Income-tax Officer, Pune V. Nitin Prem Bellara, Pune

ITA 995/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9713 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 05-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Capital asset; Question of law
• Section: 54F; 54

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 994 /PN/2011 (ASSESSMENT YEAR 2007-08) ITO WARD-2(3), PUNE .. APPELLANT VS. RITESH PREM BELLARA, FLAT NO.2, EVORA FORTALIZA, OPP: GOLD ADLABS, KALYANINAGAR, PUNE 4 11 006. .. RESPONDENT PAN NO.AAUPB 1644F ITA NO. 995 /PN/2011 (ASSESSMENT YEAR 2007-08) ITO WARD-2(3), PUNE .. APPELLANT VS. NITIN PREM BELLARA, FLAT NO.2, EVORA FORTALIZA, OPP: GOLD ADLABS, KALYANINAGAR, PUNE 4 11 006. .. RESPONDENT PAN NO.AEUPB 9948J ASSESSEE BY : SRI SUNIL GANOO DEPARTMENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 06-08-2012 DATE OF PRONOUNCEMENT : 28-08-2012 ORDER PER R.K. PANDA, AM : THE ABOVE TWO APPEALS FILED BY THE REVENUE ARE DIRE CTED AGAINST THE SEPARATE ORDERS DATED 31-05-2011OF THE CIT(A)-II, PUNE RELA TING TO ASSESSMENT YEAR 2007- 08. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY TH E REVENUE IN BOTH THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.994/PN/2011 (RITESH PREM BELLARA A.Y.2007-08 ) : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED FROM THE COMPUTATION OF INCOME 2 BY THE ASSESSEE THAT THE ASSESSEE HAS DISCLOSED CAP ITAL GAIN OF RS. 49,82,687/- ON ACCOUNT OF SALE OF A BUNGLOW SITUATED AT PLOT NO. 7 , ROAD NO.4, KALYANINAGAR, PUNE WHICH WAS HELD JOINTLY WITH HIS BROTHER. THE ASSESSEE HAS CLAIMED ENTIRE AMOUNT AS DEDUCTION U/S.54 OF THE INCOME TAX ACT. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE THE AO NOTED THAT THE ORI GINAL PROPERTY, I.E. BUNGLOW AT UMA NIVAS AT THE ABOVE-MENTIONED ADDRESS WAS SHAR ED BY THE ASSESSEE AND HIS BROTHER HAVING 50% SHARE EACH. IN THE NEW PROPERTI ES PURCHASED ASSESSEE AND HIS BROTHER HAVE PURCHASED 3 FLATS, I.E. FLAT NO. 401, 402 AND 403 AT A TOTAL CONSIDERATION OF RS. 1,07,12,860/- AND BOTH THE BRO THERS HAVE CLAIMED DEDUCTION U/S.54 OF THE INCOME TAX ACT. THE AO ANALYSED THE PROVISIONS OF SECTION 54 AND WAS OF THE OPINION THAT DEDUCTION OUT OF THE LONG T ERM CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSET IS ALLOWED IF THE NET CONSIDE RATION IS INVESTED IN A RESIDENTIAL HOUSE. SINCE ASSESSEE HAD PURCHASED 3 RESIDENTIAL HOUSES ALONG WITH HIS BROTHER, I.E. 3 DIFFERENT FLATS BEARING NO. 401, 402 AND 403 IN THE BUILDING EVORA FORTALIZA AND THERE ARE 3 DIFFERENT AGREEMENTS BETWEEN THE AS SESSEE, HIS BROTHER AND THE BUILDER, THEREFORE, THE AO WAS OF THE OPINION THAT THE DEDUCTION IS APPLICABLE IN RESPECT OF ONLY ONE HOUSE. HE REJECTED THE EXPLANA TION OF THE ASSESSEE THAT ALL THE 3 UNITS ARE ADJACENT TO EACH OTHER AND ARE CONVERTED INTO ONE HOUSE FOR THE PURPOSE OF RESIDENCE HAVING COMMON KITCHEN AND PASSAGE. DI STINGUISHING THE VARIOUS DECISIONS CITED BEFORE HIM THE AO RESTRICTED THE DE DUCTION U/S.54 TO ONE RESIDENTIAL FLAT AND THE UNUTILISED CAPITAL GAIN OF RS. 14,06,9 07/- (I.E. RS. 49,82,687/- - 35,75,780/- BEING THE COST OF ONE FLAT) WAS DISALLO WED AND ADDED BACK TO THE TOTAL INCOME. 3. IN APPEAL, THE LEARNED CIT(A) FOLLOWING THE DECI SION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. K.G. RUKMINIAMMA REPORTED IN 331 ITR 211 HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION OF THE ENTIRE AMOUNT INVESTED IN PURCHASE OF THE THREE FLATS U/S.54 OF THE INCOME TA X ACT. 3 3.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)( IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING THE ASSESSEES APPEAL INSTEAD OF CONFIRMING THE ASSESSM ENT MADE BY THE ASSESSING OFFICER. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT EACH OF THE FLAT INVESTED IN BY THE ASSESSEE WAS ACQUIRED THROUGH SEPARATE PURCHASE DEED, HAVING AN INDEPENDENT ENTRANCE, ELEC TRICITY METER, WATER CONNECTION AND ALSO SEPARATELY ASSESSED TO PROPERTY TAX BY THE LOC AL AUTHORITY, AND, THEREFORE WAS IN THE NATURE OF DIFFERENT RESIDENTIAL HOUSE. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT AS PER THE PROVISIONS OF SEC.54F, T HE DEDUCTION IS AVAILABLE ONLY TO AN INVESTMENT IN A RESIDENTIAL HOUSE AND NOT TO RES IDENTIAL HOUSE AS HAS BEEN HELD IN THE CASE OF VIDYA PRAKASH TALWAR, 132 ITR 661(DEL) AND SUSHILABAI JHAVERI, SPECIAL BENCH, ITAT, MUMBAI. 5. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT(APPEALS) MAY BE VACATED AN D THAT OF THE ASSESSING OFFICER BE RESTORED. 4. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE AND HIS BR OTHER WERE THE OWNER OF A BUNGLOW NAMED UMA NIVAS SITUATED AT PLOT NO. 7, R OAD NO. 4, KALYANINAGAR, PUNE HAVING 50% SHARE EACH. THERE IS ALSO NO DISPU TE TO THE FACT THAT THE ABOVE- MENTIONED BUNGLOW WAS SOLD ON 13-10-2006 ON WHICH A N AMOUNT OF RS. 49,82,687/- HAS ACCRUED TO THE ASSESSEE AS CAPITAL GAIN. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE ASSESSEE ALONG WITH HIS BROTHER H AD PURCHASED 3 FLATS BEARING NOS. 401, 402 AND 403 SITUATED AT 4 TH FLOOR OF BUILDING EVORA FORTALILZA BY ENTERING INT O THREE DIFFERENT AGREEMENTS ALONG WITH HIS BROTHER W ITH THE BUILDER FOR A TOTAL CONSIDERATION OF RS. 1,07,12,860/-. IT IS THE SUBM ISSION OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW THAT THE ABOVE 3 FLATS, WHICH ARE ADJACENT TO EACH OTHER HAVING COMMON KITCHEN AND PASSAGE ARE CONVERTED INTO ONE H OUSE FOR THE PURPOSE OF RESIDENCE OF THE ENTIRE FAMILY. THEREFORE, THE ASS ESSEE IS ENTITLED TO DEDUCTION 4 U/S.54 OF THE INCOME TAX ACT OF THE ENTIRE CAPITAL GAIN. IT IS THE CASE OF THE REVENUE THAT THE BUILDING IN WHICH THE ASSESSEE HAS PURCHASED 3 FLATS IS A MULTI- STOREYED HOUSING UNIT HAVING KITCHEN, LIVING ROOM A ND TOILETS, 3 BED ROOMS AND DINING HALL ETC. ALL THESE UNITS HAVE BEEN INDEPEN DENTLY PURCHASED BY SEPARATE AGREEMENTS BY THE ASSESSEE AND HIS BROTHER. THEREF ORE, THE ASSESSEE IS ENTITLED TO DEDUCTION OF CAPITAL GAIN ON ACCOUNT OF PURCHASE OF ONLY ONE FLAT. 4.1 WE FIND THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SMT. K.G. RUKMINIAMMA (SUPRA) HAS HELD THAT THE EXPRESSION A RESIDENTIAL HOUSE USED IN SECTION 54 SHOULD BE UNDERSTOOD IN A SENSE THAT THE BUILDING SHOULD BE OF RESIDENTIAL NATURE AND A SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NUMBER. IT WAS ACCORDINGLY HELD THAT THE ASSESSEE WAS ENTIT LED TO CLAIM EXEMPTION U/S.54 IN RESPECT OF 4 RESIDENTIAL FLATS ACQUIRED BY HER. 4.2 THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF PREM PRAKASH BHUTANI VS. ACIT REPORTED IN 110 TTJ DELHI 440 HAS HELD THAT AS SESSEE HAVING ACQUIRED 3 FLATS OUT OF CAPITAL GAINS AND USING THEM FOR RESIDENCE O F HIS FAMILY WHICH INCLUDED HIS SON AND WIDOWED DAUGHTER WAS ENTITLED TO CLAIM EXEM PTION U/S.54 IN RESPECT OF THE 3 FLATS. 4.3 WE FIND THE HONBLE MUMBAI HIGH COURT IN THE CA SE OF CIT VS. JOE B. FERNANDES VIDE ITA NO. 1467/2007 ORDER DATED 10-12- 2008 WHILE DISMISSING THE APPEAL OF THE REVENUE HAS HELD AS UNDER : HEARD THE LEARNED COUNSEL FOR THE APPELLANT. NO NE APPEARS FOR THE RESPONDENT. IN THE ABOVE APPEAL, APPELLANT IS SEEKING TO RAISE FOLLOWI NG QUESTION OF LAW : WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE ASSESSING O FFICER TO ALLOW EXEMPTION UNDER SECTION 54F IN RESPECT OF TWO RESIDENTIAL HOUSES AF TER VERIFICATION WHETHER THESE TWO FLATS I.E. FLAT NO. 301 & 302 ARE ADJACENT TO E ACH OTHER AND INTERCONNECTED AND USED AS ONE RESIDENTIAL HOUSE AND THE INVESTMEN T HAS BEEN MADE BY THE ASSESSEE FROM HIS OWN ACCOUNT? 2. PERUSED THE JUDGMENT AND ORDER OF THE TRIBUNAL D ATED 5 TH JULY, 2007. THE TRIBUNAL HAS GIVEN ITS FINDING IN PARAGRAPH 7 OF TH E IMPUGNED ORDER AS UNDER : 5 IT HAS BEEN SHOWN TO US THAT INVESTMENT WAS MADE B Y THE ASSESSEE HIMSELF FROM HIS BANK ACCOUNT IN RESPECT OF BOTH THE FLATS I.E. FLAT NO. 301 AND 302 AT COZY DWELL APARTMENTS, BANDRA, MUMBAI. HOWEVER, THIS NE EDS VERIFICATION BY THE ASSESSING OFFICER. FURTHER, THE FACT WHETHER THESE TWO APARTMENTS ARE BEING USED AS ONE RESIDENTIAL HOUSE OR NOT IS ALSO TO BE VERIF IED. ACCORDINGLY THE ORDER OF THE CIT(A) IS SET ASIDE AND THE MATTER IS RESTORED TO T HE FILE OF THE ASSESSING OFFICER TO (1) VERIFY THE FACT WHETHER INVESTMENT IN FLATS NO. 301 AND 302 WAS MADE BY THE ASSESSEE FROM HIS OWN FUNDS AND (2) WHETHER SUCH FL ATS ARE ADJACENT TO EACH OTHER HAVING COMMON PASSAGE AND ARE BEING USED AS ONE RES IDENTIAL HOUSE. AFTER ASCERTAINING THESE FACTS THE ASSESSING OFFICER SHAL L ALLOW THE EXEMPTION IN RESPECT OF BOTH THE FLATS IF IT IS FOUND THAT BOTH THE FLAT S ARE BEING USED AS ONE RESIDENTIAL HOUSE AND THE INVESTMENT WAS MADE BY THE ASSESSEE H IMSELF. 3. IN VIEW OF THE ABOVE, AND IN VIEW OF THE REMAND, WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW IN THE ABOVE. HENCE, THE APPEAL ST ANDS DISMISSED. 4.4 WE FIND WHEN THE REVENUE CHALLENGED THE ABOVE O RDER OF THE HONBLE HIGH COURT, THE HONBLE SUPREME COURT VIDE SPECIAL LEAVE TO APPEAL (CIVIL) C.C. NO.12607/2009 ORDER DATED 07-09-2009 DISMISSED THE APPEAL FILED BY THE REVENUE. SINCE IN THE INSTANT CASE THE ASSESSEE HAD INVESTED THE CAPITAL GAIN IN PURCHASE OF 3 FLATS WHICH ARE ADJACENT TO EACH OTHER AND CONVERTE D THE SAME INTO ONE HOUSE FOR THE PURPOSE OF RESIDENCE OF THE ENTIRE FAMILY, A FA CT NOT DISPUTED BY THE REVENUE, THEREFORE, IN VIEW OF THE DECISIONS CITED ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.54 O F THE INCOME TAX ACT OF THE ENTIRE CAPITAL GAIN. IN THIS VIEW OF THE MATTER WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ALLOWING THE CLAIM OF DEDUCTION U/S.54 O F THE ENTIRE CAPITAL GAIN. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMI SSED. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO. 995/PN/2011 (NITIN PREM BELLARA A.Y.2007-08 ) : 5. AFTER HEARING BOTH THE SIDES, WE FIND THE GROUND S RAISED BY THE REVENUE ARE IDENTICAL TO THE GROUNDS RAISED BY THE REVENUE IN I TA NO. 994/PN/2011. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE REVENUE HAVE BEEN DISMISSED. FOLLOWING THE SAME RATIO, THE GROUNDS R AISED BY THE REVENUE ARE DISMISSED. 6 6. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF AUGUST 2012 SD/- SD/- (R.S. PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: THE 28 TH AUGUST 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CCIT, PUNE 4. CIT(A)-II, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE