KHORSHED NOSHIR BHARUCHA, MUMBAI V. ACIT 19(2), MUMBAI

ITA 863/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1730 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 09-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: YOGESH A THAR
• Keywords: Question of law
• Section: 143(3); 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI . , / BEFORE SHRI D. MANMOHAN, VICE PRESIDENT /AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 863/MUM/2012 ! ! ! ! / ASSESSMENT YEAR 2008-09 MRS. KHORSHED NOSHIR BHARUCHA, LIDO TOWERS, 7 TH FLOOR, JUHU ROAD, JUHU VILLAGE, SANTACRUZ (W) MUMBAI-400 054. PAN: ALWPB 5627 K VS. ASST. C.I.T. 19(2) PIRAMAL CHAMBERS, LALBAUG, MUMBAI-400 012. ( '# / APPELLANT ) ( $%'# / RESPONDENT ) '# & / APPELLANT BY : SHRI YOGESH A. THAR $%'# ( & /RESPONDENT BY : SHRI MANOJ KUMAR DATE OF HEARING : 11-02-2013 DATE OF PRONOUNCEMENT : 15-02-2013 )* / O R D E R PER RAJENDRA, A.M. FOLLOWING GROUNDS OF APPEAL HAVE BEEN FILED BY THE APPELLANT AGAINST THE ORDER DT. 02-11-2011 OF THE CIT(A)-30, MUMBAI : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. C.I.T. (APPEALS), ERRED IN DISALLOWING THE EXEMPTION OF LONG TERM CAPITAL GAIN S U/S. 54F OF THE I. T. ACT, 1961 FOR ONE RESIDENTIAL FLAT OUT OF 2 ADJACENT FLATS US ED AS ONE RESIDENTIAL UNIT. 2. THAT THE LD. C.I.T. (APPEALS), ERRED IN NOT CONSIDERING THE DECISION OF JURISDICTIONAL TRIBUNAL, ITO V/S. MS. SUSHILA M. JHAVERI (2007) 2 92 ITR (AT) 1 [MUMBAI] [SB] DATED 17-04-2007 I.E. JUDGMENT OF SPECIAL BENCH OF MUMBAI TRIBUNAL CONSTITUTED TO DECIDE THE APPEAL AS WELL AS TO ADJUDICATE THE QUESTION OF LAW: WHETHER, THE PHRASE A RESIDENTIAL HOUSE USED IN SUB-SECTION (1) OF SECTION 54 AND 54F MEANS ONE RESIDENTIAL HOUSE OR MORE THAN ONE RE SIDENTIAL HOUSE INDEPENDENTLY ITA NO. 863/MUM/2012 MRS. KHORSHED NOSHIR BHARUCHA 2 LOCATED IN THE SAME BUILDING/COMPOUND/CITY ? 3. THAT AS PER THE JUDGMENT OF THE SPECIAL BENCH AS ST ATED ABOVE THE ASSESSEES CASE SQUARELY COVERS THE ISSUE AND THE EXEMPTION SHOULD BE AVAILABLE, WHEREAS THE LD. C.I.T. (APPEALS) HAS ERRED IN LAW AS WELL AS ON FAC TS BY NOT ALLOWING THE EXEMPTION FOR BOTH THE ADJACENT RESIDENTIAL FLATS. IT IS CLEARLY STATED IN THE ORDER OF THE JUDGMENT OF SPECIAL BENCH OF MUMBAI TRIBUNAL AT POINT NO.11 THAT IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THAT E XEMPTION UNDER SECTION 54 AND 54F OF THE ACT WOULD BE ALLOWABLE IN RESPECT OF ONE RES IDENTIAL HOUSE ONLY. IF THE ASSESSEE HAS PURCHASED MORE THAN ONE RESIDENTIAL HOUSE, THEN THE CHOICE WOULD BE WITH ASSESSEE TO AVAIL THE EXEMPTION IN RESPECT OF EITHE R OF THE HOUSES PROVIDED THE OTHER CONDITIONS ARE FULFILLED. HOWEVER, WHERE MORE THAN ONE UNIT ARE PURCHASED WHICH ARE ADJACENT TO EACH ARE CONVERTED INTO ONE HOUSE FOR THE PURPOSE OF RESIDENCE BY HAVING COMMON KITCHEN, ETC.. THEN IT WOULD BE A CA SE OF INVESTMENT IN ONE RESIDENTIAL HOUSE AND CONSEQUENTLY, THE ASSESSEE WOULD BE ENTITLED TO EXEMPTION. 4. THAT THE LD. C.I.T. (APPEALS), ERRED IN NOT CONSIDE RING THE ACTUAL FACTS OF THE CASE AND STATED THAT THERE ARE SEPARATE KITCHEN IN BOTH THE HOUSES, BUT THE FACT OF THE MATTER IS THAT AS THERE ARE TWO FLATS HAVING A COMM ON PASSAGE, THERE IS BOUND TO BE ONE EXTRA KITCHEN SPACE IN ONE OF THE FLAT, WH ICH IS USED AS A STORE HOUSE AND ONLY ONE KITCHEN IS USED AS A KITCHEN AND THE ASSESSEE IS THE ONLY PERSON STAYING IN THE FULL HOUSE AND THUS THERE IS ONLY ON E FAMILY HAVING A COMMON KITCHEN. 5. THE APPELLANTS CRAVES LEAVE TO ADD, ALTER OR DELETE ANY PORTION OF THIS APPEAL BEFORE THE FINAL HEARING BY THE BENCH ON THE BASIS OF EQUITY, GOOD CONSCIENCE AND JUSTICE. 2. ASSESSEE, AN INDIVIDUAL, FILED HER RETURN OF INCOME ON 12-07-2008 DECLARING TOTAL INCOME AT RS. 2.07 CRORES. ASSESSMENT WAS FI NALISED BY THE ASSESSING OFFICER (AO) U/S. 143(3) OF THE INCOME TAX ACT, 1961 (ACT) ON 30-12-2010 DETERMINING INCOME OF THE ASSESSEE AT RS. 3.38 CRORES. 3. THE ONLY ISSUE INVOLVED IN THE CASE UNDER CONSIDERA TION IS WHETHER THE AO AND THE FIRST APPELLATE AUTHORITY (FAA) WERE JUSTIFIED IN ALLOWING EXEMPTION OF LONG TERM CAPITAL GAIN (LTCG) U/S. 54 OF THE ACT IN RESP ECT OF ONE RESIDENTIAL FLAT ONLY AS OPPOSITE TO THE CLAIM OF THE APPELLANT OF EXEMPTION OF TWO ADJACENT FLATS. BRIEFLY STATED FACTS OF THE CASE ARE THAT DURING TH E YEAR, THE APPELLANT HAD SOLD THE TENANCY RIGHTS FOR A CONSIDERATION OF RS. 5.49 CRORES AND HAD OFFERED LTCG ON THE SAID TRANSACTION AS UNDER: SALE PROCEEDS RS. 5,49,00,000 LESS: EXPENSES ON SALE RS. 35,00,000 --------------------- RS. 5,14,00,000 LESS: INVESTED IN RESIDENTIAL FLAT RS. 3,09,80,00 0 --------------------- LONG TERM CAPITAL GAIN RS. 2,00,42,000 --------------------- ITA NO. 863/MUM/2012 MRS. KHORSHED NOSHIR BHARUCHA 3 4. AFTER GOING THROUGH THE DETAILS FILED BY THE ASSESS EE, AO THAT APPELLANT HAD CLAIMED EXEMPTION IN RESPECT OF INVESTMENT IN TWO R ESIDENTIAL FLATS-FLAT NOS.701& 702 IN LIDO TOWERS, SANTACRUZ, MUMBAI. DURING THE ASSESSMENT PROCEEDINGS, AO ASKED THE ASSESSEE AS WHY EXEMPTION SHOULD NOT BE R ESTRICTED TO ONE FLAT? THE ASSESSEE MADE AN APPLICATION U/S. 144A OF THE ACT A ND IN RESPONSE TO THE SAME, WARD INSPECTOR WAS DEPUTED BY THE AO TO VERIFY THE FACTU AL POSITION. AFTER CONSIDERING THE REPORT OF THE INSPECTOR, AO HELD THAT THOUGH BOTH T HE FLATS WERE ADJACENT, BOTH OF THEM HAD DIFFERENT ENTRY DOORS, THAT THE ASSESSEE HAD EN TERED INTO TWO DIFFERENT AGREEMENTS TO PURCHASE THE SAID FLATS, THAT THE JOINING OF THE FLATS WAS SUBSEQUENT ACT. HE RESTRICTED THE EXEMPTION AVAILABLE U/S. 54F OF THE ACT TO ONE FLAT ONLY. 5. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, FAA HELD THAT THE REPO RT OF THE INSPECTOR CLEARLY ESTABLISHED THAT THE FLATS WERE HAVING SEPARATE KIT CHENS IN BOTH THE HOUSES, THAT THE TWO FLATS WERE ORIGINAL BUILT AS TWO SEPARATE UNITS , THAT INSPECTORS REPORT NOWHERE STATED THAT THE TWO HOUSES WERE BEING USED AS A SIN GLE RESIDENTIAL UNIT, THAT JUST BECAUSE THE TWO FLATS HAD BEEN JOINED TOGETHER DID NOT MEAN THAT BOTH THE FLATS WERE USED AS ONE RESIDENTIAL UNIT, THAT BOTH THE FLATS W ERE HAVING SEPARATE ELECTRICAL METERS. CONFIRMING THE ORDER OF THE AO, FAA DISMISSED THE A PPEAL FILED BY THE ASSESSEE. 6. BEFORE US, AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT FLATS WERE BEING USED AS ONE RESIDENTIAL UNIT, THAT FLATS HAD THE CO MMON-PASSAGE, THE FLATS WERE REGISTERED IN THE NAME OF THE ASSESSEE. IN FLAT NO. 701, KITCHEN WAS NOT WORKING, THAT IN FLAT NO. 702, KITCHEN HAD OF ALL THE EQUIPMENTS. HE RELIED UPON THE CASE OF MS. SUSHILA M. JHAVERI DELIVERED BY THE ITAT SPECIAL BE NCH, MUMBAI [292 ITR (AT 1)]. HE FURTHER HELD THAT CASE UNDER CONSIDERATION WAS D IRECTLY COVERED BY THE SAID JUDGMENTS. DEPARTMENTAL REPRESENTATIVE(DR) RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PUT BEFORE US. WE FIND THAT ISSUE HAS BEEN DECIDED BY THE SPECIAL BENCH IN THE CASE OF SUSHILA M. JHAVERI (SUPRA). IN PARA 11 OF THE ORDER, TRIBUNAL HAS HELD AS UNDER: 11. IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THA T EXEMPTION UNDER SECTIONS 54 AND 54F OF THE ACT WOULD BE ALLOWABLE IN RESPECT OF ONE RESIDENTIAL HOUSE ONLY. IF THE ASSESSEE HAS PURCHASED MORE THAN ONE RESIDENTIAL HO USE, THEN THE CHOICE WOULD BE WITH ASSESSEE TO AVAIL THE EXEMPTION IN RESPECT OF EITHER OF THE HOUSES PROVIDED THE OTHER CONDITIONS ARE FULFILLED. HOWEVER, WHERE MORE THAN ONE UNIT ARE PURCHASED WHICH ARE ADJACENT TO EACH OTHER AND ARE CONVERTED INTO ONE HOUSE FOR THE PURPOSE OF RESIDENCE BY HAVING COMMON PASSAGE, COMMON KITCHEN, ETC., THEN, IT WOULD BE A CASE OF INVESTMENT IN ONE RESIDENTIAL HOUSE AND CONSEQUE NTLY, THE ASSESSEE WOULD BE ENTITLED TO EXEMPTION. IF THE FACTS OF THE CASE UNDER CONSIDERATION ARE CO MPARED WITH THE CASE OF SUSHILA M. JHAVERI (SUPRA), IT BECOMES CLEAR THAT SAME AS IDEN TICAL. IN BOTH THE CASES, TWO ADJACENT FLATS WERE PURCHASED AND LATER ON SAME WERE CONVERT ED INTO ONE SINGLE RESIDENTIAL UNIT. EXEMPTION U/S.54F IS AVAILABLE TO THE ASSESSEE, WHO INVEST SALE PROCEEDS OF SALE RESIDENTIAL UNIT IN ANOTHER UNIT. IN THE CASE UNDER CONSIDERATION, BOTH THE FLATS WERE ON ONE FLOOR ONLY AND NO OTHER DWELLING UNIT THERE WA S THERE ON THAT FLOOR. BUILDER HAD CONSTRUCTED TWO UNITS, BUT THE ASSESSEE CONVERTED T HEM IN ONE UNIT ONLY. BESIDES, SAME WAS USED AS SINGLE UNIT, AS EVIDENT FROM THE R EPORT OF THE INSPECTOR. ON THE SPOT ITA NO. 863/MUM/2012 MRS. KHORSHED NOSHIR BHARUCHA 4 INSPECTION REPORT SUBMITTED BY HIM CLEARLY PROVE T HAT THERE WAS COMMON PASSAGE AND ONLY ONE KITCHEN WAS FUNCTIONAL WITH ALL APPLIANCES . THERE IS NO DOUBT THAT ASSESSEE HAD PURCHASED TWO FLATS AND LATER ON CONVERTED THEM INTO ONE UNIT FOR THE PURPOSE OF RESIDENCE. THEREFORE, IN OUR OPINION SHE IS ENTITL E TO CLAIM EXEMPTION U/S. 54 OF THE ACT. SHE CANNOT BE DENIED THE BENEFIT OF THE PROVIS IONS OF THE SECTION ONLY ON THE BASIS THAT INITIALLY THERE WERE TWO UNITS. 8. CONSIDERING THE ABOVE FACTS AND RESPECTFULLY FOLLO WING THE DECISION OF SUSHILA M. JHAVERI (SUPRA), WE DECIDE GROUNDS OF APPEAL NOS . 1 TO 5 IN FAVOUR OF THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. + , - +. / )01 ( 23 45 ( . 6. ORDER PRONOUNCED IN THE OPEN COURT ON 1 5 TH FEBRUARY, 2013 )* ( 8! 9: ; <) 15 = , 2013 ( 23 > SD/- SD/- ( . / D. MANMOHAN) ( / RAJENDRA) / VICE PRESIDENT 9 ), / ACCOUNTANT MEMBER :?3 MUMBAI, <) DATE: 15-02-2013 TNMM )* )* )* )* ( (( ( $.@ $.@ $.@ $.@ A@!. A@!. A@!. A@!. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR A BENCH, ITAT, MUMBAI 6. GUARD FILE %@. $. //TRUE COPY// )*: )*: )*: )*: / BY ORDER, / DY./ASST. REGISTRAR , :?3 / ITAT, MUMBAI