Smt.Padmaja Gavini, Hyderabad V. ITO,Ward-8(1), Hyderabad

ITA 705/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98405 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 17-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VENKAR REDDY
• Assessee Lawyers: A V RAGHURAM
• Keywords: Capital asset; Assessment record; Tax effect
• Section: 143(3); 54F; 2(14); 54; 263

Judgement Text

ITA NO 705 OF 2014 PADMAJA GAVINI HYDERABAD PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.705/HYD/2014 (ASSESSMENT YEAR: 2009-10) SMT. PADMAJA GAVINI HYDERABAD PAN: ADZPG 0442 L VS. INCOME TAX OFFICER WARD 8(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RAGHURAM FOR REVENUE : SHRI T. VENKAR REDDY, DR DATE OF HEARING : 18 .08.2015 DATE OF PRONOUNCEMENT : 28 .08.2015 O R D E R PER SMT.P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2009-10 AGAI NST THE ORDER OF THE LD CIT-II, HYDERABAD U/S 263 OF THE AC T, DATED 18.03.2014. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A N INDIVIDUAL, FILED HER RETURN OF INCOME FOR A.Y 2009-10 ON 22.03 .2010, DECLARING AN INCOME OF RS.1,82,630. THE AO OBSERVED THAT THE ASSESSEE HAS INCOME FROM HOUSE PROPERTY, LONG TERM CAPITAL GAIN AND INCOME FROM OTHER SOURCES. DURING THE ASSESSMEN T PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, HE CA LLED FOR VARIOUS DETAILS AND AFTER VERIFICATION OF THE DETAI LS FILED BY THE ASSESSEE, HE ACCEPTED THE INCOME RETURNED BY THE AS SESSEE. THEREAFTER, ON A PERUSAL OF THE ASSESSMENT RECORD O F THE ASSESSEE, THE LD CIT OBSERVED THAT THE ASSESSMENT O RDER IS ITA NO 705 OF 2014 PADMAJA GAVINI HYDERABAD PAGE 2 OF 8 ERRONEOUS, IN SO FAR AS IT IS PREJUDICIAL TO THE IN TERESTS OF THE REVENUE. HE, THEREFORE, ISSUED A NOTICE U/S 263 OF THE ACT, DATED 28.01.2014, POINTING OUT THE ERROR IN THE ASSESSMEN T ORDER. ACCORDING TO THE NOTICE U/S 263, ASSESSEE HAD PURCH ASED A SEMI FURNISHED FLAT AT YOUSUFGUDA, HYDERABAD ADMEASURING 1536 SFT INCLUDING CAR PARKING AREA AND UNDIVIDED SHARE OF L AND FOR A CONSIDERATION OF RS.6,81,000 ON 29.05.2005 AND THE ASSESSEE HAD ALSO ENTERED INTO ANOTHER AGREEMENT WITH M/S VI JAY KRISHNA PROMOTERS FOR COMPLETE DEVELOPMENT OF FLAT FOR A CO NSIDERATION OF RS.2,46,000. IT WAS OBSERVED THAT THE ASSESSEE HAD SOLD THE SAID FLAT ON 17.12.2008 FOR A CONSIDERATION OF RS.28,00, 000 AND THAT THE ASSESSEE HAD ALSO RECEIVED A FURTHER SUM OF RS. 23,50,000 TOWARDS SALE OF FIXTURES AND FITTINGS AND THAT THE ASSESSEE HAD WORKED OUT NIL INCOME FROM LONG TERM CAPITAL GAIN , AFTER CLAIMING EXEMPTION U/S 54 OF THE ACT. ACCORDING TO THE CIT, CONSIDERATION OF RS.23,50,000 RECEIVED FROM THE SAL E OF FIXTURES, ELECTRICAL FITTINGS, INTERIORS AND OTHER AMENITIES/ FACILITIES FORM DO NOT INTEGRAL PART OF THE RESIDENTIAL FLAT SOLD BY T HE ASSESSEE AS THEY ARE SOLD UNDER A SEPARATE AGREEMENT AND THEREF ORE THE CONSIDERATION RECEIVED THEREON IS NOT ELIGIBLE FOR DEDUCTION U/S 54 OF THE I.T. ACT AND THEREFORE, THE ASSESSMENT OR DER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. 3. IN RESPONSE TO THE NOTICE U/S 263 OF THE ACT, AS SESSEE FILED ITS WRITTEN SUBMISSION STATING THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, ASSES SEE HAD FURNISHED ALL THE DOCUMENTARY EVIDENCES IN SUPPORT OF THE CLAIM MADE BY HER IN THE RETURN OF INCOME WHICH WERE EXAM INED BY THE AO WITH PROPER APPLICATION OF MIND AND THEREFORE RE SORTING TO REVISION PROCEEDINGS U/S 263 OF THE ACT WAS UNWARRA NTED. ITA NO 705 OF 2014 PADMAJA GAVINI HYDERABAD PAGE 3 OF 8 FURTHER IT WAS ALSO SUBMITTED THAT THE CONSIDERATIO N OF RS.23,50,000 RECEIVED TOWARDS SALE OF FIXTURES AND FITTINGS IN A SEPARATE AGREEMENT IS PART OF THE CONSIDERATION FOR THE SALE OF THE FLAT AS FITTINGS AND FIXTURES AND ELECTRICAL FITTIN GS AND INTERIORS ARE INTEGRAL AND INSEPARABLE PART OF THE RESIDENTIAL FL AT AND ARE ALSO IN THE NATURE OF THE CAPITAL ASSET. IT WAS SUBMITTE D THAT IT WAS AT THE REQUEST OF THE PURCHASER OF THE FLAT THAT THE T OTAL CONSIDERATION RECEIVED FOR THE FLAT WAS BIFURCATED BETWEEN THE SALE OF THE FLAT AND SALE OF FITTINGS AND FIXTURES ETC, AND THAT THIS ARRANGEMENT DOES NOT AUTOMATICALLY ALTER THE CHARAC TER OF THE CONSIDERATION RECEIVED. THEREFORE, IT WAS SUBMITTE D THAT THE TOTAL CONSIDERATION OF RS.51.50 LAKHS RECEIVED, WAS IN RE SPECT OF SALE OF THE FLAT ALONGWITH FIXTURES AND FITTINGS AND THE AS SESSEE IS ELIGIBLE FOR EXEMPTION EITHER U/S 54 OR SECTION 54F OF THE I .T. ACT ON THE ENTIRE AMOUNT. 4. THE LD CIT HOWEVER, WAS NOT SATISFIED WITH THE C ONTENTIONS OF THE ASSESSEE AND HELD THAT THE CONSIDERATION OF RS.23,50,000 RECEIVED UNDER A SEPARATE AGREEMENT TOWARDS SALE OF FIXTURES AND FITTINGS DOES NOT QUALIFY FOR DEDUCTION U/S 54 OF T HE ACT, AS ACCORDING TO HIM THE FITTINGS AND FURNITURES ARE NO T CAPITAL ASSET U/S 2(14) OF THE I.T. ACT. HE ACCORDINGLY, OBSERVED , THAT THE AO HAS FAILED TO ASSESS THE SUM OF RS.23,50,000 UNDER THE HEAD INCOME FROM OTHER SOURCES AND THEREFORE, HELD THA T THE ASSESSMENT ORDER PASSED IS BOTH ERRONEOUS AND PREJU DICIAL TO THE INTERESTS OF THE REVENUE. HE ACCORDINGLY DIRECTED T HE AO TO RE-DO THE ASSESSMENT AS PER LAW AND TO BRING TO TAX THE S UM OF RS.23,50,000 AS INCOME FROM OTHER SOURCES. ITA NO 705 OF 2014 PADMAJA GAVINI HYDERABAD PAGE 4 OF 8 5. AGAINST THIS ORDER OF THE CIT U/S 263 OF THE ACT , ASSESSEE IS IN APPEAL BEFORE US BY RAISING THE FOLLOWING GROUND S OF APPEAL: 1. THE ORDER OF THE LEARNED CIT PASSED U/S.263 IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED CIT ERRED IN INVOKING HIS JURISDICTI ON U/S.263 OF IT.ACT THOUGH THE ASSESSMENT WHICH IS REVISED IS PASSED AFTER APPLICATION OF MIND ON THE ISSUE ON WHICH REVISION IS MADE. 3. THE LEARNED CIT ERRED IN HOLDING THAT THE FURNIT URE & FIXTURES, ELECTRICAL FITTINGS ETC., SOLD WITH THE F LAT ARE NOT CAPITAL ASSET ELIGIBLE FOR DEDUCTION U/S.54. 4. THE LEARNED CIT FAILED TO APPRECIATE THE LEGAL P OSITION THAT HAVING ACCEPTED THE INCOME FROM SUCH ASSET SOL D AS INCOME FROM PROPERTY NOW THE DEPARTMENT CANNOT TAKE THE STAND IT IS NOT A CAPITAL ASSET TO DENY THE RIG HT TO CLAIM DEDUCTION U/S.54. 5. THE LEARNED CIT FURTHER FAILED TO APPRECIATE THE FACT THAT THE ITEMS THAT ARE SOLD ARE INSEPERABLE ITEMS AND ARE NOT LISTED IN THE DOCUMENT THROUGH WHICH THEY A RE SOLD AND THERE IS NO BASIS TO HOLD THAT WHAT IS SOL D IS NOT A CAPITAL ASSET AND THEREFORE ERRED IN HOLDING THAT THEY ARE NOT CAPITAL ASSET. 6. THE LEARNED CIT OUGHT TO HAVE APPRECIATED THE FA CT THAT THE ASSETS INCOME FROM WHICH ARE ASSESSED UNDE R THE HEAD PROPERTY ARE NOTHINQ BUT CAPITAL ASSETS AN D FURTHER THAT IF NOT DEDUCTION U/S.54 DEDUCTION U/S. 54 F WILL BE AVAILABLE BEING ANY OTHER CAPITAL ASSET OTH ER THAN RESIDENTIAL HOUSE AND THAT THE ASSESSEE HAS INVESTE D AMOUNTS REQUIRED FOR SUCH DEDUCTION ALSO AND THEREB Y ERRED IN PASSING ORDER U/S.263. 7. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 6. IN ADDITION TO THE ABOVE GROUNDS, ASSESSEE HAS A LSO FILED THE FOLLOWING APPLICATION FOR FILING THE ADDITIONAL GROUND OF APPEAL: ITA NO 705 OF 2014 PADMAJA GAVINI HYDERABAD PAGE 5 OF 8 1. THE ONLY ISSUE IN THE PRESENT APPEAL IS WHETHER TO TAX FIXTURES AND FITTINGS ETC., THAT WERE SOLD AS P ART OF FLAT (THOUGH SEPARATE AGREEMENTS WERE ENTERED INTO FOR SALE OF FLAT AND SALE OF FIXTURES AND FITTINGS) UND ER THE HEAD CAPITAL GAINS OR TO TREAT THE SAME AS PERSONAL ASSET TO BE OUTSIDE THE PURVIEW OF SECTION 2(14) OF THE INCOME TAX ACT, 1961 (HEREINAFTER 'THE ACT'). 2. THE APPELLANT SOLD THE FLAT FOR A CONSIDERATION OF RS.28 LAKHS AND FURTHER SOLD FIXTURES AND FITTINGS (WHICH ARE PART OF FLAT BUT SOLD SEPARATELY TO THE SAME BUYER) FOR 23,50,000. THE APPELLANT CLAIMED EXEMPTI ON OF THE ENTIRE AMOUNT I.E., RS.51,50,000 BY INVESTIN G THE SAME, AND ALSO FURTHER AMOUNT IN ALL AMOUNTING TO RS.70 LAKHS, IN ANOTHER RESIDENTIAL PROPERTY. THE LEARNED ASSESSING OFFICER HAS ACCEPTED THE CASE OF THE APPELLANT. HOWEVER, THE LEARNED COMMISSIONER OF INCOME TAX-II, HYDERABAD, EXERCISING JURISDICTION U NDER SECTION 263 OF THE ACT HAS DIRECTED THE LEARNED ASSESSING OFFICER TO DISALLOW DEDUCTION UNDER SECTI ON 54F OF THE ACT BY RS.23,50,000 AND TO BRING THE SAM E TO TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. THE APPELLANT IS IN APPEAL BEFORE THE HON'BLE TRIBUNAL AGAINST THIS ORDER. 3. THE APPELLANT IN THE APPEAL MEMORANDUM HAS RAISED THE GROUNDS ON THE MERITS OF THE MATTER THAT SALE PROCEEDS OF FIXTURES AND FITTINGS WHICH FORM PART O F FLAT SHOULD BE TREATED AS CAPITAL ASSET, AND THE SALE OF THE SAME RESULTS IN CAPITAL GAINS. HOWEVER, THE APPELLA NT HAS NOT TAKEN THE ALTERNATIVE GROUND THAT THE ENTIR E AMOUNT OF RS.23,50,OOO WILL GO OUT OF THE PURVIEW O F TAX IF THE SAME ARE HELD TO BE 'NOT CAPITAL ' ASSET ' AND THEREFORE CANNOT BE OTHERWISE BE TAXED UNDER THE HE AD 'INCOME FROM OTHER SOURCES'. THE APPELLANT THEREFOR E WITH THE LEAVE OF THE HON'BLE TRIBUNAL IS RAISING T HE FOLLOWING ADDITIONAL GROUND: ADDITIONAL GROUND 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX FAILED TO APPRECIATE THAT IF THE 'FITTINGS AND FIXTURES' WHIC H ARE PART OF FLAT DOES NOT FALL WITHIN THE MEANING OF 'C APITAL ITA NO 705 OF 2014 PADMAJA GAVINI HYDERABAD PAGE 6 OF 8 ASSET' THEN, BY THE SAME REASON THEY BECOME PERSONA L ASSET OF THE APPELLANT WHICH CANNOT BE BROUGHT TO T AX EVEN UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. 4. IT IS SUBMITTED THAT THE ABOVE GROUND IS ALTERNA TE GROUND AND IS WITHOUT PREJUDICE TO THE MAIN CONTENT ION OF THE APPELLANT. IT IS SUBMITTED THAT THE FACTS WI TH RESPECT TO THE ABOVE GROUND ARE ALREADY ON RECORD A ND THERE IS NO NEED FOR FRESH INVESTIGATION IN TO FACT S. IT IS THEREFORE PRAYED THAT THE HON'BLE TRIBUNAL MA Y GRANT LEAVE TO THE APPELLANT TO RAISE THE ABOVE ADDITIONAL GROUND, ADMIT IT AND ADJUDICATE THE SAME , AND PASS SUCH OTHER ORDER (S) AS THE HON'BLE TRIBUN AL DEEMS FIT AND PROPER IN THE INTEREST OF JUSTICE. 7. IN THE ABOVE APPLICATION, ASSESSEE HAS STATED TH AT EVEN ASSUMING THAT THE CONSIDERATION OF RS.23.50 LAKHS R ECEIVED BY THE ASSESSEE ON SALE OF FITTINGS AND FIXTURES IS TO BE ACCEPTED AS NOT A CAPITAL ASSET, THEN THEY BECOMES PERSONAL AS SET OF THE ASSESSEE AND THE INCOME THERE FROM CANNOT BE TREATE D AS INCOME FROM OTHER SOURCES AND CANNOT BE BROUGHT TO TAX AT ALL. FOR ADMISSION OF THE ADDITIONAL GROUND OF APPEAL, HE PL ACED RELIANCE UPON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN T HE CASE OF NTPC REPORTED IN 229 ITR 383. THUS THE LD COUNSEL F OR THE ASSESSEE PRAYED FOR ADMISSION OF THE ADDITIONAL GRO UNDS OF APPEAL. THE LD DR HOWEVER, OPPOSED THE ADDITIONAL G ROUNDS OF APPEAL. 8. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ADDITIONAL GROUND OF APPEA L RAISED BY THE ASSESSEE IS A LEGAL GROUND AND FURTHER NEEDS NO FRE SH VERIFICATION OF FACTS. THEREFORE, IN THE LIGHT OF THE JUDGMENT O F THE HON'BLE ITA NO 705 OF 2014 PADMAJA GAVINI HYDERABAD PAGE 7 OF 8 SUPREME COURT IN THE CASE OF NTPC (SUPRA), WE ARE I NCLINED TO ADMIT THE ADDITIONAL GROUNDS OF APPEAL. THE FACTS M ENTIONED ABOVE ARE NOT DISPUTED BY EITHER OF THE PARTIES. AS POINTED OUT BY THE LD COUNSEL FOR THE ASSESSEE EVEN IF THE FITTING S AND FIXTURES ARE NOT TREATED AS PART OF THE FLAT, AS RIGHTLY POI NTED OUT BY THE ASSESSEE, THEY CANNOT BE TREATED AS CAPITAL ASSET A S WELL AND THEY BECOME THE PERSONAL ASSETS OF THE ASSESSEE. THE L D COUNSEL FOR THE ASSESSEE HAD PLACED RELIANCE UPON THE JUDGMENT OF THE HON'BLE DELHI COURT IN ITA NO.655/2014 IN THE CASE OF SHRI SACHINDER MOHAN MEHTA VS. ACIT, WHEREIN, ON SIMILAR SET OF FACTS, THE HON'BLE HIGH COURT HELD THAT THE FURNITU RE AND FIXTURES ARE PERSONAL EFFECTS AND INCOME FROM SALE OF SUCH A SSETS IS EXCLUDED FROM THE DEFINITION OF CAPITAL ASSETS U/S 2(14) OF THE ACT AND IS NOT ELIGIBLE FOR DEDUCTION U/S 54F OF THE AC T. 9. HAVING REGARD TO THE RIVAL CONTENTIONS, WE FIND THAT THE BASIC QUESTION BEFORE US IS WHETHER THE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTERE STS OF REVENUE. AS THE LIST OF THE FITTINGS AND FIXTURES ARE NOT PA RT OF THE RECORD, WE ARE UNABLE TO EXAMINE THE NATURE OF THE ASSET AN D ALSO AS TO WHETHER THEY FORM PART OF THE FLAT. THE ASSETS IN Q UESTION ARE FITTINGS AND FIXTURES IN THE FLAT. EVEN IF THEY ARE NOT ACCEPTED TO BE PART OF THE FLAT, WHETHER THE INCOME FROM SALE O F SUCH ASSETS IS TAXABLE IN THE HANDS OF THE ASSESSEE AS INCOME FROM OTHER SOURCES?. THE FURNITURE AND FITTINGS ARE IN THE NA TURE OF PERSONAL EFFECTS OF THE ASSESSEE HELD FOR HER PERSO NAL USE AND INCOME FROM SUCH AFFECTS IS NOT CHARGEABLE TO TAX. WHETHER THE AMOUNT IS CONSIDERED AS SALE CONSIDERATION AND ALLO WED DEDUCTION U/S 54F OR EXCLUDED FROM COMPUTATION AND DISALLOWED ITA NO 705 OF 2014 PADMAJA GAVINI HYDERABAD PAGE 8 OF 8 THE DEDUCTIONS, THERE IS NO TAX EFFECT. THEREFORE, BY NOT BRINGING IT TO TAX, THERE IS NO PREJUDICE CAUSED TO THE REVE NUE. THE ADDITIONAL GROUNDS OF APPEAL ARE ACCORDINGLY ALLOWE D. SINCE THE ASSESSMENT ORDER IS HELD TO BE NOT PREJUDICIAL TO T HE INTERESTS OF REVENUE, THE REVISION ORDER U/S 263 IS NOT SUSTAINA BLE AND IS ACCORDINGLY QUASHED. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST, 2015. S D/ - S D/ - (B. RAMAKOTAIAH) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 28 TH AUGUST, 2015. VNODAN/SPS COPY TO: 1. SMT.PADMAJA GAVINI, C/O K.VASANTKUMAR & A.V.RAGHURA M, ADVOCATES, 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 2. INCOME TAX OFFICER WARD 8(1) HYDERABAD 3. CIT II HYDERABAD 4. ADD.CIT, RANGE 8 HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER