Sri M Santosh Reddy (HUF), Hyderabad V. ITO, Ward 11(2), Hyderabad

ITA 854/HYD/2013

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7271 (ITAT-HYDERABAD)
• Duration Of Justice: 6 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 03-12-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 24-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Keywords: Capital asset; Cost of acquisition; Set aside; Capital Gains
• Section: 143(3); 54F; 13; 6

Judgement Text

ITA NO 854 OF 2013 AND OTHERS. PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER APPEAL IN ITA NO APPELLANT RESPONDENT A.Y 854/HYD/2013 SHRI M. SA NTOSH REDDY (HUF) UPPAL RR DISTT. PAN:AAKHM0945H I NCOME TAX OFFICER, WARD 11(2) HYDERABAD 2009 - 1 0 855/HYD/2013 SHRI M. SHANKAR REDDY (HUF), UPPAL RR DISTT PAN:AAKHM2647F ACIT CIRCLE 11(1) HYDERABAD 856/HYD/2013 SHRI M. MEPALA REDDY (HUF), UPPAL, RR DISTT. PAN:AAJHM9386E -DO- 857/HYD/2013 SHRI M. SRIKANTH REDDY (HUF), HYDERABAD PAN:AAJHM9378J -DO- 8 58/HYD/2013 SHRI M. DHARMA REDDY (HUF), HYDERABAD PAN:AAKHM0944B ITO WARD 11(2) HYDERABAD 859/HYD/2013 SRI M. VENKAT REDDY (HUF) HYDERABAD PAN:AAKHM0943G ADDL. CIT, RANGE- 11 HYDERABAD 860/HYD/2013 SRI M. SHARATH REDDY (HUF) HYDERABAD PAN:AAKHM0942H ACIT, CIRCLE 11(1) HYDERABAD 861/HYD/2013 SHRI M. RAMACHANDRA REDDY ALIAS CH. RAMCHANDRA REDDY (HUF) HYDERABAD PAN:AACHC9460L ADD.CIT RANGE - 11 HYDERABAD ` 862/HYD/2013 SMT. S. ANUPAMA REDDY, HYDERABAD PAN:CCRPS1221G ADD. CIT, RANGE 11 HYDERABAD 889/HYD/2013 SHRI M. RAGHURAMA REDDY HUF, HYDERABAD PAN:AAJHM9377H ITO WARD 11(2) HYDERABAD ITA NO 854 OF 2013 AND OTHERS. PAGE 2 OF 7 ASSESSEE BY: SRI A.V. RAGHURAM REVENUE BY : SRI SUNKU SRINIVAS, DR DATE OF HEARING: 03/12/2019 DATE OF PRONOUNCEMENT: 31/01/2020 ORDER PER BENCH: ALL OF THESE APPEALS ARE FILED BY THE RESPECTIVE ASSESSEES AGAINST THE SIMILAR BUT SEPARATE ORDERS OF THE CIT (A)- VI, HYDERABAD, DATED 28.03.2013. 2. BRIEF FACTS OF THE CASE ARE THAT ALL THE ASSESSE ES BEFORE US ARE RELATED TO EACH OTHER. ALL THE ASSESSEES EXC EPT SMT. ANUPAMA REDDY, FILED THEIR RETURNS OF INCOME FOR TH E A.Y 2009-10 IN THE STATUS OF HUF, WHILE SMT. ANUPAMA REDDY FILE D HER RETURN AS AN INDIVIDUAL. DURING THE SCRUTINY ASSESSMENT PR OCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT ALL THE ASS ESSEES HAVE TOGETHER SOLD LANDED PROPERTY AND HAVE RECEIVED CON SIDERATION AND SINCE THE LANDED PROPERTY IS SITUATED WITHIN 8 KMS FROM THE MUNICIPALITY IN HYDERABAD, IT WAS TO BE TREATED AS A CAPITAL ASSET AND THE CAPITAL GAINS WAS LIABLE TO TAX. THE AO OBS ERVED THAT ONE MR. RAM REDDY WAS A PROTECTED TENANT OF CERTAIN EXT ENT OF LAND IN UPPAL, HYDERABAD AND ACCORDINGLY HAD ACQUIRED 60% R IGHTS IN THE PROPERTY AS THE PROTECTED TENANT AND THAT ON HIS DE MISE, HIS SONS SHRI A. LAXMA REDDY AND OTHERS WERE IN OCCUPATION O F THE SAID LAND AS PROTECTED TENANTS. IN THE PAHANI OF 1959-60 , THE NAME OF THE ELDER SON SHRI A. LAXMA REDDY WAS SHOWN AS THE OCCUPANT BECAUSE HE WAS THE KARTHA OF THE FAMILY. THEREAFTER , THE NAMES OF HIS BROTHERS AND ALSO THE ELDEST SON MR. A. LAXMA R EDDY WERE ITA NO 854 OF 2013 AND OTHERS. PAGE 3 OF 7 INCLUDED IN THE PAHANI OF 1988-89. SUBSEQUENTLY, IN THE PAHANI OF 2005-06, THE NAMES OF ALL THE 13 MEMBERS OF THE FAM ILY INCLUDING THE GRANDSON OF MR. RAM REDDY WERE ENTERED IN THE P AHANI. THE FAMILY ACQUIRED THE RIGHTS OF THE BALANCE OF 40% OF THE LAND BY PURCHASING THE LAND FROM PATTEDARS UNDER THE PROVIS IONS OF SUB- SECTION 6 OF SECTION 38A OF THE A.P. (TELANGAMA ARE A) TENANCY AND AGRICULTURAL LAND ACT OF 1950. THE 60% OF THE LAND WAS ALLOTTED TO THE PATTEDARS WITHOUT ANY CONSIDERATION. THE ASSESS EES, CLAIMED THAT THERE WAS A DIVISION OF HUF AND FURTHER SUBDIV ISION AMONGST EACH OF THE SMALLER HUFS UNIT AND THEREFORE, THE SA LE CONSIDERATION WAS ALSO RECEIVED BY INDIVIDUAL SHARE HOLDERS AND TAX LIABILITY IS ALSO ON THE INDIVIDUALS. THE AO, H OWEVER, WAS NOT CONVINCED WITH THE ASSESSEES ARGUMENTS. HE HELD TH AT 40% OF THE LAND BELONGING TO THE LANDOWNERS WAS ACQUIRED BY TH E PATTEDARS AND THEREFORE, THE 13 PERSONS WHO ARE THE PROTECTED TENANTS ARE THE ABSOLUTE OWNERS TO THE SAID EXTENT. WITH REGARD TO THE 60% OF THE LAND, THE AO DID NOT ACCEPT THE ASSESSEES CONT ENTION THAT SINCE THERE WAS NO COST OF ACQUISITION, THE CAPITAL GAINS CANNOT BE WORKED OUT. HE HELD THAT THE SAID CONTENTION IS NOT TENABLE. HE OBSERVED THAT AS PER THE A.P. TELANGANA AREA ABOLIT ION OF INAMS ACT, 1955, THE INTEREST OF THE PROTECTED TENANTS IN THE LAND HELD BY THEM AS THE PROTECTED TENANTS SHALL FORM 60% OF THE MARKET VALUE OF ALL THE INTERESTS IN THE LAND. HE, THEREFORE, HE LD THAT THE MARKET VALUE OF THE LAND WHICH HAS COME TO THE SHARE OF TH E PROTECTED TENANTS IS THE COST OF ACQUISITION TO THE PROTECTED TENANTS. THE AO ALSO DID NOT ACCEPT THAT THERE IS A PARTITION OF TH E HUF PROPERTY AMONGST THE FAMILY MEMBERS AND THAT EACH INDIVIDUAL IS EXIGIBLE TO TAX. HOWEVER, HE OBSERVED THAT IN THE CASE OF SH RI MEKKALA RAM REDDY, ONE OF THE CO-OWNERS OF THE LAND, THE AS SESSMENT HAS BEEN MADE IN HIS INDIVIDUAL HANDS. THEREFORE, THE A O INITIATED ITA NO 854 OF 2013 AND OTHERS. PAGE 4 OF 7 147 PROCEEDINGS IN THE CASE OF SRI M.SANTOSH REDDY, THE INDIVIDUAL TO BRING THE SAME TO TAX IN HIS INDIVIDU AL STATUS. HOWEVER, TO PROTECT THE INTEREST OF THE REVENUE, TH E SALE CONSIDERATION RECEIVED BY THE ASSESSEE WAS ASSESSED TO TAX UNDER THE HEAD OTHER SOURCES AND ACCORDINGLY, THE ASSES SMENT WAS COMPLETED. SIMILARLY, THE ASSESSMENTS IN THE CASE O F S/SHRI DHARMA REDDY, SHANKAR REDDY, SHARATH REDDY AND SRIK ANTH REDDY, THE ASSESSMENTS WERE COMPLETED ON PROTECTIVE BASIS AND THE SUBSTANTIVE ADDITIONS WERE MADE IN THE HANDS OF LARGER HUF RAGHU RAM REDDY, HUF, VENKAT REDDY HUF AND RANGA RE DDY HUF. ON APPEAL BY ALL THE PARTIES, THE CIT (A) CONF IRMED THE ADDITIONS IN THE HANDS OF THE LARGER HUFS AND HAVE SET ASIDE THE ASSESSMENTS IN THE HANDS OF THE SMALLER HUFS. AS RE GARDS THE CLAIM OF 54F BY ALL THE ASSESSEES, THE CIT (A) HAS ALLOWED THE EXEMPTION U/S 54F ONLY TO THE LARGER HUFS WHERE THE SUBSTANTIVE ADDITIONS WERE MADE AND HAVE REJECTED THE CLAIM OF 54F BY THE SMALLER HUF. AGGRIEVED BY THE ORDER OF THE CIT (A) ALL THE PARTIES ARE IN APPEAL BEFORE THE TRIBUNAL. 3. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITE RATING THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW S UBMITTED THAT THERE WAS A PARTITION OF THE PROPERTY BETWEEN THE S ONS OF RAM REDDY AND THEREAFTER BETWEEN THE CHILDREN OF 3 SONS I.E. LAXMA REDDY, PAPI REDDY AND MALLA REDDY AND THEREAFTER AL SO FURTHER SUB DIVISION WAS MADE AMONGST THEIR CHILDREN. HE SU BMITTED THAT THAT IS THE REASON FOR INCLUDING ALL THE GRAND CHIL DREN ALSO AS PARTIES TO THE SALE DEED AND IT IS EVIDENT FROM THE SALE DEED THAT EACH OF THE PERSON HAS RECEIVED THE SALE CONSIDERAT ION IN THEIR INDIVIDUAL CAPACITY, TO THE EXTENT OF THEIR HOLDING . HE SUBMITTED THAT THE PARTITION CAN BE EITHER ORAL OR WRITTEN AN D IN THE CASE OF ITA NO 854 OF 2013 AND OTHERS. PAGE 5 OF 7 THE ASSESSEES BEFORE US, THE PARTITION WAS REDUCED INTO WRITING. HE SUBMITTED THAT THE SALE CONSIDERATION RECEIVED ALSO HAS BEEN RETURNED IN THEIR SMALLER HUF HANDS AND THEREFORE, EACH OF THE SMALLER HUF IS EXIGIBLE TO CAPITAL GAIN TAX AND THA T EACH OF THE HUFS HAVE FILED THEIR RETURNS OF INCOME IN THEIR ST ATUS OF SMALLER HUFS AND HAVING INVESTED THE CAPITAL GAIN IN ACQUIR ING RESIDENTIAL HOUSES, HAVE ACCORDINGLY CLAIMED DEDUCTION U/S 54F OF THE ACT. HE SUBMITTED THAT THE AO AND THE CIT (A) HAVE ERRON EOUSLY NOT ACCEPTED THE PARTITION AND THUS HAVE BROUGHT THE EN TIRE SALE CONSIDERATION TO TAX IN THE HANDS OF THE LARGER HUF WHICH IS NOT CORRECT. 4. THE LEARNED DR WAS ALSO HEARD. HE SUBMITTED THAT THERE IS NO PARTITION AMONGST THE FAMILY MEMBERS AN D PARTICULARLY AMONG THE GRAND CHILDREN OF MR. RAM REDDY, BECAUSE, IN THE PARTITION DEED THERE IS NO PARTITION BY METES AND B OUNDS BUT IT IS ONLY MENTIONED ON PERCENTAGE BASIS. HE DREW OUR ATT ENTION TO THE CLAUSES OF THE PARTITION DEED TO DEMONSTRATE THAT I T WAS ONLY 1/3 RD OF EACH OF THE PROPERTY WHICH IS BEING SHARED AND T HERE ARE NO BOUNDARIES SET OUT IN THE AGREEMENT. THEREFORE, ACC ORDING TO HIM, THE CIT (A) HAS RIGHTLY CONFIRMED THE LIABILITY OF CAPITAL GAINS IN THE HANDS OF THE LARGER HUF. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT IN THE CASE OF ONE SHRI RAM REDDY, S/O SHRI LAXMA REDDY, THE ISSUE OF THE PARTITION HAD CO ME UP AND IT WAS HELD THAT HE IS LIABLE TO TAX IN HIS INDIVIDUA L CAPACITY AND NOT IN THE CAPACITY OF HUF. IN FACT, IT WAS THE CONTENT ION OF SHRI RAM REDDY THAT THE PROPERTY BELONGS TO HUF AND THEREFOR E CANNOT BE ITA NO 854 OF 2013 AND OTHERS. PAGE 6 OF 7 BROUGHT TO TAX IN HIS INDIVIDUAL CAPACITY. THE SAME HAS BEEN NEGATIVED BY THE DEPARTMENT AND THE ISSUE HAD TRAVE LLED UPTO ITAT AND THE COORDINATE BENCH OF ITAT IN ITA NO.1052/HYD/2013, ACCEPTED THAT THE PARTITION DEED HAD BEEN ACTED UPON AND HELD THAT THE ENTIRE SALE CONSIDERAT ION SHOULD NOT BE CONSIDERED FOR CAPITAL GAIN IN THE HANDS OF THE ASSESSEE THEREIN. THE TRIBUNAL HAS CLEARLY HELD THAT THE PAR TITION DEED NEED NOT BE REGISTERED. IN THE CASE ON HAND, THE INDIVID UAL ASSESSEES HAVE OFFERED CAPITAL GAINS TO TAX IN THEIR HANDS AS INDIVIDUALS OR AS SMALLER HUFS AND HAVE CLAIMED EXEMPTION U/S 54F OF THE ACT. WE FIND THAT THERE ARE TOTAL OF 45 PERSONS IN THESE TRANSACTIONS BUT IN THE CASES OF ONLY 13 PEOPLE THEY HAVE EITHER FILED RETURNS OF INCOME OR HAVE BEEN PICKED UP FOR VERIFICATION. THE DEPARTMENT HAS FILED A STATUS REPORT ALONG WITH THE DETAILS AN D IT IS SEEN THEREFROM THAT MOST OF THE PARTIES HAVE EITHER NOT FILED THE RETURNS OF INCOME OR THEIR RETURNS WERE NOT PICKED UP FOR S CRUTINY EXCEPT THE ASSESSEES BEFORE US. FURTHER, IT IS SEEN THAT T HERE WAS NO HUF PAN AVAILABLE TO MOST OF THE ASSESSEES. SINCE THE T RIBUNAL IN THE CASE OF ONE OF THE CO-OWNER HAS ACCEPTED THAT THERE WAS A PARTITION OF THE PROPERTY AMONGST THE PARTIES BEFOR E THE SALE OF THE PROPERTY AND EACH INDIVIDUAL HAS RECEIVED THE SALE CONSIDERATION IN ACCORDANCE WITH THEIR SHARE OF THE PROPERTY, WE ARE ALSO INCLINED TO ACCEPT THAT THERE IS PARTITION OF THE P ROPERTY, AND THEREFORE, THE INDIVIDUAL OR THE SMALLER HUF ONLY I S LIABLE TO TAX. IN VIEW OF THE SAME, WE SET ASIDE THE ORDERS OF THE CIT (A) AND REMAND THE ISSUE TO THE FILE OF THE AO WITH THE DIR ECTION TO CONSIDER THE CLAIMS OF EXEMPTION U/S 54F OF THE ACT IN THE CASE OF EACH OF THE ASSESSEES BEFORE US. IF THE ASSESSEES F ULFIL THE CONDITIONS FOR EXEMPTION U/S 54F, THEN THERE SHALL BE NO DISALLOWANCE IN THE CASE OF EACH OF THE ASSESSEES. ITA NO 854 OF 2013 AND OTHERS. PAGE 7 OF 7 6. IN THE RESULT, APPEALS OF THE ASSESSEES ARE ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2020. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 31 ST JANUARY, 2020. VINODAN/SPS COPY TO: 1 SHRI K.VASANTKUMAR, A.V. RAGHURAM, ADVOCATES, 610 BABUKHAN ESTATES, BASHEERBAGH, HYDERABAD 500001 2 ITO/ADD.CIT, RANGE-11/ACIT CIRCLE-11 (1) HYDERABA D 3 CIT (A)-VI, HYDERABAD 4 PR. CIT V HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER