Smt. Kalpana H.B., Mysore V. DCIT, Mysore

ITA 885/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0715 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 28-08-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: ASHWATH NARAYANA
• Keywords: Capital Gains
• Section: 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI K.P.T. THANGAL, VICE PRESIDENT AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.885/BANG/2009 ASSESSMENT YEAR : 2006-07 SMT. KALPANA H.B., 92, C LAYOUT, HANUMANTHANAGAR, NEW BANNIMANTAP EXTENSION, MYSORE 570 018. : APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE 1(2), MYSORE. : RESPONDENT APPELLANT BY : SHRI ASHWATH NARAYANA RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE AN INDIVIDUAL IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), MYSORE, FOR THE ASSESS MENT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED THREE GROUNDS, OUT OF W HICH, GROUND NO.3 BEING GENERAL IN NATURE, IT DOESNT SURVIVE FO R ADJUDICATION. THE REMAINING GROUNDS ARE REFORMULATED IN THE FOLLOWING MANNER: ITA NO. 885/BANG/09 PAGE 2 OF 8 (I) THE CIT(A) HAS ERRED IN UPHOLDING THE STAND OF THE AO IN CLUBBING THE INCOME IN TERMS OF S.64(1A) OF THE ACT. THE EX CLUSION PROVIDED IN THE SECTION THAT PROPERTIES WHICH WERE IN THE NATURE OF SELF ACQUIRED PROPERTIES INHERITED BECOMES THE PERS ONAL PROPERTY OF FEMALE INDIVIDUAL IN TERMS OF S.15 (SIC) 14 OF H INDU SUCCESSION ACT AND, THUS, THE QUESTION OF CLUBBING THE SAME DO ESNT ARISE AS EXCLUSION COVERED U/S 64A OF THE ACT; & (II) THE CIT(A) HAS ERRED IN HOLDING THAT THE EXEMPTION U/S 54F OF THE ACT IS AVAILABLE ONLY WITH RESPECT TO A NEW HOUSE. 3. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSES SEE HAD DECLARED AN INCOME OF RS.12.78 LAKHS (OUT OF RS.53.77 LAKHS) ON ACCOUNT OF LTCG ARISING ON SALE OF A SITE AT BANGALORE. THIS WAS D IVIDED EQUALLY AMONG THE ASSESSEE AND HER TWO DAUGHTERS. THE ASSESSEE HAD A LSO FILED ANOTHER ROI IN THE CAPACITY OF MOTHER-GUARDIAN IN THE NAME OF O NE OF HER MINOR DAUGHTERS H.S.AKSHATHA ON SHOWING THE SHARE OF CG OF H.S.AKSHTHA. ON EXAMINING THE ISSUE WITH REGARD TO THE APPLICABI LITY OF S. 64(1A) OF THE ACT, THE AO HAD INFORMED THE ASSESSEE THAT, AS PER THE PROVISIONS OF THE ACT, THE ASSESSEE SHOULD HAVE FILED A SINGLE RETURN , CLUBBING THE INCOME OF HER MINOR CHILD U/S 64(1A) WITH HER OWN INCOME AND CLAIMED MINIMUM EXEMPTION OF RS.1.35 LAKHS AS PER THE PROVISO TO S .112(1)(A) OF THE ACT, IN STEAD OF FURNISHING TWO RETURNS AND, THUS, CLAIMING THE BENEFIT TWICE. 3.1. REFUTING THE AOS ARGUMENT, THE ASSESSEE SOUG HT REFUGE UNDER SECTION 14(1) OF THE HINDU SUCCESSION ACT 1956 WHIC H PROVIDES THAT ANY FEMALE INHERITING ANY PROPERTY, BECOMES THE ABSOLUT E OWNER OF THE PROPERTY AND SHE HOLDS THAT PROPERTY IN HER INDIVIDUAL CAPAC ITY AS IF IT IS HER SELF- ACQUIRED PROPERTY. IN VIEW OF THIS PROVISION, THE ASSESSEE HAS, ACCORDINGLY, INHERITED HER SHARE OF THE PROPERTY AND HOLDS IT AS HER INDIVIDUAL PROPERTY. ITA NO. 885/BANG/09 PAGE 3 OF 8 3.2. BRUSHING ASIDE THE ASSESSEES CONTENTION AND QUOTING THE SPECIAL AND SPECIFIC PROVISIONS OF S. 64(1A), THE AO DROVE HOME HIS POINT THAT IT IS WELL SETTLED IN LAW THAT A SPECIAL PROVISION OVERRI DES THE GENERAL PROVISIONS. IN VIEW OF THIS S. 64(1A) OF THE ACT OVERRIDES OTHE R PROVISIONS OF LAW. ACCORDINGLY, THE CG OF RS.17.92 LAKHS ARISING TO TH E ASSESSEES MINOR DAUGHTER FROM THE SALE OF SITE WAS TO BE CLUBBED IN THE HANDS OF THE ASSESSEE U/S 64(1A) OF THE ACT. 4. WITH REGARD TO THE CLAIM OF RS.3.78 LAKHS U/S 54F OF THE ACT, AFTER DULY CONSIDERING THE ASSESSEES SPIRITED CONTENTION AND ALSO EXTENSIVELY ANALYZING THE BILLS OF THE CONTRACTOR WHO HAD EXECU TED THE WORK, THE AO REJECTED THE ASSESSEES CLAIM OF EXEMPTION U/S 54F ON THE GROUND THAT THE CONTRACTOR HAD MADE RENOVATION AND ALTERATION ONLY AND EVIDENTLY NO NEW HOUSE WAS CONSTRUCTED. 5. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUES WITH THE LD.CIT(A) FOR REDRESSAL. AFTER EXAMINING THE ARGUMENTS PUT FORT H BY THE ASSESSEE WITH REFERENCE TO THE RELEVANT PROVISIONS OF THE ACT, TH E LD.CIT (A) HAD VIRTUALLY UPHELD THE STAND OF THE AO ON BOTH THE ISSUES THUS (I) (ON PAGE 2) THE ISSUE ARISES IS IN RESPECT OF CAPI TAL GAINS ARISING TO APPELLANTS MINOR DAUGHTER CLUBBED IN THE HANDS OF THE APPELLANT U/S 64(IA). I HAVE CONSIDERED THE ABOVE PLEA. THE CLUBBING HAS BEEN DONE AS PER THE PROVISIONS OF IT ACT. THE ONLY EXCEPTION IS IN RESPECT OF INCOME ACCRUING TO MINOR CHILD ON ACCOUNT OF MANUAL WORK AND SKILLFUL ACTIVITY AND TH E INCOME IN QUESTION IS NOT COVERED BY THE ABOVE EXCEPTION. TH E AO WAS, THEREFORE, CORRECT IN CLUBBING THE CAPITAL GAINS IN COME. (II) (ON PAGE 4) IT IS CLEAR FROM THE FACTS GIVEN THAT NO NEW HOUSE HAS COME INTO EXISTENCE. THE EXEMPTION U/S 54F IS TO B E GIVEN FOR A NEW ASSET. THIS IS NOT EVEN A CASE WHERE A NEW FLO OR HAS BEEN ITA NO. 885/BANG/09 PAGE 4 OF 8 CONSTRUCTED TO THE EXISTING HOUSE. THE ARGUMENTS T AKEN BY THE APPELLANT ARE NOT PERTINENT TO THIS VITAL FACT. I HAVE ALSO CONSIDERED THE HIGH COURT DECISIONS CIT ED BY THE APPELLANT. IT IS SEEN THAT IN THE FIRST DECISION C ITED, A NEW FLOOR WAS CONSTRUCTED. IN THE SECOND DECISION CITED ALSO , EXEMPTION WAS GIVEN IN RESPECT OF CONSTRUCTION OF A SEPARATE FLOO R TAKING INTO ACCOUNT THE FACT THAT THE MULTI-STORIED FLATS ARE B ECOMING THE ORDER OF THE DAY. THE THIRD DECISION WAS REALLY ON THE ISSUE WHETHER THE NEW ASSET WAS SUBSTANTIALLY USED FOR RE SIDENTIAL PURPOSE OF THE APPELLANT OR NOT. THE FACTS OF THE ABOVE DECISIONS BEING DIFFERENT, THE SAME CANNOT BE APPLIED TO THIS CASE. 6. DISILLUSIONED WITH THE FINDINGS HANDED OUT BY T HE LD. CIT(A), THE ASSESSEE HAS COME UP WITH THE PRESENT APPEAL. THE LD. A.R REITERATED MORE OR LESS WHAT HAS BEEN PUT FORTH BEFORE THE FIR ST APPELLATE AUTHORITY. DURING THE COURSE OF HEARING, THE LD.A R HAD FURNIS HED AN EXTRACT OF S.14 OF HINDU SUCCESSION ACT AND ALSO RELIED ON THE FOLLOWI NG JUDICIAL PRECEDENTS: (I) CIT V. P.V.NARASIMHAN 181 ITR 101 (MAD); (II) ADDL.CIT V. VIDYAPRAKASH TALWAR 132 ITR 661 (GUJ) ; & (III) CIT V. KODANDAS CHUNCHMAL 155 ITR 273 (GUJ) 6.1. ON HER PART, THE LD. D.R. WAS RATHER EMPHATIC IN HER RESOLVE THAT THE LOWER AUTHORITIES HAVE COMPREHENSIVELY EXAMINED THE ISSUES IN DEPTH AND CONCLUDED THAT THE ASSESSEE WAS NOT ENTITLED TO BO TH THE CLAIMS. IT WAS, THEREFORE, PLEADED THAT THE STAND TAKEN BY THE LOWE R AUTHORITIES BE SUSTAINED. BEFORE PARTING WITH, SHE HAD PLACED STR ONG RELIANCE ON THE FOLLOWING CASE LAWS: (I) K.V.KUPPA RAJU & ORS. V. GOVT. OF INDIA & ORS. (200 0) 242 ITR 522 (KAR); (II) MRS.MEERA JACOB V. ITO (2009) 313 ITR 411 (KER) ITA NO. 885/BANG/09 PAGE 5 OF 8 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS, DULY PERUSED THE RELEVANT RECORDS AND ALSO THE VARIOUS JUDICIAL PRONOUNCEMENTS ON WHICH BOTH THE PARTIES HAVE PLACED THEIR CONFIDENCE. 7.1. BEFORE PENETRATING INTO THE FIRST ISSUE RAISE D BY THE ASSESSEE, LET US HAVE A GLIMPSE OF S. 64(1A) OF THE ACT: S.64 (1A) IN COMPUTING THE TOTAL INCOME OF THE IND IVIDUAL, THERE SHALL BE INCLUDED ALL SUCH INCOME AS ARISES OR ACCRUES TO H IS MINOR CHILD, NOT BEING A MINOR CHILD SUFFERING FROM ANY DISABILITY OF THE NA TURE SPECIFIED IN SECTION 80U: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL A PPLY IN RESPECT OF SUCH INCOME AS ARISES OR ACCRUES TO THE MINOR CHILD ON ACCOUNT OF ANY- (A) MANUAL WORK DONE BY HIM; OR (B) ACTIVITY INVOLVING APPLICATION OF HIS SKILL, TALENT OR SPECIALIZED KNOWLEDGE AND EXPERIENCE. IN THAT PREVIOUS YEAR 7.1.2. AS POINTED OUT BY THE LD. CIT(A ) IN A JUDI CIOUS WAY, THE CLUBBING OF INCOME HAS BEEN DONE AS PER THE PROVISI ONS OF THE ACT. HOWEVER, THE ONLY EXCEPTION WAS IN RESPECT OF THE I NCOME ACCRUING TO MINOR CHILD ON ACCOUNT OF MANUAL WORK AND SKILLFUL ACTIVITY AND THE INCOME IN QUESTION WAS NOT COVERED BY THE SAID EXCEPTION. 7.1.3. THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF K.V.KUPPA RAJU & ORS. V.GOI & ORS REFERRED SUPRA WA S EMPHATIC IN ITS RESOLVE THAT, IT IS A PROVISION FOR COMPUTATION OF INCOME OF AN INDIVIDUAL WHOSE MINOR CHILD IS HAVING INCOME AND THAT BY ITSE LF CONSTITUTES A DIFFERENT CLASS. INSTEAD OF PROVIDING A SEPARATE SLAB, IT IS PROVIDED THAT INCOME OF MINOR WOULD BE INCLUDED IN THE INCOME OF SUCH INDIV IDUAL. THERE IS NO LACK OF COMPETENCE IN THE LEGISLATURE FOR PROVIDING SUCH LEGISLATION. IT CANNOT BE CONSIDERED AS UNCONSTITUTIONAL SIMPLY BECAUSE IT LE ADS TO HIGHER TAX BURDEN. ITA NO. 885/BANG/09 PAGE 6 OF 8 THERE IS NO HOSTILE DISCRIMINATION BETWEEN THOSE M INORS WHOSE INCOME IS NOT INCLUDED WITH THE INCOME OF THEIR PARENT AS THE Y ARE NOT ASSESSABLE AT ALL OR MAY BE ASSESSABLE AT A LOWER RATE OF TAX AS THE INDIVIDUAL WHOSE MINOR CHILDREN IS HAVING INCOME HAVE BEEN CONSIDERED A DI FFERENT CLASS BY THEMSELVES. THE PROVISIONS OF S. 64(1A) WERE ENACT ED TO PLUG THE LOOPHOLE FOR LIKELY TAX AVOIDANCE. THE PROVISIONS CANNOT BE CONSIDERED TO BE VIOLATIVE OF ART.14 OF THE CONSTITUTION. 7.1.4. IN VIEW OF THE ABOVE LEGAL POSITION, WE ARE OF THE UNANIMOUS VIEW THAT THE LOWER AUTHORITIES WERE JUSTIFIED IN C OMING TO SUCH A CONCLUSION WHICH DOESNT REQUIRE ANY INTERFERENCE AT THIS STAG E. IT IS ORDERED ACCORDINGLY . 8. LET US NOW ANALYZE THE OTHER ISSUE RAISED. THE ASSESSEES CLAIM FOR EXEMPTION U/S 54F OF THE ACT WAS DENIED B Y THE LOWER AUTHORITIES ON THE GROUND THAT (I) NO NEW HOUSE HAS COME INTO EXISTENCE; & (II) THIS IS NOT EVEN A CASE WHERE A NEW FLOOR HAS BEEN CONSTRUCTED TO THE EXIS TING HOUSE. 8.1. WE HAVE, WITH DUE RESPECTS, PERUSED THE FOLLO WING CASE LAWS ON WHICH THE ASSESSEE HAS PLACED SUSTAINED CONFIDEN CE: (I) THE ISSUE BEFORE THE HONBLE MADRAS HIGH COURT [181 ITR 101 ] WAS THAT THE ASSESSEE OWNED TWO RESIDENTIAL HOUSES AND SOLD THE SELF-OCCUPIED PROPERTY AND CONSTRUCTED A FIRST FLOOR ON HIS OTHER PROPERTY AND THUS ASSESSEE WAS ENTITLED TO EXEMPTIO N IN RESPECT OF THE CG ARISING FROM THE SALE OF PROPERTY; ITA NO. 885/BANG/09 PAGE 7 OF 8 (II) IN THE CASE OF ADDL. CIT V. . VIDYA PRAKASH TALWAR [132 ITR 661], THE HONBLE GUJARAT HIGH COURT WAS PLEASED TO CONCEDE TO THE ASSESSEES PLEA AS THE ASSESSEE CONSTRUCTED A HOUSE PROPERTY AND WAS USED FOR HIS OWN USE; & (III) YET AN ANOTHER CASE, THE HONBLE H.C IN THE CASE REFERRED SUPRA (III) [155 ITR 273] WAS MAGNANIMOUS IN ITS WISDOM T O FAVOUR THE ASSESSEE, AS THE ASSESSEE A HUF HAD SOLD A RESI DENTIAL PROPERTY AND WITHIN TWO YEARS OF ITS SALE, HAD CONS TRUCTED A HOUSE AND CLAIMED A PART OF CG IN RESPECT OF THE SALE OF THE PREVIOUS PROPERTY WAS USED FOR CONSTRUCTION OF A NEW RESIDENTIAL PROPERTY. 8.1.1. ON A CLOSE PERUSAL OF THE ABOVE JUDICIAL PR ONOUNCEMENTS WOULD INDICATE THAT THE PRESENT ISSUE ON HAND IS ON A DIFFERENT FOOTING AND THESE DECISIONS WOULD NOT IN ANY WAY COME TO THE AS SESSEES RESCUE. 8.1.2. ON THE OTHER HAND, THE HONBLE HIGH COURT O F KERALA IN THE CASE OF MRS. MEERA JACOB V. ITO [2009] 313 ITR 411 HAS RULED THAT SEC.54F DOES NOT PROVIDE FOR EXEMPTION ON INVESTME NT IN RENOVATION OR MODIFICATION OF AN EXISTING HOUSE. CONSTRUCTION OF A HOUSE ONLY QUALIFIES FOR EXEMPTION ON THE INVESTMENT. EVEN ADDITION OF A FL OOR OF A SELF-CONTAINED TYPE TO THE EXISTING HOUSE QUALIFIES FOR EXEMPTION. SINCE THE ASSESSEE HAS ONLY MADE ADDITION TO THE PLINTH AREA, WHICH IS IN THE FORM OF MODIFICATION OF THE EXISTING HOUSE, SHE IS NOT ENTITLED TO DEDUCTIO N UNDER S.54F. 8.1.3. ON A CURSORY PERUSAL OF THE IMPUGNED ORDER OF THE AO REVEALS THAT THE CONTRACTOR WHO EXECUTED THE WORK HAD GIVEN CASH RECEIPTS WHEREIN HE HAD EMPHASIZED THAT ( I) RECEIVED RS.1,47,688/- TOWARDS RENOVATION AND ALTERATION WORK IN HOUSE NO.2; (II) IN BILL NO.2. N AME OF WORK: RENOVATION, ITA NO. 885/BANG/09 PAGE 8 OF 8 ALTERATION AND CONSTRUCTION WORK OF EXISTING FIRST FLOOR HOUSE NO.2 AND HAD ACKNOWLEDGED IN THE CASH RECEIPT: RECEIVED THE SUM OF RS.231144/- TOWARDS RENOVATION AND ALTERATION WORK IN HOUSE NO. 2: THIS CLEARLY VINDICATES THE AOS STAND THAT THE ASSESSEE HAD ONL Y UNDER-TAKEN RENOVATION AND ALTERATION OF THE EXISTING HOUSE AND THAT NO NEW HOUSE HAS BEEN CONSTRUCTED. 8.1.4 IN AN OVERALL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE ISSUE AND ALSO RESPECTFULLY FOLLOWING THE RULIN G OF THE HONBLE KERALA HIGH COURT REFERRED SUPRA, WHICH IS DIRECTLY ON THE POINT, WE ARE OF THE UNANIMOUS VIEW THAT THE LOWER AUTHORITIES ARE JUSTIFIED IN DENYING THE EXEMPTION U/S 54F AS CLAIMED BY THE ASSESSEE. 9. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF NOVEMBER, 2009. (K.P.T. THANGAL ) (A. MOHAN ALANKAMONY ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 30 TH NOVEMBER, 2009. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.