Raj Kumar Mandhani, Hyderabad, Hyderabad V. DCIT, Central Circle-1(3), Hyderabad, Hyderabad

ITA 835/HYD/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1942 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-09-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 12-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRABHAT KUMAR GUOPTA
• Assessee Lawyers: B SATYANARAYANA MURTHY
• Keywords: Revised return
• Section: 143(3); 54F; 54

Judgement Text

ITA NO 83 5 OF 2017 RAJKUMAR MANDHANI CHENNAI. PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.835/HYD/2017 (ASSESSMENT YEAR: 2012-13) SHRI RAJKUMAR MANDHANI CHENNAI PAN: ABTPM9810E VS DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(3) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI B. SATYANARAYANA MURTHY FOR REVENUE : SHRI PRABHAT KUMAR GUOPTA, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2012-13 AGAIN ST THE ORDER OF THE CIT (A)-11, HYDERABAD, DATED 31.01 .2017. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE HON'BLE COMMISSIONER OF INCOME TAX , IN SO FAR AS IT IS AGAINST THE APPELLANT, IS CONTRARY TO THE FACTS OF THE CASE AND PROVISIONS OF LAW . 2 THE HON'BLE COMMISSIONER OF INCOME TAX IS NOT JUS TIFIED IN SUSTAINING THE DISALLOWANCE OF EXEMPTION U/S.54F OF THE INCOME TAX ACT. 3. THE HON'BLE COMMISSIONER OF INCOME TAX IS NOT JU STIFIED IN HOLDING THAT THE APPELLANT IS NOT ENTITLED TO TH E DEDUCTION AS THE HOUSE CONSTRUCTED STANDS IN THE NAME OF THE APPELLANT'S WIFE. DATE OF HEARING : 05.09.2018 DATE OF PRONOUNCEMENT : 20.11.2018 ITA NO 83 5 OF 2017 RAJKUMAR MANDHANI CHENNAI. PAGE 2 OF 7 4. THE HON'BLE COMMISSIONER OF INCOME TAX SHOULD HA VE APPRECIATED THAT THE APPELLANT DID SHOW THE INVESTM ENT AS HOUSE IN HIS BALANCE SHEET AND THAT HIS INTENTION I S TO ACQUIRE A HOUSE FOR LIVING, THOUGH IN THE NAME OF H IS WIFE. 5. THE HON'BLE COMMISSIONER OF INCOME TAX SHOULD HA VE APPRECIATED THAT THE OBJECT OF THE PROVISION TO SEC TION 54 AND 54F IS TO PROMOTE INVESTMENT IN RESIDENTIAL PRO PERTY AND THAT THE APPELLANT HAS COMPLIED WITH THAT CONDI TION. THEREFORE, THE HON'BLE COMMISSIONER OF INCOME TAX S HOULD HAVE DIRECTED THE ASSESSING OFFICER TO ALLOW THE EX EMPTION PROVIDED IN SECTION 54F OF THE INCOME TAX ACT. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING, IT IS SUBMITTED THAT THE ORDER OF THE L OWER AUTHORITIES BE SET ASIDE OR MODIFIED AS MAY BE DEEM ED FIT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A N INDIVIDUAL AND DIRECTOR OF M/S. MAHESHWARI BROTHERS COAL LTD AND OTHER GROUP CONCERNS OF MAHESHWARI GROUP, FILED HIS RETURN OF INCOME FOR THE A.Y 2012-13 ON 28.03.2013 ADMITTING AN INCOME OF RS.4,36,59,390. DURING THE ASSESSMENT PROCEEDINGS U /S 143(3) OF THE ACT, THE ASSESSEE FILED A REVISED RETURN OF INC OME ON 18.03.2015 CLAIMING EXEMPTION OF RS.47,44,308 U/S 5 4F OF THE ACT IN RESPECT OF THE LONG TERM CAPITAL GAINS EARNE D BY HIM ON THE SALE OF SHARES DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE ALSO REQUESTED TO GRANT EXEMPTION U/S 54F OF THE AC T IN RESPECT OF THE AMOUNTS APPROPRIATED BY HIM BEFORE 30.09.2012 T OWARDS CONSTRUCTING A HOUSE AT CHENNAI IN THE NAME OF HIS WIFE SMT. NIRMALA DEVI MANDHANI. THE AO DID NOT ALLOW THE EXE MPTION U/S 54F, ON THE GROUND THAT THE ASSESSEE HAS NOT SUBMIT TED PROOF OF HOUSE BEING CONSTRUCTED AND THAT HE HAS FURNISHED T HE PLAN OF APPROVAL FROM THE PRESCRIBED AUTHORITY. HE ALSO OBS ERVED THAT IT IS NOT KNOWN WHETHER IT IS A RESIDENTIAL OR COMMERCIAL BUILDING AND THAT HE HAS NOT PRODUCED ANY SUPPORTING VOUCHERS FO R CONSTRUCTION EXPENDITURE. FURTHER, HE ALSO OBSERVED THAT THE ITA NO 83 5 OF 2017 RAJKUMAR MANDHANI CHENNAI. PAGE 3 OF 7 ASSESSEE IS ALREADY AN OWNER OF A PROPERTY AND IS R ECEIVING INCOME FROM HOUSE PROPERTY, HENCE 54F IS NOT ALLOWABLE. HE ALSO CONSIDERED THE FACT THAT THE HOUSE IS IN THE NAME O F ASSESSEES WIFE AND THEREFORE, HE DISALLOWED THE CLAIM OF DEDU CTION U/S 54F ON THIS GROUND ALSO. AGGRIEVED, THE ASSESSEE PREFER RED AN APPEAL BEFORE THE CIT (A) ALONG WITH NECESSARY EVIDENCE TH AT THE HOUSE CONSTRUCTED AT CHENNAI WAS A RESIDENTIAL HOUSE. THE CIT (A) ACCEPTED THE ASSESSEES CONTENTION WITH REGARD TO T HE HOUSE BEING A RESIDENTIAL HOUSE, BUT DISALLOWED THE CLAIM OF TH E ASSESSEE ON THE GROUND THAT THE PROPERTY IS IN THE NAME OF ASSE SSEES WIFE AND FURTHER THAT THE SAID PROPERTY IS NOT THE ONLY PROP ERTY OF THE OWNER AS REQUIRED U/S 54F(1) OF THE ACT. THE CIT (A) HOWE VER ACCEPTED THE ASSESSEES CONTENTION THAT HIS CLAIM U/S 54F IS RS. 28,02,308 ONLY AND ACCORDINGLY RESTRICTED THE DISALLOWED THE SAID SUM. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THERE IS NO DOUBT OR DISPUTE ABOUT THE INVESTMENTS OF THE CAPITAL GAINS IN THE HOUSE CONSTRUCTED AT CHENNAI IN THE NA ME OF ASSESSEES WIFE. HE SUBMITTED THAT THE ISSUE AS TO WHETHER THE CAPITAL GAINS CAN BE INVESTED IN HIS WIFES NAME AN D STILL BE ELIGIBLE FOR THE EXEMPTION U/S 54F, IT IS COVERED I N FAVOUR OF THE ASSESSEE BY VARIOUS DECISIONS OF THE TRIBUNAL AND P ARTICULARLY IN THE CASE OF SHRI N. RAM KUMAR VS. ADD. CIT IN ITA NO.1901/HYD/2011 DATED 10.08.2012 WHEREIN THE TRIBU NAL HAS TAKEN NOTE OF THE DECISIONS BOTH IN FAVOUR OF THE A SSESSEE AND AGAINST THE ASSESSEE AND HAS HELD THAT THE ASSESSEE WILL BE ENTITLED FOR DEDUCTION U/S 54F OF THE ACT FOR THE F LATS PURCHASED IN THE NAME OF ASSESSEES DAUGHTER THEREIN, SUBJECT TO RESTRICTIONS ITA NO 83 5 OF 2017 RAJKUMAR MANDHANI CHENNAI. PAGE 4 OF 7 UNDER THE PROVISIONS OF SECTION 54F(1) OF THE ACT. HE SUBMITTED THAT IN THE CASE OF THE ASSESSEE, INVESTMENT IS MAD E IN THE NAME OF THE WIFE AND IN SIMILAR CASES, THE COORDINATE BE NCHES OF THIS TRIBUNAL HAVE BEEN ALLOWING THE EXEMPTION U/S 54F O F THE ACT TO THE ASSESSEE. 4. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND PLACED RELIANCE UPON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF PRAKASH VS. ITO DATED 12.09.2018 REPORTED IN 312 ITR 40 (BO M.) WHEREIN THE INVESTMENTS MADE IN THE NAME OF THE SON WAS NOT ALLOWED AS EXEMPTION U/S 54F AND IT HAS BEEN PARTICULARLY HELD THAT FOR QUALIFYING THE EXEMPTION, IT IS NECESSARY TO HAVE I NVESTMENTS MADE IN THE RESIDENTIAL HOUSE IN THE NAME OF THE AS SESSEE ONLY. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ONLY ISSUE IS WHETHER E XEMPTION U/S 54F CAN BE GRANTED TO THE ASSESSEE WHEN THE RESIDEN TIAL PROPERTY IS PURCHASED/CONSTRUCTED IN THE NAME OF HIS SPOUSE? IN THE CASE BEFORE US, BOTH THE ASSESSEE AND HIS WIFE ARE INDEP ENDENT INCOME TAX ASSESSEES. IN THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE, WE FIND THAT THE FACTS AR E SLIGHTLY DISTINGUISHABLE AS THE SPOUSE/SON/DAUGHTER IN WHOSE NAME THE PROPERTY WAS PURCHASED/CONSTRUCTED DID NOT HAVE IND EPENDENT SOURCE OF INCOME. LET US THEREFORE EXAMINE THE APP LICABILITY OF THOSE CASES TO THE FACTS OF THE CASE BEFORE US. IN THE CASE OF CIT VS. NATARAJAN REPORTED IN 287 ITR 271 (MAD), THE AS SESSEE THEREIN HAD SOLD A PROPERTY AT BANGALORE AND PURCHASED A PR OPERTY AT ITA NO 83 5 OF 2017 RAJKUMAR MANDHANI CHENNAI. PAGE 5 OF 7 ANNA NAGAR IN THE NAME OF HIS WIFE AND THE TRIBUNAL HAD HELD THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE HON'BLE HIG H COURT HAD REFUSED TO INTERFERE WITH THE FINDINGS OF THE FACT BY THE ITAT. THERE IS NO FINDING ABOUT THE STATUS OF THE WIFE TH EREIN, I.E., WHETHER, SHE HAD INDEPENDENT SOURCE OF INCOME OR NO T. 6. IN THE CASE OF RAJ KUMAR ARORA VS. AJAY KUMAR [CS(OS) 788/2010, DATED 18.12.2014], THE HON'BLE DE LHI HIGH COURT WAS DEALING WITH THE CASE OF A SUIT FOR PARTI TION BETWEEN THE BROTHERS AND THE PLAINTIFF THEREIN, WHO WAS PHYSICA LLY HANDICAPPED, HAD PURCHASED A RESIDENTIAL HOUSE IN T HE JOINT NAMES WITH HIS WIFE, FOR SHAGUN PURPOSES, AND THE HON'BLE HIGH COURT HELD THAT THE PLAINTIFF THEREIN WAS THE REAL OWNER OF THE RESIDENTIAL HOUSE IN QUESTION. 7. IN THE CASE OF GURNAM SINGH REPORTED IN 327 ITR 278, THE HON'BLE PUNJAB & HARYANA HIGH COURT WAS CONSIDE RING THE CASE OF AN ASSESSEE WHO HAD PURCHASED THE RESIDENTI AL HOUSE IN THE NAME OF HIS WIFE. THE HON'BLE HIGH COURT CONSID ERED THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF RAJ KUMAR ARORA TO HOLD THAT WHERE THE ASSESSEE HAD PAID THE ENTIRE SALE CONSIDERATION AND MERELY HAS INCLUDED HIS WIFE AS T HE OWNER OF THE PROPERTY, IT WOULD NOT MAKE ANY DIFFERENCE AND IN FACT SUCH A CONTRACT HAS TO BE ENCOURAGED WHICH HELPS IN EMPOWE RMENT OF WOMEN AND THAT THE GOVERNMENT ITSELF HAS FLOATED VA RIOUS SCHEMES PERMITTING JOINT OWNERSHIP WITH WIFE. THE H ON'BLE HIGH COURT FURTHER PROCEEDED TO CONSIDER THE ASSESSEE TH EREIN TO BE A CONSTRUCTIVE OWNER OF THE PROPERTY. THE HON'BLE HIG H COURT ALSO CONSIDERED THE DECISION OF THE HON'BLE ANDHRA PRADE SH HIGH COURT IN THE CASE OF LATE GULAM ALI KHAN VS. CIT RE PORTED IN 165 ITA NO 83 5 OF 2017 RAJKUMAR MANDHANI CHENNAI. PAGE 6 OF 7 ITR 228 (A.P), WHEREIN IT WAS HELD THAT THE OBJECT OF GRANTING EXEMPTION U/S 54F OF THE ACT, IS THAT THE HOUSE SHO ULD HAVE BEEN PURCHASED FOR RESIDENTIAL PURPOSES, MUST BE GIVEN E XEMPTION SO FAR AS CAPITAL GAINS ARE CONCERNED THAT THE WORD 'A SSESSEE' MUST BE GIVEN A WIDE AND LIBERAL INTERPRETATION SO AS TO INCLUDE HIS LEGAL HEIRS ALSO AND THERE IS NO WARRANT FOR GIVING TOO S TRICT INTERPRETATION ON THE WORD 'ASSESSEE' AS THAT WOULD FRUSTRATE THE OBJECT OF GRANTING THE EXEMPTION. IN THE CASE BEFO RE US, THE ASSESSEE AND HIS WIFE ARE INDEPENDENT INCOME TAX AS SESSEES AND THE ASSESSEE ALREADY OWNED ONE HOUSE AT KILPAUK, CH ENNAI. THE ASSESSEE THEREFORE, CANNOT BE SAID TO HAVE INVESTED IN ORDER TO AVOID CAPITAL GAINS TO TAX IN HIS HANDS, AS U/S 54F (1), THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 54F EVEN IF H E ALREADY HOLDS ONE PROPERTY IN HIS NAME. THEREFORE, THE INVESTMENT BY THE ASSESSEE OF THE CAPITAL GAINS IN PURCHASE OR CONSTR UCTION OF A RESIDENTIAL HOUSE AT ALAGAPPA NAGAR, CHENNAI IN THE NAME OF HIS WIFE WILL NOT DISENTITLE THE ASSESSEE FROM EXEMPTIO N U/S 54F OF THE ACT. IN VIEW OF THE SAME, WE ALLOW THE ASSESSEES A PPEAL. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH NOVEMBER, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 20 TH NOVEMBER, 2018. VINODAN/SPS ITA NO 83 5 OF 2017 RAJKUMAR MANDHANI CHENNAI. PAGE 7 OF 7 COPY TO: 1 VENUGOPAL & CHENOY, C.A. 4-1-889/16/2, TILAK ROAD , HYDERABAD 500004 2 DY. CIT, CENTRAL CIRCLE 1(3) HYDERABAD 3 CIT (A)-11, HYDERABAD 4 PR. CIT CENTRAL, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER