE USED TO DUMP ALL UNUSED ARTICLES. THE NATURE OF HOUSE PROPERTY IS DETERMINED ON THE BASIS OF ITS US AGE, I.E., VERY SAME PROPERTY COULD BE USED FOR RESIDENTIAL PURPOSES AS WELL AS FOR COMMERCIAL PURPOSES. WE NOTICE THE ASSESSEE HAS ALSO NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE FARM HOUSE WAS NOT USED FOR RESIDENTIAL PURPOSES OR WAS I.T.A. NO .6361 /M/2011 4 NOT FIT TO BE USED AS A RESIDENTIAL HOUSE. THE ASSESSING OFFICER HAS ALSO NOT CONDUCTED NECESSARY ENQUIRIES/INSPECTION TO FIND OUT THE ACTUAL USER OF THE PROPERTY. HENCE, IN THE ABSENCE OF RELEVANT DETAILS, WE ARE UNABLE TO RESOLVE THIS CONTROVERSY. (D) THE ASSE SSEE HAS FILED A LETTER DATED 26.12.2008 BEFORE THE ASSESSING OFFICER, WHICH WAS DISCUSSED IN PARAGRAPH 3.8 OF THE ASSESSMENT ORDER. A PERUSAL OF THE SAME WOULD SHOW THAT THE ASSESSEE IS REFERRING TO MANY OTHER PROPERTIES VIZ., F1, F2 & G, G - 302, G602, F1 - 501A ETC. IT IS NOT CLEAR AS TO WHETHER THE ABOVE SAID PROPERTIES WERE ALSO HELD AS RESIDENTIAL HOUSE PROPERTIES OR NOT? THE ANSWER TO THE ABOVE SAID QUESTION WILL DETERMINE THE ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S 54F OF THE ACT. (E) T HE ASSESSEE HAS SOLD A FLAT LOCATED AT RH NO.16, MADHUBAN CHS LTD. THE DATE OF SALE OF THE ABOVE SAID FLAT WAS NOT BROUGHT ON RECORD. SIMILARLY, THE DATES OF SALE OF FSI AND LAND WERE ALSO NOT BROUGHT ON RECORD. THE ELIGIBILITY OF THE ASSESSEE TO CLAIM D EDUCTION U/S 54F SHOULD BE ASCERTAINED AS PER THE NUMBER OF RESIDENTIAL HOUSES AVAILABLE ON THE DATE OF SALE OF THE LONG TERM CAPITAL ASSET OTHER THAN THE RESIDENTIAL HOUSE PROPERTY. HENCE, THE DATE OF SALE OF THE ABOVE SAID ASSETS IS CRUCIAL TO DETERMINE THE ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S 54F OF THE ACT. (F) THE DEDUCTION U/S 54 SHOULD BE ALLOWED AGAINST THE LONG TERM CAPITAL GAIN. HOWEVER, THE AO HAS NOT COMPUTED THE LONG TERM CAPITAL GAIN, BUT ALLOWED THE SAME AGAINST THE SALE VA LUE. (G) IN RESPECT OF THE PURCHASE OF RESIDENTIAL HOUSE LOCATED AT B - 3, SATYANAND, THANE, IN OUR VIEW, THE ASSESSEE HAS GOT AN OPTION TO CLAIM I.T.A. NO .6361 /M/2011 5 DEDUCTION EITHER U/S 54 OR U/S 54F, IF HE IS ELIGIBLE TO CLAIM DEDUCTION UNDER BOTH THE SECTIONS. IN VIEW OF OUR DISCUSSIONS MADE SUPRA, THE ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY AFRESH TO EXERCISE HIS OPTION. 6. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 54/54F REQUIRES FRESH EXAMINATION AT T HE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE CLAIM AFRESH IN ACCORDANCE WITH THE LAW, AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD. 7. THE NEXT ISSUE CONTESTED BY THE ASSESSEE RELATES TO THE ASSESSMENT OF RENTAL INCOME AS INCOME FROM HOUSE PROPERTY, INSTEAD OF ASSESSING THE SAME AS BUSINESS INCOME. BEFORE US, THE LD A.R PLACED RELIANCE ON THE RECENT DECISION RENDERED BY THE HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD. HENCE, WE ARE OF THE VIEW THAT THIS ISSUE ALSO REQUIRES FRESH EXAMINATION IN THE LIGHT OF THE DECISION OF HONBLE APEX COURT, REFERRED ABOVE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE ALSO AND RESTORE THE SAME TO THE FILE OF THE AO FOR FRESH CONSIDERATION. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 26TH AUGUST , 2015. 26TH AUGUST , 2015 SD SD ( / JOGINDER SINGH ) ( . . , / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: 26TH AUGUST , 2015 . I.T.A. NO .6361 /M/2011 6 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI