INCOME TAX OFFICER, WARD- 2(2)(5), BANGALORE vs. MS. KUPPARAJU CHANGAMARAJU RADHA, BANGALORE

The grounds of appeal urged by the Revenue give raise to the following 2 issues:- a) Allowing deduction claimed by the assessee u/s 54F of the Act b) Not adjudicating the ground relating to disallowance of interest expenditure

The AO noticed that both the buildings sold by the assessee are commercial properties and remaining properties are two plots. Accordingly, he took the view that the assessee is not eligible for deduction u/s 54, but eligible u/s 54F of the Act. One of the conditions for claiming u/s 54F of the Act is that the assessee should not own more than one residential property on the date of sale of assets.

The AO noticed the assessee has owned following residential properties:- a) A residential flat in Golden Orchid b) 50% share in residential house located in dollars scheme Madiwala 1st Stage, wherein the assessee resides. Since the assessee held more than one residential property, the AO held that the assessee is not eligible for deduction u/s 54F of the Act.

Before the ld.CIT(A), the assessee contended that she owns only one residential flat in Golden Orchid. In respect of 50% share in the Madiwals building, the assessee submitted that the said building belongs to and owned by her husband. It was submitted that name of the assessee was included as second person only to ensure easy succession of the property to her, which is common practice adopted by everyone. In support of the claim, the assessee furnished copies of wealth tax returns filed by her husband in order to show that her husband has declared the residential property located in Madiwala as his residential house. The ld.CIT(A) was convinced with the explanations of the assessee and held that the residential building located in Madiwala does not belong to the assessee. Accordingly he held that the assessee has owned only one residential house property and accordingly she is eligible for deduction u/s 54F of the Act.

The ld. DR submitted that the ld.CIT(A) has examined Wealth-tax returns of assessee’s husband in order to come to the conclusion that the residential building at Madiwala belongs to the assessee’s husband only. He submitted that these materials were not produced before the AO and the assessee has furnished these details for the first time before Ld CIT(A). He further submitted that the Ld CIT(A) did not confront these materials with the AO and has accepted the claim of the assessee at its face value. He submitted that the claim of the assessee requires verification. Accordingly, the ld.DR submitted that this issue may be restored to the file of the AO for examining the above said claim of the assessee.

On the contrary, the ld.AR submitted that there is no dispute with regard to the facts presented before the ld.CIT(A) and hence the decision rendered by the ld.CIT(A) deserves to be accepted.

We heard the parties on this issue and perused the record. Admittedly, the details of the ownership of the Madiwala property was submitted to ld.CIT(A) along with the copies of Wealth-tax Returns for the first time. These details and the contentions of the assessee in this regard were not available before the AO. We noticed that the ld.CIT(A) has also not confronted these materials with the AO in order to elicit his opinion with regard to the claim of the assessee. Under the set of facts, we are of the view that this issue requires to be remitted to the file of AO for examining it afresh by duly considering the claim of the assessee with regards to the ownership of the residential building located at Madiwala.

Under these set of facts, we set the order passed by the ld.CIT(A) on this issue and restore the same to the file of the AO for examining it afresh by duly considering the claim of the assessee with regard to the ownership of residential building located at Madiwala. The assessee is also directed to furnish all the relevant materials to prove that the residential building located in Madiwala is not owned by her and she was only a name lender. After hearing the assessee, the AO may take appropriate decision on this issue in accordance with law.

The next issue relates to disallowance of interest expenditure claimed by the assessee against income from other sources. We noticed earlier that the ld.CIT(A) did not adjudicate this issue even though contentions were raised by the assessee on this issue. Before us, the Revenue has raised a ground stating that the ld.CIT(A) has not adjudicated this issue. In fact, the Revenue cannot be said to be aggrieved by the action of the ld.CIT(A) in not adjudicating this issue. It is the assessee who is aggrieved in this matter, but the assessee is not in appeal before us. Further, the revenue has only pointed out in its ground that Ld CIT(A) has not adjudicated this issue. Accordingly, we are of the opinion that this ground of the revenue does not require adjudication.

In the result, the appeal filed by the Revenue is treated as allowed for statistical purposes.