Arun Kumar B M , Bangalore V. Income Tax Officer Ward-5(3)(5), Bangalore

ITA 667/BANG/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5140 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 23-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: L BHARATH
• Keywords: Capital asset; Opportunity of being heard; Set aside; Capital Gains
• Section: 54F; 54EC; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA 667/BANG/2017 ASSESSMENT YEAR : 2013 14 SHRI. ARUN KUMAR B M, # 37, I A CROSS, UDAYARAVI, VEERAPPA ROAD, HANUMANTHNAGAR, BENGALURU 560 019. PAN NO : AHDPA9846L VS. INCOME TAX OFFICER, WARD 5(3) (5), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI. L. BHARATH, CA RESPONDENT BY : MR. SHAHNAWAZ UL RAHMAN, JCIT DR DATE OF HEARING : 11 - 02 - 2020 DATE OF PRONOUNCEMENT : 19 - 02 - 2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 21/12/2016, PASSED BY LD. CIT (A)-5, BANGALORE FOR ASSESSMENT YEAR 2013-14 ON FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LAA IS BAD IN LAW AND NOT IN ACCORDANCE WITH THE PROVISIONS OF INCOME-TAX ACT, 1961. 2. A. THE LAA ERRED IN CONFIRMING THE ACTION OF THE LAO IN DISALLOWING THE CLAIM OF THE APPELLANT FOR THE BENEFIT OF SECTION 54F. B. THE LAA ERRED IN CONFIRMING THE ACTION OF LAO IN WRONGLY COMING TO THE CONCLUSION THAT THE APPELLANT OWNS MORE THAN ONE RESIDENTIAL HOUSE. PAGE 2 OF 8 ITA 667/BANG/2017 A.Y : 2013 14 3. A. THE LAA ERRED IN CONFIRMING THE ACTION OF THE LAO IN DISALLOWING THE CLAIM OF THE APPELLANT OF THE BENEFIT OF SECTION 54EC TO THE EXTENT OF RS. 1,00,00,00 AND RESTRICTING THE BENEFIT TO THE EXTENT OF RS. 50,00,000/-. B. THE LAA ERRED IN CONFIRMING THE ACTION OF LAO I NOT FOLLOWING THE RULINGS OF THE JURISDICTIONAL TRIBUNAL WHICH ARE FAVOURABLE TO THE APPELLANT. BRIEF FACTS PF THE CASE ARE AS UNDER: 2. ASSESSEE IS AN INDIVIDUAL AND IS AN EMPLOYEE OF M/S. TATA CONSULTANCY SERVICES LTD.,. HE FILED HIS RETURN OF INCOME FOR YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS.8,29,610/-. THE RETURN WAS PROCESSED UNDER SECTION 143 (1) AND THE CASE WAS SELECTED FOR SCRUTINY. SUBSEQUENTLY, NOTICES UNDER SECTION 143 (2) AND 142 (1) ALONG WITH QUESTIONNAIRE WAS SERVED UPON ASSESSEE. IN RESPONSE TO STATUTORY NOTICES, ASSESSEES REPRESENTATIVE APPEARED BEFORE LD. AO AND FILED REQUISITE DETAILS AS CALLED FOR. 3. LD. AO OBSERVED THAT, ASSESSEE DURING THE YEAR UNDER CONSIDERATION SOLD RESIDENTIAL SITES BEARING NO. 565/O, HAL II STAGE, INDIRA NAGAR, BANGALORE ALONG WITH HIS PARENTS VIDE REGISTERED SALE DEED DATED 20/03/2013 FOR CONSIDERATION OF RS.9,00,000,000/-. AS PER THE SALE DEED, SHARE RECEIVED BY ASSESSEE AMOUNTED TO RS.2,25,00,000/-WHICH WAS INVESTED BY ASSESSEE IN REC BONDS AMOUNTING TO RS. 1 CRORE AND IN CAPITAL GAINS ACCOUNT SCHEME FOR AN AMOUNT OF RS.1,22,00,000/-. LD. AO OBSERVED THAT, SUBSEQUENTLY OUT OF AMOUNT DEPOSITED IN CAPITAL GAINS ACCOUNT SCHEME, ASSESSEE PURCHASED RESIDENTIAL HOUSE THROUGH REGISTERED SALE DEED ON 02/11/2014 AT NO. 805, REMCO HOUSING BUILDING CO-OPERATIVE SOCIETY LTD., PATTANAGREE VILLAGE, BENGALURU SOUTH FOR CONSIDERATION OF RS.90 LAKHS AND REGISTRATION PAGE 3 OF 8 ITA 667/BANG/2017 A.Y : 2013 14 CHARGES ALONG WITH STAMP DUTY AMOUNTING TO RS.5,94,460/-. ASSESSEE CLAIMED DEDUCTION UNDER SECTION 54F, WHICH WAS DENIED BY LD. AO. LD. AO WAS OF THE OPINION THAT ASSESSEE HAS OBTAINED SANCTIONED PLAN FOR CONSTRUCTION OF GROUND PLUS 2 FLOORS, WHICH WAS LET OUT AS 3 RESIDENTIAL HOUSES TO 3 DIFFERENT PERSONS AND DERIVING RENTAL INCOME WHICH IS AN ADMITTED POSITION. 4. HE ALSO DENIED THE INVESTMENT OF RS. 50 LAKHS IN REC BONDS AS LD. AO WAS OF THE OPINION THAT DURING A YEAR MAXIMUM DEDUCTION ALLOWABLE UNDER SECTION 54 EC (1) WAS RESTRICTED TO RS. 50 LAKHS, WHEREAS ASSESSEE HAD INVESTED A SUM OF RS. 1 CRORE. AGGRIEVED BY THE ORDER OF LD. AO ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A) BEFORE WHOM ASSESSEE LOST BOTH THE CLAIMS. AGGRIEVED BY ORDER OF LD. CIT (A) ASSESSEE IS IN APPEAL BEFORE US NOW. GROUND NO. 1 IS GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. GROUND NO.2 HAS NOT BEEN ARGUED BY LD. AR AND HENCE DISMISSED. GROUND NO.3 (A) IS REGARDING DENIAL OF EXEMPTION CLAIMED UNDER SECTION 54F. AT THE OUTSET, LD.AR SUBMITTED AS UNDER: IN RESPECT OF THE RELIEF CLAIMED UNDER SECTION 54F OF THE ACT A. PER PROVISO(A)(I) TO SECTION 54F, A TAXPAYER SHOULD HAVE NOT MORE THAN ONE RESIDENTIAL HOUSE. B. THE PHRASE RESIDENTIAL HOUSE IS NOT DEFINED IN THE ACT. NO OTHER GUIDANCE IS AVAILABLE WITHIN THE ACT TO GATHER THE MEANING OF THE SAID PHRASE. IN THE ABSENCE OF GUIDANCE, RESORT OUGHT TO BE HAD TO: I. RULINGS IN THE CONTEXT OF SECTION 54/54F WHICH HAVE GATHERED THE MEANING OF THE PHRASE RESIDENTIAL HOUSE; PAGE 4 OF 8 ITA 667/BANG/2017 A.Y : 2013 14 II. USAGE OF THE WORD RESIDENTIAL HOUSE IN VARIOUS CONTEXTS IN THE ACT; III. DICTIONARY MEANING OF THE WORD RESIDENTIAL HOUSE. C. WHERE TWO OR MORE MULTIPLE FLOORS HAVE THE SAME RESIDENTIAL NUMBER, ARE CONTIGUOUS TO EACH OTHER, ARE WITHIN A COMMON BOUNDARY AND A COMMON COMPOUND. FURTHER WHERE THE PROPERTY TAX AND WATER TAX ARE PAID FOR THE ENTIRE HOUSE AS A WHOLE AND IT IS COMPOSITE UNIT, THE STRUCTURE SHOULD BE CONSTRUED AS A SINGLE RESIDENTIAL HOUSE. D. THE ABOVE PROPOSITION IS AFFIRMED BY THE CHENNAI ITAT IN ITO V. NATHAMUNI KRISHNASWAMY BALAJI (85 TAXMANN.COM 201) ( P. 1 OF THE CLC; RELEVANT PORTION IN P.44-46 OF THE CLC); HERE, THE CHENNAI ITAT WAS DECIDING THE SCOPE OF ONE RESIDENTIAL HOUSE UNDER SECTION 5(VI) OF THE WEALTH TAX ACT, 1957 WHICH PHRASE IS SIMILAR TO THAT ADOPTED IN SECTION 54F OF THE ACT. E. THE FACTS IN THE RESENT CASE ARE SIMILAR TO THAT IN THE ABOVE RULING OF THE CHENNAI ITAT. F. IN ADDITION TO THE ABOVE, RESIDENTIAL HOUSE SHOULD BE DISTINGUISHED FROM RESIDENTIAL UNIT. G. RESIDENTIAL HOUSE COULD COMPRISE OF SEVERAL INDEPENDENT UNITS WHICH CAN IF THE NED ARISES CONVENIENTLY AND INDEPENDENTLY USED AS AN INDEPENDENT RESIDENCE. H. 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 INCOME IS AUGMENTED. I. ONE MAY BUILD A HOUSE CONSISTING OF 4 BEDROOMS (ALL IN THE SAME OR DIFFERENT FLOORS) IN SUCH A MANNER THAT AN INDEPENDENT RESIDENTIAL UNIT CONSISTING OF 2/3 BEDROOMS MAY BE CARVED OUT WITH AN INDEPENDENT ENTRANCE SO THAT IT CAN BE LET OUT. J. THE ABOVE APPROACH IS AFFIRMED BY THE DELHI HC IN GEETA DUGGAL (357 ITR 157); ( P. 7 OF THE CLC; RELEVANT PORTION IN P. 12 OF THE CLC). PAGE 5 OF 8 ITA 667/BANG/2017 A.Y : 2013 14 K. IN CONTRAST A RESIDENTIAL UNIT IS CONTEMPLATED UNDER SECTION 80- IB(10) OF THE ACT WHICH CORRESPONDS TO THE STATEMENT OF THE LAO. SINCE SUCH A PROVISION IS ABSENT IN SECTION 54F, THE APPROACH OF THE APPELLANT CANNOT BE FAULTED. L. FURTHER SECTION 23 OF THE ACT CONTEMPLATES INCOME FROM HOUSE PROPERTY BEING A HOUSE OR PART OF THE HOUSE. THIS CONNOTES THAT A RESIDENTIAL HOUSE MAY HAVE MULTIPLE UNITS. M. FURTHER THE DICTIONARY MEANING OF THE WORD HOUSE IS THAT IT IS A BUILDING FOR HUMAN HABITATION, ESPECIALLY ONE THAT CONSISTS OF A GROUND FLOOR AND OR MORE UPPER STOREYS. N. IN THE APPELLANTS CASE, THE ALLEGED THREE HOUSES BEAR THE SAME RESIDENTIAL NUMBER, ARE CONTIGUOUS TO EACH OTHER, ARE WITHIN A COMMON BOUNDARY AND A COMMON COMPOUND. FURTHER THE PROPERTY TAX AND WATER TAX ARE PAID FOR THE ENTIRE HOUSE AS A WHOLE AND IT IS A COMPOSITE UNIT. O. HENCE, THE APPELLANTS CASE DOES NOT VIOLATE THE CONDITIONS MENTIONED IN THE PROVISO(A)(I) TO SECTION 54F OF THE ACT. 5. HE ALSO SUBMITTED THAT, THESE REQUIREMENTS HAVE NOT BEEN RAISED BEFORE LD.CIT(A) AND ACCORDINGLY NEEDS RECONSIDERATION. LD. CIT DR DID NOT OBJECT FOR THE ISSUE BEING SET ASIDE TO LEARNT CIT (A) TO CONSIDER THE ABOVE CONTENTIONS RAISED BY ASSESSEE IN ACCORDANCE WITH LAW. CONSIDERING THE JOINT SUBMISSION BY BOTH SIDES, WE DEEM IT FIT AND PROPER TO SET ASIDE THIS ISSUE BACK TO LD. CIT (A). LD. CIT (A) SHALL VERIFY ALL THESE CONTENTIONS HAVING REGARD TO KATHA CERTIFICATE BEING SINGLE FOR CONSTRUCTED PROPERTY, SINGLE WATER BILL BEING ISSUED, A SINGLE ELECTRICITY BILL BEING ISSUED, AND TO PASS A DETAILED ORDER. WE ALSO NOTE THAT AMENDMENT TO SECTION 54F IS APPLICABLE FROM 01-04-2015. PRESENT YEAR BEING A. Y : 2013-14, LD. AO IS DIRECTED TO APPLY LAW APPLICABLE AT THE RELEVANT PERIOD, PAGE 6 OF 8 ITA 667/BANG/2017 A.Y : 2013 14 HAVING REGARD TO VARIOUS DECISIONS OF HONBLE KARNATAKA HIGH COURT IN SUPPORT. NEEDLESS TO SAY, THAT PROPER OPPORTUNITY OF BEING HEARD SHALL BE GRANTED TO ASSESSEE IN ACCORDANCE WITH LAW. ACCORDINGLY, THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. GROUND 3 (B) IS REGARDING DENIAL OF 54 EC TO THE EXTENT OF RS. 50 LAKHS. 6. LD. AR SUBMITTED THAT, ASSESSEE HAD INVESTED IN RAC BONDS AMOUNTING TO RS. 50 LAKHS ON 31/03/2013 IN FINANCIAL YEAR 2012-13 AND RS. 50 LAKHS ON 31/07/2013 IN FINANCIAL YEAR 2013- 14. HE HAD ACCORDINGLY CLAIMED RELIEF UNDER SECTION 54 EC AMOUNTING TO RS. 1 CRORE. LD. AR SUBMITTED THAT, ASSESSING OFFICER REJECTED CLAIM OF ASSESSEE, AS ACCORDING TO 54 EC ASSESSEE IS REQUIRED TO INVEST ONLY TO AN EXTENT OF RS. 50 LAKHS IN RAC BONDS FOR ANY FINANCIAL YEAR. 7. LD. AR SUBMITTED THAT, THE AMENDED PROVISIONS OF SECTION 54 EC ENTITLE ASSESSEE TO INVEST IN APPROVED BONDS WITHIN A PERIOD OF 6 MONTHS FROM THE PERIOD OF SALE OF CAPITAL ASSET. HE SUBMITTED THAT, THERE IS NO SUCH RESTRICTION AS HAS BEEN OBSERVED BY LD.AO UNDER SECTION 54 EC. PLACING RELIANCE ON DECISION OF CO- ORDINATE BENCH OF THIS TRIBUNAL IN CASE OF ITO VS. UMADEVI MALAVALLI IN ITA NO. 1718/B/2016 FOR ASSESSMENT YEAR 2013-14 VIDE ORDER DATED 28/07/2017 AND SH.VIVEK JAIRAZBHOY VS DCIT IN ITA NO. 236/B/2012 FOR ASSESSMENT YEAR 2008-09 VIDE ORDER DATED 14/12/2012 . HE SUBMITTED THAT, INVESTMENT OF RS. 50 LAKHS EACH IN SPECIFIED SECURITIES WAS MADE INTO DIFFERENT FINANCIAL YEAR BUT WITHIN A PERIOD OF 6 MONTHS FROM THE DATE OF SALE AND ACCORDINGLY ASSESSEE IS ENTITLED TO EXEMPTION OF RUPEES ONE CRORE. PAGE 7 OF 8 ITA 667/BANG/2017 A.Y : 2013 14 LD. CIT DR PLACED RELIANCE UPON ORDERS PASSED BY AUTHORITIES BELOW. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 8. IT IS OBSERVED THAT, ASSESSEE DEPOSITED RS. 50 LAKHS ON 31/03/2013 WHICH PERTAINED TO A. Y: 2013 14 AND BALANCE RS. 50 LAKHS WAS DEPOSITED ON 31/07-2013 THAT PERTAINED TO A. Y: 2014 15. IN OUR VIEW ASSESSEE COMPLIED WITH REQUIREMENT UNDER SECTION 54EC THAT EXISTED DURING THE RELEVANT PERIOD TO AVAIL EXEMPTION. ASSESSEE IN OUR VIEW IS ELIGIBLE TO CLAIM EXEMPTION FOR RS. 50 LAKHS DURING YEAR UNDER CONSIDERATION. BALANCE 50 LAKHS DEPOSITED ON 31/07/2013, WILL HAVE TO BE CONSIDERED DURING ASSESSMENT YEAR RELEVANT TO A. Y : 2014 15 IN ACCORDANCE WITH LAW. 9. WE ARE OF THE VIEW, THAT LD. CIT(A) WAS CORRECT IN RESTRICTING DEDUCTION U/S. 54EC TO RS. 50 LAKHS FOR YEAR UNDER CONSIDERATION. ACCORDINGLY, THIS GROUND RAISED BY ASSESSEE STANDS DISMISSED. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRUARY, 2020. SD/- SD/- (A. K. GARODIA) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 19 TH FEBRUARY, 2020. /MK/ PAGE 8 OF 8 ITA 667/BANG/2017 A.Y : 2013 14 COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL. BANGALORE. DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR 17-02-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 18 - 02 - 2020 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON SR.PS 9. FILE SENT TO THE BENCH CLERK SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS