MRS. PRAMILA R. WADHAWAN, MUMBAI V. ACIT CIR 19(2), MUMBAI

ITA 798/MUM/2011

• Counselvise Citation: 79819914 RSA 2011
• Duration Of Justice: 3 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 28-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MIHIR NANIWADEKAR
• Assessee Lawyers: A K KARDA M
• Keywords: Capital asset; Gift; Cost of acquisition; Fair market value
• Section: 54F

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . , , , BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDI CIAL MEMBER . / ITA NO. 798 /MUM./ 2011 ( / ASSESSMENT YEAR : 2007 08 ) SMT. PRAMILA R. WADHAWAN 12, DWADESH, 17 TH ROAD MUMBAI 400 054 .. / APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CI RCLE 19(2), PIRAMAL CHAMBER MUMBAI 400 012 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAAPW3384P . / ITA NO. 1901/MUM./2011 ( / ASSESSMENT YEAR : 2007 08 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 19(2), PIRAMAL CHAMBER MUMBAI 400 012 .. / APPELLANT V/S SMT. PRAMILA R. WADHAWAN 12, DWADESH, 17 TH ROAD MUMBAI 400 054 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAAPW3 384P / REV E NUE BY : SHRI MIHIR NANIWADEKAR / ASSESSEE BY : SHRI A.K. KARDAM / DATE OF HEARING 05 .08.2014 / DATE OF ORDE R 28.08.2014 SMT. PRAMILA R. WADHAWAN 2 / ORDER , / PER AMIT SHUKLA , J.M. THE SE CROSS APPEALS ARE DIRECTED AGAINST THE IMPUGNED ORDER DATED 14 TH DECEMBER 2010, PASSED BY THE LEARNED COMMISSIONER (APPEALS) XXX, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTI ON 143(3), OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 2007 08. WE FIRST TAKE UP REVENUES APPEAL IN ITA NO.798/MUM./2011, VIDE WHICH, FOLLOWING GROUNDS HAVE BEEN RAISED: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) ERRED IN DIRECTING TO TAKE THE FULL VALUE CONSIDERATION AS ON 1.4.1981 TOWARDS THE COST OF ACQUISITION WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS THE OWNER OF PROPERTY AS ON 23.7.1993 2. ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACDT THAT THE CLAUSE (B) OF SEC. 2(42A) IS ONLY FOR DETERMINING THE PERIOD HELD BY THE AS FOR THE PURPOSE OF TREATING THE ASSET AS A LONG TERM CAPITAL GAIN AND EXPLANATION (III ) TO SECTION 48 CLEARLY STATES THAT THE COST INFLATION INDEX SHALL BE FROM THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE. 3. THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN THE CASE OF MANJULA J. SHAH, ITA NO.7315/M/2007 DATED 16.6.2009 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT. 2. FACTS IN BRIEF : THE ASSESSEE HAS INHERITED THROUGH PROBATE OF WILL, L EASE HOLD RIGHTS ACQUIRED FROM BOMBAY PORT TRUST IN RELATION TO THE LAND AND BUILDING KNOWN AS SHELLEYS HOTELS . THESE LEASE HOLD RIGHTS WERE EAR LIER ACQUIRED BY LATE SHRI B.R. SHELLEY, FATHER OF THE SMT. PRAMILA R. WADHAWAN 3 ASSESSEE VIDE DEED OF ASSIGNMENT DATED 28 TH DECEMBER 1966. SHRI SHELLEY EXPIRED ON 23 RD JULY 1993 AND THE LEASE HOLD RIGHTS WAS DEVOLVED UPON THE ASSESSEE THROUGH THE PROBATED WILL. THE ASSESSEE SOLD T HE ASSIGNMENT LEASE HOLD RIGHTS , VIDE DEED OF ASSIGNMENT DATED 22 ND DECEMBER 2006 TO SHUBH HOSPITALITY PVT. LTD. THE ASSESSING OFFICER HELD THAT SINCE THE ASSESSEE HAD ACQUIRED THE ASSET FROM HER LATE FAT H ER ON 23 RD JULY 1993, AND THEREFORE, INDEXATION SHO ULD BE ALLOWED FROM THIS DATE AND NOT FROM 1 ST APRIL 1981, AS CLAIMED BY THE ASSESSEE. THE LEARNED COMMISSIONER (APPEALS), HOWEVER, ALLOWED THE ASSESSEES CLAIM FOLLOWING SPECIAL BENCH DECISION OF THE TRIBUNAL, MUMBAI BENCH, IN DICT V/S MANJULA J. SHAH, 31 8 (AT) 417 (SB), WHEREIN IT WAS HELD THAT FOR THE PURPOSE OF INDEXATION THE DATE SHOULD BE RECKONED FROM THE DATE FROM WHICH THE ORIGINAL OWNER HELD THE PROPERTY. 3. BEFORE US, BOTH THE PARTIES ADMITTED THAT THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL HAS NOW BEEN APPROVED BY THE HON'BLE JURISDICTIONAL HIGH COURT , SINCE REPORTED IN [2013] 355 ITR 474. 4. IN VIEW OF THE ADMITTED POSITION OF LAW AS UPHELD BY THE HON'BLE JURISDICTIONAL HIGH C OURT IN MANJULA J. SHAH (SUPRA), THAT INDEXED COST OF ACQUISITION AS ENVISAGED IN EXPLANATION (III) TO SECTION 48, HAS TO BE RECKONED FROM THE YEAR IN WHICH PREVIOUS OWNER ACQUIRED THE ASSET AND NOT FROM THE YEAR IN WHICH THE ASSESSEE HAD ACQUIRED . T HEREFORE, SMT. PRAMILA R. WADHAWAN 4 IN THIS CASE THE COST OF ACQUISITION HAS TO BE TAKEN FROM 1 ST APRIL 1981 AS THE PREVIOUS OWNER HAD ACQUIRED THE ASSET MUCH PRIOR TO IT I.E., ON 28 TH DECEMBER 1966. THUS, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT , THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) IS AFFIRMED AND REVENU ES APPEAL IS DISMISSED. 5. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. WE NOW TAKE UP ASSESSEES APPEAL IN ITA NO. 1901/MUM./2011 , VIDE WHICH FOLLOWING GROUNDS HAVE BEEN RAISED: I . (I) LEARNED CIT(A) ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE COST ACQUISITION OF THE CAPITAL ASSET UNDER SECTION 55(2) TO BE THE COST OF ACQUISITION OF THE PREVIOUS OWNER OF RS . 3 , 50,OOO I - BEING THE COST FOR WHICH LATE FATHER OF THE APPELLANT ACQUIRED THE CAPITAL ASSET ON 28 . 12.1966. (II ) ERRED IN NOT ACCEPTING THE APPELLANT'S CONTENTION THAT THE APPELLANT HAS AN OPTION TO CONSIDER THE FAIR MARKET VALUE AS ON 1 . 4.1981 TO BE THE COST OF THE CAPITAL ASSET , IN VIEW OF THE PROVISIONS OF SECTION 55(2)(B)(II) WHERE THE CAPITAL ASSET BECOME THE PROPERTY OF THE APPELLANT BY PROBATED WILL OF HER FATHER , BEING ONE OF THE MODES SPECIFIED IN SECTION 49( 1) AND THAT THE CAPITAL ASSET BECAME THE PROPERTY OF THE PREVIOUS OWNER I.E ., FATHER OF THE APPELLANT ON 28.12 . 1966 I.E. BEFORE 1 . 4.1 981 . (III ) ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 55(2)(A) WHICH DEAL WITH COST OF ACQUISITION OF GOODWILL, TRADE MARK ETC. ARE APPLICABLE IN THE CASE OF THE APPELLANT AND NOT THE PROVISIONS OF SECTION 55(2)(B) WHICH APPLY TO ' OTHER CAPITAL ASSE T ', AS THE CAPITAL ASSET UNDER REFERENCE IS ' LEASEHOLD RIGHTS .' II.(I) LEARNED CIT(A) ERRED IN LAW AS WELL AS ON FACTS IN DISALLOWING THE CLAIM OF THE APPELLANT MADE U/S . 54F. (II) ERRED IN NOT ACCEPTING THAT THE HOUSE PROPERTY UNDER REFERENCE W AS PURCHA SED BY THE APPELLANT WITH THE BASIC INTENTION TO USE THE SAME FOR COMMERCIAL PURPOSES AND AS SUCH SMT. PRAMILA R. WADHAWAN 5 SHOULD NOT HAVE BEEN HELD THAT THE APPELLANT HAS PURCHASED RESIDENTIAL HOUSE. (III) ERRED IN NOT APPRECIATING THE FACT THAT TILL 31 . 3.2007 THE POSSESSION OF SAID THE PROPERTY WAS NOT MADE AVAILABLE TO THE APPELLANT BY THE BUILDER FOR W ANT OF COMPLETION OF THE WORK AND IN ABSENCE OF ANY USER OF THE PROPERTY TILL 31 . 3.2007 , ERRED IN HOLDING THAT THE APPELLANT HAS ACQUIRED RESIDENTIAL HOUSE IN ASSESSMENT YEAR 20 07 - 08 AND THEREBY DENYING THE CLAIM OF APPELLANT UNDER THE PROVISIONS OF SECTION 54F. 6. AS STATED IN THE FORGOING PARAGRAPHS, THE ASSESSEE HAD ACQUIRED LEASE HOLD RIGHTS O F THE LAND AND BUILDING THROUGH WILL FROM HER LATE FATHER , WHO HAD ACQUIRED THE LEA SE HOLD RIGHT AT ` 3.50 LAKHS, VIDE DEED OF ASSIGNMENT DATED 28 TH DECEMBER 1966, AND THE ASSESSEE HAD ACQUIRED THE SAID LEASE HOLD ON THE SAID PROPERTY THROUGH WILL ON 23 RD JULY 1993. THESE LEASE HOLD RIGHTS WERE LATER ON ASSIGNED OR SOLD VIDE DEED OF ASSI GNMENT DATED 22 ND DECEMBER 2006, FOR ` 15,86,19,000. THE ASSESSEE HAS TAKEN THE FAIR MARKET VALUE OF THE SAID LEASE HOLD RIGHT ON THE PROPERTY AS ON 1 ST APRIL 1981, WHILE COMPUTING THE LONG TERM CAPITAL GAIN. THE ASSESSING OFFICER , HOWEVER, HELD THAT THE A SSESSEES OPTION TO TAKE THE MARKET VALUE AS ON 1 ST APRIL 1981, IS NOT CORRECT AND THE SAME SHOULD BE TAKEN AT THE COST TO THE EARLIER OWNER I.E., WHO HAD ACQUIRED IT WHICH WAS FOR ` 3.50 LAKHS. AFTER ANALYSI NG THE PROVISIONS OF SECTION 55, IN DETAIL, HE T OOK THE COST OF ACQUISITION AT ` 3.50 LAKHS. 7. BEFORE THE LEARNED COMMISSIONER (APPEALS), THE ASSESSEE SUBMITTED THAT SECTION 55(2), WHICH DEALS WITH THE COST OF ACQUISITION SMT. PRAMILA R. WADHAWAN 6 FOR THE PURPOSE OF SECTION 48 AND 49, PROVIDES THAT WHE N CAPITAL ASSETS BECOMES THE PROPERTY OF THE ASSESSEE BY ANY MODES SPECIFIED IN SUB SECTION 1 OF SECTION 49 AND THE CAPITAL ASSET BECOME THE PROPERTY OF THE PREVIOUS OWNER BEFORE 1 ST APRIL 1981, THEN IT MEANS THAT COST OF CAPITAL ASSET TO THE PREVIOUS OWNER OR AT THE FAIR MARKET VALU E OF THE ASSESSEE ON 1 ST APRIL 1981 AT THE OPTION OF THE ASSESSEE . THIS HAS BEEN PROVIDED IN CLAUSE (B)(II) OF SECTION 55(2) . HEAR THE ASSESSEE HAS OPTED FOR FAIR MARKET VALUE AS ON 1 ST APRIL 1981. HOWEVER, THE LEARNED COMMISSIONER (APPEALS) DISAGREED WITH THE ASSESSEES CONTENTION AND UPHELD THE ORDER OF THE ASSESSING OFFICER THAT THE COST OF ACQUISITION SHOULD BE THE COST TO THE EARLIER OWNER WHICH IN THE PRESENT CASE WAS ` 3.50 LAKHS. 8. BEFORE US, THE LEARNED COUNSEL, SHRI MIHIR NANIWADEKAR , SUBMITTED THA T THE PROPERTY WAS ACQUIRED THROUGH WILL BY THE ASSESSEE IN TERMS OF THE CLAUSE (II) OF EXPLANATION 1 TO SECTION 49 AND, THEREFORE, THE COST OF ACQUISITION IN THE PRESENT CASE HAS TO BE TAKEN IN TERMS OF SECTION 55(2)(B) AND NOT UNDER SECTION 55(2)(A)(II) , I F AT ALL THE LEASE HOLD RIGHTS IS TO BE EQUATED WITH THE TENANCY RIGHTS AS PER SECTION 55(2)(B). THUS, HE SUBMITTED THAT THE VIEW TAKEN BY THE LEARNED COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER ARE LEGALLY NOT TENABLE. SMT. PRAMILA R. WADHAWAN 7 9. THE LEARNED DEPARTMENTAL REP RESENTATIVE, ON THE OTHER HAND, RELIED ON THE ORDER OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS). 10. AFTER HEARING BOTH THE PARTIES AND ON A PERUSAL OF THE FINDINGS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS), WE FIND T HAT BOTH THE REVENUE AUTHORITIES HAVE HELD THAT COST OF ACQUISITION SHOULD BE TAKEN ON THE VALUE ON WHICH IT WAS ACQUIRED BY THE PREVIOUS OWNER THAT IS AT 3 . 50 LAKHS, ON 28 TH DECEMBER 1966. WHEREAS, THE ASSESSEE HAS ADOPTED THE MARKET VALUE AS ON 1 ST APRIL 1981, FOR THE PURPOSE OF COST OF ACQUISITION. IN THE PRESENT CASE, THE SUBJECT MATTER OF SALE IS LEASE HOLD RIGHTS. SECTION 55 PROVIDES THE MEANING OF ADJUSTMENT , COST OF IMPROVEMENT AND COST OF ACQUISITION FOR THE PURPOSE OF SECTION 48 AND 49. SUB SECTION (2) OF SECTION 55 , PROVIDES THE MEANING OF COST OF ACQUISITION IN THE FOLLOWING MANNER: (2) [FOR THE PURPOSES OF SECTIONS 48 AND 49 , 'COST OF ACQUISITION', [(A) IN RELATION TO A CAPITAL ASSET, BEING GOODWILL OF A BUSINESS [OR A TRADE MARK OR BRAND NAME ASSOCIATED WITH A BUSINESS] [OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING] 1 [OR RIGHT TO CARRY ON ANY BUSINESS], TENANC Y RIGHTS, STAGE CARRIAGE PERMITS OR LOOM HOURS, (I) IN THE CASE OF ACQUISITION OF SUCH ASSET BY THE ASSESSEE BY PURCHASE FROM A PREVIOUS OWNER, MEANS THE AMOUNT OF THE PURCHAS E PRICE ; AND (II) IN ANY OTHER CASE [NOT BEING A CASE FALLING UNDER SUB - CLAUSES (I) TO (IV) OF SUB - SECTION (1) OF SECTION 49 ], SHALL B E TAKEN TO BE NIL; SMT. PRAMILA R. WADHAWAN 8 11. THUS, CLAUSE (A) OF SUB SECTION (2) OF SECTION 55, PROVIDES THAT FOR THE PURPOSE OF SECTION 48 AND 49, THE COST OF ACQUISITION IN RELATION TO A CAPITAL ASSET AS MENTIONED IN CLAUSE (A) IS TO BE ADOPTED IN TWO WAY ONE IN CASE WHERE ASSET HAS BEEN ACQUIRED BY WAY OF PURCHASE FROM THE PREVIOUS OWNER THEN IT IS THE AMOUNT OF PURCHASE PRICE AND SECONDLY, IN OTHER CASES NOT COVERED WITHIN SUB CLAUSE (I) TO (IV) OF SUB SECTION 1 OF SECTION 49, THEN IT SHALL BE TAKEN AT NIL . THUS, IN THE LATER CATEGORY, THE COST OF ACQUISITION HAS TO BE TAKEN AT NIL UNLESS IT IS NOT A CASE FALLING WITHIN SUB CLAUSE (I) TO (IV) OF SECTION 49(1). CLAUSE (II) OF SECTION 49( 1 ) DEALS, WHERE THE CAPITAL ASSET BECOMES THE PROPERTY OF THE ASSESSEE UNDER THE GIFT OR WILL . H ERE THIS CASE, THE PROPERTY HAS BECOME THE CAPITAL ASSET OF THE ASSESSEE BY WAY OF WILL, THEREFORE, COST OF ACQUISITION AS PRESCRIBED IN SECTION 55(2)(A)(II) WILL NOT BE APPLICABLE. THEN IN SUCH A CASE, THE COST OF ACQUISITION HAS TO BE WORKED OU T AS PER CLAUSE (B) OF SECTION 55(2), WHICH PROVIDES THAT IT IS THE OPTION OF THE ASSESSEE IF THE PROPERTY HAS BEEN ACQUIRED BY THE ASSESSEE BEFORE 1 ST APRIL 1981 TO ADOPT THE FAIR MARKET VALUE AS ON 1 ST APRIL 1981. HERE IN THIS CASE, THE ASSESSEE HAS OPTE D TO FAIR MARKET VALUE AS ON 1 ST APRIL 1981, AND THEREFORE, THE ASSESSEE HAS RIGHTLY ADOPTED THE FAIR MARKET VALUE OF THE ASSET AS ON 1 ST APRIL 1981. ACCORDINGLY, THE OBSERVATION AND THE FINDING OF THE LEARNED COMMISSIONER (APPEALS) IS SET ASIDE AND ASSESS EES CONTENTION IS SMT. PRAMILA R. WADHAWAN 9 ALLOWED. THE ASSESSING OFFICER IS THUS DIRECTED TO TAKE THE FAIR MARKET VALUE AS ADOPTED BY THE ASSESSEE AS ON 1 ST APRIL 1981 FOR THE PURPOSE OF COST OF ACQUISITION. 12. IN GROUND NO.2, THE ASSESSEE HAS RAISED DENIAL OF DEDUCTION UNDER SECT ION 54F FOR ` 1,84,59,710, BEING COST OF ACQUISITION OF RESIDENTIAL UNIT. 13. WHILE EXAMINING THE CLAIM OF DEDUCTION UNDER SECTION 54F, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS PURCHASED RESIDENTIAL FLAT NO.902 A AND 902 B IN A BUILDING NAMED AS WAT ER FRONT AT S.NO.202, YERWADA, PUNE, FOR A CONSIDERATION OF ` 57,73,830, AND ` 35,01,495 RESPECTIVELY ON 20 TH MARCH 2007. 14. BEFORE THIS PURCHASE, THE ASSESSEE HAS ALSO PURCHASED A RESIDENTIAL FLAT NO.ACER 502 AT MUNDHWA, PUNE, FOR CONSIDERATION OF ` 1,25, 00,000, ON 17 TH FEBRUARY 2007. THE ASSESSING OFFICER REQUIRED THE ASSESSEE AS TO WHY THE CLAIM FOR DEDUCTION CLAIMED UNDER SECTION 54F , SHOULD BE ALLOWED UNDER PROVISO (A)(II) TO SECTION 54F(1), WHICH PROVIDES THAT THE CLAIM FOR DEDUCTION WILL NOT BE ALLOW ED TO THE ASSESSEE WHO HAS PURCHASED ANY RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANSFER OF ORIGINAL ASSET. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE CLAIM UNDER SECTION 54F, IS MADE FOR INVESTMENT IN RE SIDENTIAL HOUSE FOR FOREST SMT. PRAMILA R. WADHAWAN 10 CASTLES FLAT AT PUNE IN CONNECTION WITH THE CAPITAL GAIN ARISING FROM THE SALE OF LEASE RIGHT OF SHELLEY ESTATE. THE OTHER TWO FLATS PURCHASED IN WATER FRONT AT PUNE WAS NOT MEANT FOR RESIDENTIAL PURPOSE BUT THE BASIC INTENTION O F THE ASSESSEE WAS TO USE IT FOR COMMERCIAL PURPOSE. BESIDES THIS, TILL 31 ST MARCH 2007, POSSESSION OF THIS PROPERTY WAS NOT GIVEN TO THE ASSESSEE BY THE BUILDER AS IT WAS GIVEN ON 29 TH MAY 2007 , THE ASSESSEE WAS HANDED OVER THE POSSESSION OF THE SAID FLAT S , THEREFORE, HER CLAIM CANNOT WITHDRAWN. THE ASSESSING OFFICER REJECTED THE ASSESSEES CONTENTION AND HELD THAT THE PROVISO (A)(II) TO SECTION 54F(1) CLEARLY PROHIBITS THE CLAIM OF DEDUCTION UNDER SECTION 54F IF THE ASSESSEE HAS PURCHASED ANY OTHER RESIDE NTIAL HOUSE BESIDES ONE RESIDENTIAL HOUSE , PURCHASED WITHIN THE PERIOD OF ONE YEAR. THE DOCUMENTS SUBMITTED BY THE ASSESSEE I.E., PURCHASE AGREEMENT CLEARLY SUGGESTED THAT THE TWO NEW FLATS AT WATER FRONT WERE RESIDENTIAL UNITS AND HENCE, THE INTENTION TO USE AS COMMERCIAL AS CLAIMED BY THE ASSESSEE , DOES NOT ABSOLVE THE ASSESSEE. ACCORDINGLY, HE HELD THAT EXEMPTION UNDER SECTION 54F ON THE PURCHASE OF RESIDENTIAL FLAT ON LONG TERM CAPITAL GAIN WILL NOT BE AVAILABLE TO THE ASSESSEE. 15. BEFORE THE LEARNED COMM ISSIONER (APPEALS), THE SAME CONTENTIONS WERE REITERATED, HOWEVER, THE LEARNED COMMISSIONER (APPEALS) REJECTED THE ASSESSEES CONTENTION AND UPHELD THE ORDER OF THE ASSESSING OFFICER AFTER OBSERVING AND HOLDING AS UNDER: SMT. PRAMILA R. WADHAWAN 11 I HAVE CAREFULLY GONE THROUGH TH E ASSESSMENT ORDER, SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AND THE FACTS OF THE CASE. THE AO HAS STATED IN THE ASSESSMENT ORDER THAT AS PER THE PROVISO TO SECTION 54(A)(II) THE APPELLANT IS NOT ENTITLED EXEMPTION U/S.54F OF THE I.T. ACT, 1961. THE AO HAS STATED THAT THE SAID PROVISO CLEARLY DOES NOT PROVIDE FOR ANY INTENTION TO USE ANY RESIDENTIAL PROPERTY WHETHER FOR RESIDENCE OR FOR ANY OTHER PURPOSE. THE AO NOTED THAT THE DOCUMENTS SUBMITTED BY THE ASSESSEE VIZ. PURCHASE AGREEMENTS, CLEARLY STATES T HAT THESE NEW ASSETS ARE RESIDENTIAL UNITS AND HENCE THE INTENTION AS CLAIMED BY THE ASSESSEE DOES NOT SAVE THE SITUATION IN ANY MANNER. WITHOUT AN IOTA OF DOUBT, THE SUBMISSIONS OF THE ASSESSEE ARE NOT WORTHY OF ANY FAVOURABLE CONSIDERATION. IN MY CONSIDE RED VIEW THE TWO HOUSES PURCHASED BY THE APPELLANT ARE RESIDENTIAL FLATS ONLY. THE AO HAS GIVEN DESCRIPTION OF THE PROPERTY/INVESTMENT IN THE EARLY PART OF THE ASSESSMENT ORDER. I AGREE WITH THE AO THAT THE TWO HOUSES WHICH HAS BEEN PURCHASED AFTER THE INI TIAL PURCHASE OF HOUSES ARE RESIDENTIAL HOUSE AND THEREFORE AS PER THE PROVISO TO SECTION 54F MENTIONED (SUPRA) THE APPELLANT IS NOT ENTITLED FOR DEDUCTION U/S.54 OF THE I .T.ACT, 1961 AND ACCORDINGLY THE ACTION OF THE AO IN DENYING THE DEDUCTION U/S.54F IS CONFIRMED. THIS AROUND OF APPEAL IS DISMISSED. 16. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT SUBSEQUENT PURCHASE OF FLATS WAS NOT INTENDED TO USE FOR RESIDENTIAL UNIT AND, THEREFORE, IT CANNOT BE HELD THAT THE ASSESSEE HAS BOUGHT RESIDENTIAL UNIT OTHER THAN THE ONE PURCHASED EARLIER. IN OTHER WORDS, HE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 17. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND THE LEARNED COMMISSION ER (APPEALS) AND SUBMITTED THAT THERE IS A CLEAR CUT VIOLATION OF THE CONDITIONS AS LAID DOWN IN SECTION 54F, AS GIVEN IN PROVISO THERETO, THEREFORE, THE CLAIM OF DEDUCTION HAS RIGHTLY BEEN DENIED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMI SSIONER (APPEALS). SMT. PRAMILA R. WADHAWAN 12 18. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS CLAIMED THE DEDUCTION UNDER SECTION 54F ON ACCOUNT OF LONG TERM CAPITAL GAIN, ARISING OUT OF SALE OF LEASE RIGHT OF THE PROPERTY. THE CAPITAL GAIN ARISING OUT OF TRANSFER OF SUCH A LONG TERM CAPITAL ASSET WAS UTILIZED FOR PURCHASING OF A RESIDENTIAL FLAT AT FOREST CASTLES, MUNDHAWA, PUNE. BESIDES THIS, THE ASSESSEE HAS ALSO PURCHASED TWO ADJAC ENT FLATS IN A DIFFERENT LOCALITY AND IN A DIFFERENT BUILDING CALLED AS W ATER F RONT. THE ASSESSING OFFICER HAS DENIED THE CLAIM OF EXEMPTION UNDER SECTION 54F ON THE GROUND THAT THE ASSESSEE HAS PURCHASED RESIDENTIAL HOUSE AGAIN AFTER PURCHASING EARLIER RE SIDENTIAL UNIT WITHIN A PERIOD OF ONE YEAR FROM THE DATE OF TRANSFER. THIS CLEARLY PROHIBITS THE CLAIM OF DEDUCTION UNDER SECTION 54F UNDER SUB CLAUSE (II) OF CLAUSE (A) OF PROVISO TO SECTION 54F(1). WHEREAS, THE ASSESSEES CASE HAS BEEN TWO FOLD I.E., THE SECOND RESIDENTIAL FLAT PURCHASED IN THE BUILDING WATER FRONT WAS INTENDED TO BE USED FOR COMMERCIAL PURPOSE AND SECONDLY, WITHOUT PREJUDICE THE PO SSESSION OF THE SAID FLAT S W ERE GIVEN IN THE NEXT FINANCIAL YEAR I.E., ON 29 TH MAY 2007, THEREFORE, THE CLAI M OF DEDUCTION UNDER SECTION 54F CANNOT BE DENIED IN THIS YEAR. PROVISO TO SECTION 54F(1) CARVES OUT THE EXCEPTION S UNDER WHICH THE CLAIM FOR DEDUCTION UNDER SECTION 54F, WILL NOT BE AVAILABLE TO THE ASSESSEE. THE SAID PROVISO READS AS UNDER: SMT. PRAMILA R. WADHAWAN 13 [ PROVIDED T HAT NOTHING CONTAINED IN THIS SUB - SECTION SHALL APPLY WHERE (A) THE ASSESSEE, (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR (II) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR (III) CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET; AND (B) THE INCOME F ROM SUCH RESIDENTIAL HOUSE, OTHER THAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET, IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'.] 19. FROM THE ABOVE, IT IS SEEN THAT SUB CLAUSE (II) OF CLAUSE (A) CLEARLY PROVI DES THAT WHEN THE ASSESSEE HAS PURCHASED ANY RESIDENTIAL HOUSE OTHER THAN THE NEW RESIDENTIAL HOUSE WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANSFER , THEN THE ASSESSEE SHALL NOT BE ELIGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 54F. AS STATED EARLIER, THE ASSESSEE HAS PURCHASED ONE RESIDENTIAL HOUSE ON 17 TH FEBRUARY 2007, AT FOREST CASTLES BUILDING IN MUNDHWA, PUNE. THEREAFTER, THE ASSESSEE HAD AGAIN PURCHASED TWO ADJACENT FLATS IN WATER FRONT BUILDING ON 20 TH MARCH 2007, WHICH IS WITHIN ONE YEAR FROM THE DATE OF TRANSFER I.E., 22 ND DECEMBER 2006. THUS, IN SUCH CIRCUMSTANCES, THERE IS A CLEAR VIOLATION OF CONDITIONS LAID DOWN IN PROVISO TO SECTION 54F(1), THEREFORE, THE SMT. PRAMILA R. WADHAWAN 14 ASSESSING OFFICER AS WELL AS THE LEARNED COMMISSIONER (APPEALS) HAVE RIGHTLY DENIED THE ASSESSEES CLAIM OF DEDUCTION. THERE IS NO MERIT IN THE SECOND RESIDENTIAL UNITS PURCHASED ON 20 TH MARCH 2007, WHERE INTEN D ED TO BE FOR COMMERCIAL PURPOSES AS IT IS WITHOUT ANY BASIS . A S RIGHTLY POINTED OUT BY THE ASSESSING OFFICER THAT THE PURCHASE AG REEMENT CLEARLY MENTIONS THAT THESE UNITS ARE RESIDENTIAL UNITS AND NOT ANY COMMERCIAL COMPLEX OR SHOP. THE OTHER CONTENTION THAT POSSESSION WAS GIVEN IN THE NEXT FINANCIAL YEAR WILL NOT ASSIST THE CASE OF THE ASSESSEE , AS ADMITTEDLY THE PURCHASE AGREEMENT IS DATED 20 TH MARCH 2007, WHICH IS WITHIN 30 TH MARCH 2007. THUS, UNDER THE FACTS AND THE CLEAR CUT PROVISION OF LAW, THE FINDING RECORDED BY THE LEARNED COMMISSIONER (APPEALS) IS FACTUALLY AND LEGALLY CORRECT AND THE SAME IS AFFIRMED. THUS, GROUND NO.2, R AISED BY THE ASSESSEE IS DISMISSED. 20. 20. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. 28 TH AUGUST 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 28 TH AUGUST 2014 SD/ - . D. KARUNAKARA RAO ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 28 TH AUGUST 2014 SMT. PRAMILA R. WADHAWAN 15 / COPY OF THE ORDER FO RWARDED TO : (1) / THE ASSESSEE ; (2) / THE REVENUE; (3) ( ) / THE CIT(A ) ; (4) / THE CIT, MUMBAI CITY CONCERNED ; (5) , , / THE DR, ITAT, MUMBAI ; (6) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI