Asst.CIT., Circle-9(1), Hyderabad V. Sri G Janardhan Reddy, Hyderabad

ITA 719/HYD/2013

• Counselvise Citation: 71922514 RSA 2013
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 13-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Assessee Lawyers: R SRINIVAS RAO
• Section: 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.719/HYD/2013 ASSESSMENT YEAR 2007-08 ACIT, CIRCLE 9 (1) HYDERABAD-4 VS. SRI G. JANARDHAN REDDY HYDERABAD PAN AAAHG6482N (APPELLANT) (RESPONDENT) C.O.NO.39/HYD/2013 ARISING OUT OF ITA.NO.719/HYD/2013 - ASSESSMENT YEAR 2007-08 SRI G. JANARDHAN REDDY HYDERABAD PAN AAAHG6482N VS. ACIT, CIRCLE 9 (1), HYDERABAD-4 (CROSS-OBJECTOR) (RESPONDENT) FOR REVENUE : MR. B. YADAGIRI FOR ASSESSEE : MR. R. SRINIVAS RAO DATE OF HEARING : 07.01.2014 DATE OF PRONOUNCEMENT : 05.02.2014 ORDER PER B. RAMAKOTAIAH, A.M. THE APPEAL IS BY REVENUE CONTESTING THE ORDER OF THE LEARNED CIT(A), VIJAYAWADA AGAINST WHICH ASSESSEE HAS PREFERRED CROSS-OBJECTION SUPPORTING THE ORDER OF THE LEARNED CIT(A). IN THE CROSS-OBJECTION, ASSESSEE ALSO RAISED A GROUND FOR EXPENSES WHICH THE LEARNED CIT(A) DISMISSED AS ACADEMIC. 2. BRIEFLY STATED, ASSESSEE IS A HUF AND HAS LONG TERM CAPITAL GAIN IN THE YEAR WHICH WAS CLAIMED AS EXEMPT BY INVESTING ITA.NO.719/HYD/2013 & C.O.39/HYD/2013 G. JANARDHAN REDDY, HYDERABAD. IN PURCHASE OF NEW HOUSE PROPERTY. THE A.O. WHILE CALCULATING THE LONG TERM CAPITAL GAIN DID NOT ALLOW CERTAIN EXPENDITURE PERTAINING TO EARLIER YEARS, THEREBY, MODIFYING THE WORKING OF LONG TERM CAPITAL GAIN. AFTER ARRIVING AT THE LONG TERM CAPITAL GAIN OF RS.1,02,03,689/- AS AGAINST RS.65,03,308/- OFFERED BY THE ASSESSEE, THE A.O. DID NOT ALLOW THE EXEMPTION CLAIMED UNDER SECTION 54F. ASSESSEE HAS INVESTED IN A RESIDENTIAL HOUSE PROPERTY AT ADIKIMET, HYDERABAD FOR THE CONSIDERATION OF RS.1,65,25,275/ - WHICH IS MORE THAN THE SALE CONSIDERATION OF RS.1,11,00,000/- ON SALE OF PROPERTY, SO ASSESSEE CLAIMED EXEMPTION UNDER SECTION 54F. A.O. ON NOTICING THAT THERE ARE TWO MORE DOCUMENTS BY THE ASSESSEE TRANSFERRING THE PROPERTY TO THE FAMILY MEMBERS AT THE SAME TIME AND HOLDING THAT ASSESSEE IS HAVING MORE THAN ONE RESIDENTIAL PROPERTY ON THE DATE OF INVESTMENT, DEDUCTION UNDER SECTION 54F WAS NOT ALLOWED. 3. BEFORE THE LEARNED CIT(A), ASSESSEE SUBMITTED THAT ASSESSEE HAS PURCHASED THE ENTIRE LAND AND HOUSE PROPERTY FROM DIFFERENT OWNERS BY SEPARATE DEEDS AND HE HAS PURCHASED A HOUSE ALONG WITH LAND AND ON A PORTION OF THE ENTIRE PROPERTY HAVING SAME DOOR NUMBER, TO THE EXTENT OF RS.1,65,00,000/- IT CLAIMED BENEFIT UNDER SECTION 54F. IT WAS ALSO SUBMITTED THAT ASSESSEE HAD ONLY AGREEMENTS OF SALE CUM- GPA FOR THE OTHER PARTS OF THE PROPERTY WHICH WERE TRANSFERRED TO ASSESSEES WIFE AND DAUGHTER AT THE SAME COST AND HAS NOT CLAIMED ANY BENEFIT. IT WAS SUBMITTED THAT THE ENTIRE PROPERTY IS ONE AND ASSESSEE HAS CLAIMED ONLY BENEFIT OF INVESTMENT IN THE HOUSE PROPERTY. LEARNED ITA.NO.719/HYD/2013 & C.O.39/HYD/2013 G. JANARDHAN REDDY, HYDERABAD. CIT(A) AFTER CONSIDERING THE ASSESSEES CONTENTIONS ACCEPTED AND DECIDED BY THE FOLLOWING ORDER : 3. I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELLAN T, SEEN THE ASSESSMENT ORDER AND PERUSED ALL OTHER MATERIAL AVAILABLE ON RECORD. THE MAIN ISSUE IS THAT THE APPELLANT HUF FROM THE SALE 'PROCEEDS OF THE PROPERTY AT HYDERGUDA HAS INVESTED IN PART OF THE HOUSE PROPERTY AT SHIVAM ROAD AN D CLAIMED EXEMPTION UNDER SECTION 54F, WHICH WAS DENIED BY THE AO ON THE GROUND THAT THE APPELLANT OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET. FOR UNDERSTANDING THE CASE A LITTLE BACKGROUND IS NEEDED, WHICH IS AS UNDER. 4. THE APPELLANT HAS SOLD THE HYDERGUDA HOUSE PROPERTY ON 29.01.2007 FOR A CONSIDERATION OF RS.1,11,00,000, RECEIVED THROUGH BANKING CHANNELS AND INVESTED THE SAME IN PART 3 OF THE SHIVAM ROAD PROPERTY ON 16.07.2007 BY ISSUING THREE CHEQUES OF RS.50,00,000 EACH TO THREE OF THE LAND LORDS, ON WHICH EXEMPTION UNDER SECTION 54F WAS CLAIMED. PRIOR TO THIS, THE APPELLANT HUF AS GPA HOLDER ACQUIRED PART 1 AND PART 2 OF THE SAME SHIVAM PROPERTY A T RS.64,00,000 EACH BY AVAILING FUNDS FROM OD ACCOUNTS MAINTAINED WITH BANK OF BARODA AND BANK OF INDIA ON 26.04.2007 THESE TWO PROPERTIES, I.E., PART 1 AND PART 2 OF SHIVAM ROAD PROPERTIES WERE TRANSFERRED TO HIS WIFE ON 16.07.2007 AND TO HIS DAUGHTER IN LAW ON 03.10.2007, FOR THE SAME PRICE FOR WHICH HE HAS ACQUIRED AS GPA HOLDER. THE AO ON THE GROUND THAT THE APPELLANT HUF WAS HAVING TWO HOUSING PROPERTIES AS ON 26.04.2007, DENIED EXEMPTION UNDER SECTION 54F WHICH IN MY HUMBLE OPINION IS NOT CORRECT. AS TO WHY THE AO WAS NOT CORRECT IS SPELT OUT IN THE SUCCEEDING PARAGRAPH. 5. FOR THE PROPOSITION THAT THE APPELLANT HUF IS ELIGIBLE FOR EXEMPTION UNDER SECTION 54F IS ON TWO FRONTS. AS FAR A S THE FIRST FRONT IS CONCERNED, ALL THE 3 PARTS OF THE PROPERT Y ARE OF THE SAME DOOR NUMBER AND PARTS OF THE SAME HOUSE. THUS, EVEN THOUGH IT IS OF 3 PARTS, THE WHOLE UNIT BEING THE SAME, THE CRITERION THAT WHOLE OF THE SALE PROCEEDS WERE INVESTED IN ITA.NO.719/HYD/2013 & C.O.39/HYD/2013 G. JANARDHAN REDDY, HYDERABAD. THE NEW HOUSE PROPERTY HOLDS GOOD AND THE APPELLANT HUF IS ELIGIBLE FOR EXEMPTION UNDER SECTION 54F. IN SO FAR AS THE SECOND FRONT IS CONCERNED, THE CRITERION IS NOT THAT WHEN THE SALE PROCEEDS ARE UTILIZED FOR ACQUIRING A SINGLE OR MORE UNITS, BUT THE CRITERION IS THAT WHETHER WHOLE OF THE SAL E PROCEEDS WERE UTILIZED TO ACQUIRE THE RESIDENTIAL UNITS OR NO T. THAT IS, IT IS IMMATERIAL, WHETHER THE RESIDENTIAL UNI TS ACQUIRED FROM OUT OF SALE PROCEEDS ARE ONE OR MORE, BUT THE SALE PROCEEDS COULD HAVE BEEN UTILIZED TO ACQUIRE THE RESIDENTIAL UNITS. THUS, AS PER THE MATERIAL ON RECORD, T HE WHOLE OF THE SALE PROCEEDS OF RS.1,11,00,000 WERE UTILIZED I N ACQUIRING THE PART 3 OF THE RESIDENTIAL PROPERTY FOR A CONSIDERATION OF RS.1,65,00,000 AND AS SUCH THE APPELLAN T HUF IS ELIGIBLE TO CLAIM EXEMPTION UNDER SECTION 54F IN RESPECT OF THE ENTIRE SALE PROCEEDS OF RS.1,11,00,000, WHI CH WERE REINVESTED IN ACQUIRING THE PART 3 OF THE RESIDENTIA L PROPERTY, AS DISCUSSED SUPRA. IN THIS RESPECT, THE KARN ATAKA HIGH COURT'S DECISION IN THE CASE OF CIT VS. K.G. RUKMINAMMA, REPORTED IN (2011) 196 TAXMAN 87 (KAR) IS HANDY AND SUPPORTS THE ABOVE DECISION OF THE UNDERSIGNED. 6. IN AS MUCH AS THE DEVELOPMENTAL EXPENSES ARE CONCERNED, IT BECOMES ACADEMIC NOW. BUT, IN ANY CASE, N O NEW MATERIAL HAS BEEN PLACED BEFORE THE UNDER SIGNED EXCEPT FURNISHING A PHOTOGRAPH, WHICH BY ITSELF WOULD NO T PROVE THAT DEVELOPMENTAL EXPENSES HAVE BEEN INCURRED. IN THE CIRCUMSTANCES, I AM DECLINED TO INTERFERE IN THE DECIS ION OF THE AO AND AS SUCH HIS DECISION IS UPHELD . 4. REVENUE IS AGGRIEVED ON THE ALLOWANCE OF DEDUCTION UNDER SECTION 54F BY THE CIT(A) AND RAISED GROUNDS 2 AND 3 IN I TS APPEAL. ASSESSEE WHILE SUPPORTING THE ORDER OF THE CIT(A) ON THE DEDUCTION ALLOWED, IS CONTESTING THE EXPENSES CLAIMED IN THE COMPUTATION WHICH WERE REJECTED BY THE CIT(A) AS ACADEMIC IN THE CROSS OBJECTION. 5. WE HAVE HEARD RIVAL CONTENTIONS. WE ALSO REQUESTED THE ASSESSEE TO PLACE ON RECORD RESPECTIVE DOCUMENTS AND PLAN OF ITA.NO.719/HYD/2013 & C.O.39/HYD/2013 G. JANARDHAN REDDY, HYDERABAD. THE HOUSE, WHICH WAS SAID TO HAVE BEEN PURCHASED BY THE ASSESSEE. AS SEEN FROM THE DOCUMENTS, IT TURNS OUT THAT THE PROPERTY, HAVING ONE HOUSE NUMBER, IS ACTUALLY AN AREA OF LAND WITH A HOUSE OWNED BY DIFFERENT PEOPLE. THE ASSESSEE ACCORDINGLY ENTERED INTO SEPARATE SALE AGREEMENTS CUM- GPA AND HAS INVESTED ITS PART OF AMOUNT OF RS.1,65,00,000/- ON THE PORTION WITH HOUSE I.E., PORTION (C) OF THE PROPERTY. ON THIS SCHEDULED PROPERTY, ASSESSEE HAS CLAIMED DEDUCTION. ON PERUSING THE FACTS, WE HAD TO PRIMA FACIE AGREE WITH THE ORDER OF THE CIT(A) TH AT THE PROPERTY IS ONE. HOWEVER, WE ARE UNABLE TO COME TO A CONCLUSION WHETHER THE PROPERTY IS RESIDENTIAL OR NOT. SINCE ASSESSEE HAS ENTERED INITIALLY FOR OTHER PARTS OF THE OPEN LAND COVERING THE SAME HOUSE NUMBER BUT TRANSFERRED TO KARTAS WIFE AND DAUGHTER, IT I S REQUIRED TO BE EXAMINED WHETHER THE PROPERTY IS A RESIDENTIAL PROPERTY OR NOT. ALONG WITH THAT, IN THE CROSS-OBJECTION ASSESSEE ALSO CONTESTING INVESTMENTS MADE EARLIER WHICH WERE CLAIMED WITH INDEXATION BENEFIT IN THE COMPUTATION OF CAPITAL GAIN. THIS ASP ECT ALSO REQUIRES EXAMINATION BY THE A.O. IN CASE, ASSESSEES CLAIM OF BENEFIT UNDER SECTION 54F IS ALLOWABLE ON THE RESIDENTIAL PROPERTY INVESTED BY HUF, THEN, THE COMPUTATION OF CAPITAL GAINS BECOMES ACADEMIC, AS HELD BY THE CIT(A) AS ASSESSEE HAS INVESTED MORE THAN THE SALE PRICE OF THE ERSTWHILE PROPERTY. THEREFORE, TO THE LIMITED EXTENT OF EXAMINING THE NATURE OF HOUSE PROPERTY PURCHASED, THE MATTER IS RESTORED TO THE FILE OF A.O. IF THE PROPERT Y IS ONLY ONE RESIDENTIAL HOUSE, ASSESSEE IS ENTITLED FOR DEDUCTION AS DECIDED BY LD. CIT(A). IN CASE, IT TURNED OUT THAT ASSESSEE IS NOT ENTITLED FOR BENEFIT UNDER SECTION 54F, ON VERIFICATION/EXAMINATION OF FACTS, THEN A.O. IS DIRECTED TO DETERMINE CLAIM OF ADDITIONAL ITA.NO.719/HYD/2013 & C.O.39/HYD/2013 G. JANARDHAN REDDY, HYDERABAD. EXPENDITURE SPENT BY THE ASSESSEE ON THE OLD PROPERTY ON WHICH INDEXATION BENEFIT WAS CLAIMED AND THEN COMPUTE THE LONG TERM CAPITAL GAIN ACCORDINGLY. FOR THIS PURPOSE, THE ORDERS OF THE A.O. AND CIT(A) ARE SET ASIDE AND RESTORED TO THE A.O. TO EXAMINE THE ABOVE TWO ISSUES AND DETERMINE ACCORDINGLY. WE MAKE IT CLEAR THAT THE ISSUES WERE RESTORED ONLY TO THE LIMITED EXTENT AS DIRECTED ABOVE. GROUNDS OF REVENUE AND GROUNDS IN CROSS OBJECTION OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, APPEAL OF REVENUE AND CROSS OBJECTION OF ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 05.02 .2014. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATE 05 TH FEBRUARY, 2014 VBP/- COPY TO : 1. ACIT, CIRCLE 9 (1), BLOCK NO.1B, INCOME TAX TOWERS, A.C. GUARDS, HYDERABAD-4 2. SRI G. JANARDHAN REDDY, H.NO.2-62, BAIRAMALGUDA, RANGA REDDY DISTRICT, HYDERABAD 500 079. 3. CIT(A), VIJAYAWADA 4. CIT-VI, HYDERABAD 5. D.R. ITAT, A BENCH, HYDERABAD.