ACIT, Bangalore v. Shri Naresh Kumar J Shah, Bangalore

ITA 1009/BANG/2009 | 2004-2005
Pronouncement Date: 13-05-2010 | Result: Allowed

Appeal Details

RSA Number 100921114 RSA 2009
Bench Bangalore
Appeal Number ITA 1009/BANG/2009
Duration Of Justice 6 month(s) 9 day(s)
Appellant ACIT, Bangalore
Respondent Shri Naresh Kumar J Shah, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 13-05-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted B
Tribunal Order Date 13-05-2010
Date Of Final Hearing 11-05-2010
Next Hearing Date 11-05-2010
Assessment Year 2004-2005
Appeal Filed On 03-11-2009
Judgment Text
PAGE 1 OF 6 ITA NO.1009/BANG/2009 1 IN THE INOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SMT. P MADHAVI DEVI J.M. AND SHRI A MOHAN ALANKAMONY A.M. ITA NO.1009/BANG/2009 (ASST. YEAR 2004-05) THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-2(1) BANGALORE. - APPELLANT VS SHRI NARESH KUMAR J SHAH PROP: M/S NARESH KUMAR & CO. NO.106 VENKATESHWARA MARKET 120 AVENUE ROAD BANGALORE-2. - RESPONDENT APPELLANT BY : SMT. SWATHI S PATIL CIT-II RESPONDENT BY : SHRI H N KHINCHA C.A. O R D E R PER P MADHAVI DEVI : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) BANGALORE DATED 26.8.2009. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- I) THE LEARNED CIT(A) WAS NOT JUSTIFIED IN ALLOWING TH E DEDUCTION CLAIMED BY THE ASSESSEE U/S 54F OF THE I T ACT 1961 IN THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE. II) THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR THE CONSTRUCTION OF MORE THAN ONE RESIDENTIAL HOUSE IN CONTRAVENTION OF THE SPECIFIC PROVISIONS OF SECTION 54F OF THE I T ACT 1961. PAGE 2 OF 6 ITA NO.1009/BANG/2009 2 III) THE LEARNED CIT(A) ERRED IN ACCEPTING THE CLAIM OF THE ASSESSEE THAT THE TWO FLATS ON THE 1 ST FLOOR AND TWO FLATS LOCATED ON THE 8 TH FLOOR CONSTITUTED ONE RESIDENTIAL HOUSE WITHOUT APPRECIATING THE FACTS AND CIRCUMSTA NCES OF THE ASSESSEES CASE AND THE PROVISIONS OF SECTIO N 54F OF THE I T ACT 1961. IV) THE LEARNED CIT(A) ERRED IN ALLOWING THE CLAIM OF T HE ASSESSEE U/S 54F OF THE I T ACT 1961 WITHOUT APPRECIATING THAT THE CONSTRUCTION HAD NOT BEEN COMPLETED WITHIN THE STIPULATED PERIOD OF THREE YEA RS AS REQUIRED UNDER SUB-SECTION (1) OF SECTION 54F OF TH E I T ACT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL. HE FILED HIS RETURN OF INCOME ON 29.3.2005 DECLARING I NCOME OF RS.26 22 887. DURING ASSESSMENT PROCEEDINGS U/S 143(3) OF THE I T ACT THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED EXEMPTION U/S 54F FOR RS.9 86 64 667/- AGAINST THE PROFIT ON SALE OF SHARES. THE DETAILS WERE CALLED FOR. THE ASSESSEE FILED THE DETAILS OF CAPITAL GAINS ON SALE OF SHARES. WHILE CONSIDERING THE CLAIM OF THE ASSESSEE U/S 54F OF TH E I T ACT THE A.O. NOTICED THAT IN ORDER TO BE ELIGIBLE FOR EXEMPTION U/S 54F THE CONSTRUCTION OF NEW ASSET OUGHT TO HAVE BEEN COMPLETED ON OR BEF ORE 16.6.2006 I.E. WITHIN THREE YEARS OF TRANSFER OF ORIGINAL ASSET I. E. 17.6.2003. HE FURTHER OBSERVED THAT AS PER SECTION 54F(1) OF THE I T ACT THE ASSESSEE SHOULD HAVE CONSTRUCTED NEW ASSET BEING A RESIDENTIAL HOUSE WIT HIN THREE YEARS AFTER THE SAID TRANSACTION WHEREAS IN THE ASSESSEES CASE TH E ASSESSEE HAS MADE AGREEMENT FOR CONSTRUCTION OF NEW ASSET FOR MORE TH AN ONE RESIDENTIAL HOUSE AS IS EVIDENT FROM THE AGREEMENT DATED 28.5. 2004 AND THAT THE ASSESSEE HAD PRE-ENGAGED FOR CONSTRUCTION OF PROPER TY AND NOT AFTER SALES OF PAGE 3 OF 6 ITA NO.1009/BANG/2009 3 ORIGINAL ASSET. HE THEREFORE DISALLOWED THE EXEMPT ION U/S 54F OF THE I T ACT. 4. AGGRIEVED ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) STATING THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT ONL Y ON 28.10.2004 I.E. AFTER THE SALE OF SHARES ON 17.6.2003 AND ALSO CONS TRUCTED THE FLATS ON THE FIRST FLOOR AND AS ADJUNCT TO IT IT HAD ALSO CONST RUCTED/ACQUIRED RIGHTS IN THE 8 TH FLOOR APARTMENTS AND THESE ARE CONNECTED BY TWO CO MMON LIFTS AND ONE EXCLUSIVE CAPSULE LIFT AND THEREFORE FOR ALL INTEN DED PURPOSES THE ASSESSEE HAS ACQUIRED ONLY ONE FLAT AND HENCE THE CONCLUSIO N OF THE AO THAT THERE IS ACQUISITION OF MORE THAN ONE FLAT IS NOT CORRECT. 5. THE CIT(A) CALLED FOR A REMAND REPORT FROM THE A.O. AND THE A.O. SUBMITTED THE REMAND REPORT DATED 26.3.2008 A CCORDING TO WHICH THE ASSESSEE HAD ENTERED INTO AGREEMENT FOR CONSTRUCTIO N ON 28.10.2004 BASING ONLY ON THE PRIOR AGREEMENTS MADE WITH M/S SAHARA INDIA COMMERCIAL CORPORATION LTD. ON 22.2.2000 AND THEREFORE THE AS SESSEES AGREEMENT FOR CONSTRUCTION EMANATES FROM A DATE PRIOR TO DATE OF TRANSFER OF ORIGINAL ASSET. HE FURTHER OBSERVED THAT THE ASSESSEE HAS NOT PRODU CED ANY PROOF REGARDING THE COMPLETION OF CONSTRUCTION OF THE RESIDENTIAL H OUSE EXCEPT FOR SAYING ORALLY THAT IT IS COMPLETED. HE ALSO OBSERVED THAT THE ASSESSEE HAS ENTERED INTO AGREEMENT FOR CONSTRUCTION OF FLATS IN FIRST F LOOR AND ALSO IN 8 TH FLOOR BY THE AGREEMENT DATED 28.5.2004 AND THUS THE ASSESS EE HAD ENTERED INTO AGREEMENT FOR PURCHASE OF FOUR UNITS OF FLATS I.E. 4 RESIDENTIAL UNITS AND IF AT ALL THE FLOORWISE ACQUISITION IS CONSIDERED IT IS NEVER-THE-LESS 2 RESIDENTIAL UNITS AND THEREFORE THE ASSESSEE HAS NOT SATISFIED THE CONDITION (D) OF PAGE 4 OF 6 ITA NO.1009/BANG/2009 4 SECTION 54F. HE THEREFORE CONCLUDED THAT THE AO WA S CORRECT IN DENYING THE CLAIM OF SECTION 54F OF THE ACT. 6. AFTER RECEIVING A COPY OF THE REMAND REPORT TH E ASSESSEE HAS SUBMITTED HIS EXPLANATION AND AFTER CONSIDERING THE SAME AND ALSO THE COPIES OF DEED OF ASSIGNMENT AND DEVELOPMENT AGREEM ENT THE CIT(A) CAME TO THE CONCLUSION THAT THE A.O. HAS NOT MADE A NY VERIFICATION OF THE CLAIM OF THE ASSESSEE THAT THE FLATS OF 8 TH AND THE FIRST FLOOR ARE ADJACENT AND ARE JOINTED BY A SPECIAL CAPSULE LIFT AND THEREFORE IT IS ONE HOUSE EVEN AT THE REMAND STAGE AND THEREFORE HE ACCEPTED THE CLA IM OF THE ASSESSEE AS TRUTH AND TREATED THE FOUR FLATS AS ONE HOUSE AND A LLOWED THE CLAIM OF THE ASSESSEE. 7. AGGRIEVED BY THE RELIEF GIVEN BY THE CIT(A) TH E REVENUE IS IN APPEAL BEFORE US. 8. THE LEARNED DR STRONGLY SUPPORTED THE ORDER OF THE A.O. WHILE THE LEARNED COUNSEL FOR THE ASSESSEE THOUGH DID NOT LEAVE HIS GROUND THAT THE FLATS ON THE FIRST FLOOR AND THE 8 TH FLOOR ARE ONE RESIDENTIAL UNIT FAIRLY ACCEDED THAT THE FLATS ON THE FIRST FLOOR MA Y BE CONSIDERED AS ONE UNIT AND THE FLATS ON THE 8 TH FLOOR MAY BE CONSIDERED AS ANOTHER SINGLE UNIT AND PRAYED THAT EXEMPTION U/S 54F MAY BE GRANTED FOR TH E CONSTRUCTION OF THE FLATS ON THE FIRST FLOOR AND EXEMPTION MAY BE REVOK ED IN THE YEAR OF CONSTRUCTION OF THE FLATS ON THE 8 TH FLOOR AS PROVIDED U/S 54(2) OF THE I T ACT. THE LEARNED DR HAD NO OBJECTION FOR THE SAME. 9. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS WE FIND THAT THE ISSUE AS TO WHETHER T HE EXEMPTION U/S 54F IS PAGE 5 OF 6 ITA NO.1009/BANG/2009 5 ALLOWABLE IN RESPECT OF A SINGLE RESIDENTIAL UNIT O R MORE THAN ONE RESIDENTIAL UNIT IS COVERED BY THE DECISION OF THE SPECIAL BENC H OF THE TRIBUNAL IN THE CASE OF SUSHILA M JHAVERI REPORTED IN 2007-TIOL-142 -ITAT-MUM-SB WHEREIN IT HAS BEEN HELD THAT THE EXEMPTION IS PERM ISSIBLE ONLY FOR A SINGLE RESIDENTIAL UNIT. THE SPECIAL BENCH HAS ALSO CONSI DERED THE AMALGAMATION OF TWO FLATS INTO SINGLE FLAT FOR THE PURPOSE OF GR ANTING EXEMPTION U/S 54F AND HAS HELD THAT WHERE THE FLATS ARE ADJACENT TO E ACH OTHER EITHER HORIZONTALLY OR VERTICALLY AND HAVE A COMMON KITCHE N AND COMMON PASSAGE/STAIRCASE AND INTENDED TO BE USED AS SINGLE HOUSE FOR THE RESIDENCE OF THE FAMILY THEY CAN BE CONSIDERED AS A SINGLE R ESIDENTIAL UNIT. IF THE FLATS ON THE FIRST FLOOR ARE ADJACENT TO EACH OTHER HAVING COMMON PASSAGE AND KITCHEN THEN THE FLATS ON THE FIRST FLOOR HAVE TO BE CONSIDERED AS A SINGLE RESIDENTIAL HOUSE AND SIMILAR TREATMENT IS T O BE GIVEN FOR THE FLATS ON THE 8 TH FLOOR ALSO. HOWEVER THIS FACT HAS TO BE VERIFIED BY THE A.O. IN CASE IT IS FOUND THAT THE FLATS IN THE FIRST FLOOR ARE SINGLE RESIDENTIAL UNIT SATISFYING THE CONDITIONS LAID DOWN BY THE SPECIAL BENCH OF THE TRIBUNAL (SUPRA) IT MAY BE CONSIDERED AS A SINGLE RESIDENTI AL UNIT AND EXEMPTION U/S 54F HAS TO BE GRANTED IN RESPECT OF THE INVESTMENT MADE FOR THE CONSTRUCTION OF THE SAID FLAT PROVIDED IT SATISFIES THE OTHER CONDITION OF BEING COMPLETED WITHIN THE PERIOD OF 3 YEARS. HOWE VER AS ADMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THE FLATS ON THE 8 TH FLOOR HAVE BEEN CONSTRUCTED WITHIN THE PERIOD OF 3 YEARS FROM THE D ATE OF CONSTRUCTION OF FLATS ON THE FIRST FLOOR AND AS PER THE PROVISIONS OF SUB-SECTION 2 OF SECTION 54F OF THE I T ACT THE SAID EXEMPTION HAS TO BE WI THDRAWN IN THE YEAR OF SUCH CONSTRUCTION/PURCHASE. THE A.O. IS DIRECTED T O GRANT THE EXEMPTION ACCORDINGLY IN THE LIGHT OF OUR OBSERVATIONS ABOVE . PAGE 6 OF 6 ITA NO.1009/BANG/2009 6 10. IN THE RESULT THE APPEAL OF THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED ON 13 TH .. MAY 2010. SD/- SD/- (A MOHAN ALANKAMONY) (P MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE DT.13/5/2010 COPY TO : 1) THE ASSESSEE (2) THE REVENUE (3) TH E CIT(A) CONCERNED. (4) THE CIT CONCERNED. (5) THE DR (6) GUARD FILE. (7) GUARD FILE NEW DELHI. MSP/12.5 BY ORDER ASST. REGISTRAR ITAT BANGALORE.