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Income Tax Appellate Tribunal, “G”, BENCH
Before: SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANESH, AM Smt. Shailaja S. Hemdev
आदेश / O R D E R PER M. BALAGANESH (A.M):
This appeal in A.Y.2012-13 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-34, Mumbai in appeal No.CIT(A)-34/DCIT 23(3)/IT-575/14-15 dated 25/03/2015 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 24/02/2015 by the ld. Dy. Commissioner of Income Tax -23, Mumbai (hereinafter referred to as ld. AO).
2. The Revenue has raised the following grounds:-
Smt. Shailaja S Hemdev 1. (a) In the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in computing the 'Annual value' of the property as the same should be as per section 23(l)(a) and 23(l)(b) of the IT Act 1961 and by ignoring the fact that deduction from the annual value is to be considered under section 24(a) which allows deduction @ 30% of the annual value. (b) In the facts and circumstances of the case and in law, the Ld. CIT(A) has erred allowance of maintenance expense from the license fees received by the assessee which amounts to double deduction under the head Income from House Property.
2. In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the assessee was entitled to deduction u/s. 54 being a legal and beneficial owner of the property whereas there was no actual purchase consideration paid by the assessee but in effect there was only an 'arrangement' made with a related party for availing deduction u/s. 54.
3. The appellant prays that the order of the Ld. CIT (A) on the above grounds be set aside and that of the A.O. be restored.
4. The appellant craves leave to add, delete, amend or alter any ground.
3. With regard to the issue raised in 1(a) above, the ld. AR stated that the issue is decided in favour of the assessee in assessee’s own case by Hon’ble Jurisdictional High Court in and 578 of 2012 dated 04/09/2014. We have gone through the said order and for the sake of convenience, the entire order is reproduced hereunder:- 1. “Both these appeals purport to raise the same question and styled as a substantial question of law. That is formulated by the Revenue at page 7 of the paper-book in Income Tax Appeal No.578 of 2012. The question reads as under:-
Whether on the facts and in the circumstances of the case and in law the Income Tax Appellate Tribunal was justified in upholding the order of the CIT(A) holding that the notional interest income free security deposit and advance rent cannot be included in the income from property for the purpose of section 23(1)(a) of the Income Tax Act, 1961 ?
When these matters were placed before us earlier and both the parties had requested that since we were to render a judgment in a batch of appeals raising identical issue, that it was decided to await the same. Now Smt. Shailaja S Hemdev that decision has been rendered, but the present appeals are placed for directions as Mr.Mistri, learned senior counsel for the assessee submitted that the question of law which has been reproduced by us above and formulated in the paperbook of the revenue is not accurate and correct.
The question of law ought to be in the context of section 23(1)(b) of the Income Tax Act, 1961 [the I.T. Act]. In that regard, Mr.Mistri has taken us through the paper-book in Income Tax Appeal No.578 of 2012. He first points out the order of the assessing officer on the relevant issue in question. He then also invites our attention to the finding of the Commissioner and the Tribunal to urge that the issue was, whether interest free security deposit, as it was refundable, could have been taken into consideration for computation of annual letting value. Meaning thereby, the assessing officer's view that such deposit is collected, the amount invested and it would earn interest and, therefore, such notional interest could be taken into consideration for the above computation is correct or not.
4. Placing reliance upon the Division Bench of this Court in the case of Commissioner of Income Tax V/s. J.K. Investors (Bombay) Ltd. reported in [2001] 248 ITR 723, which has been stated to be confirmed by the Hon'ble Supreme Court, Mr.Mistry urged that the appeals do not raise any substantial question of law.
5. On the other hand, Mr.Abhay Ahuja, learned counsel appearing for the Revenue submits that the Tribunal has referred to both the sections 23(1)(a) and 23(1)(b) of the I.T. Act. It also relied upon the judgment of the Full Bench of the Delhi High Court in the case of Commissioner of Income Tax V/s. Moni Kumar Subba reported in [2011] 333 ITR 38 (Del). Mr.Ahuja, therefore, submits that the reference to sub-clause (a) of section (1) of section 23 of the I.T. Act is correct.
6. Without entering into this controversy but finding that the notional interest on such security deposits cannot be taken into consideration for determining and computing the annual letting value, we answer this question as framed, against the revenue and in favour of the assessee and for that we rely not only on the Division Bench judgment in the case of J.K.Investors (Bombay) Ltd. (supra) but the judgment delivered by this Court, to which one of us [S.C.Dharmadhikari, J.] was a party in the case of Commissioner of Income Tax-12, Mumbai V/s. Tip Top Typography [Income Tax Appeal No.1213 of 2011] and other connected appeals pronounced on 8th August, 2014.
Smt. Shailaja S Hemdev 8. In the result, the appeals do not raise any substantial question of law and are accordingly dismissed. No costs.
Respectfully following the same, the ground No.1(a) raised by the revenue is dismissed. 3.1.1. With regard to ground No.1(b) raised hereinabove, the ld. AR stated that the same is covered in favour of the assessee by the decision of this Tribunal in assessee’s own case for the A.Y.2011-12 in dated 02/06/2017. We have perused the said order and for the sake of convenience the said order is reproduced hereunder:- “Challenging the order,dated 16.12.2014,of the CIT(A)-34 Mumbai the Assessee has filed the present appeal. Assessee,an individual,is a partner in M/s. Access International. He filed his return of income on 30.09.2011,declaring total income at Rs.1.45 crores. The Assessing officer (AO) completed the assessment on 21/02/2014, u/s.143(3) of the Act, determining its income at Rs.1.57 crores.The only effective ground raised by the assessee is the claim for deduction of maintenance charges (Rs.1.78 lakhs + Rs.5.64 lakhs +Rs.70.717/-) in respect of let out properties while computing income under the head 'income from house property'. It was brought to our notice that identical issue was decided by the Tribunal in assessee's own case vide order dt.24/6/15 (ITA/55/Mum/2014 ). We are reproducing the facts of the case and the operative part of the order and it reads as under:- "2. Rival contentions have been heard and record perused. Facts in brief are that the assessee is an individual and a partner in Access International. During the course of scrutiny assessment, the AO found that assessee has not taken ALV of flat situated in Peace Heaven Housing Cooperative Society Ltd. Accordingly, he computed the ALV, wherein he has taken highest range rent obtained from the society. In appeal, the additional made by the AO was confirmed by the CIT(A), against which assessee is in further appeal before us.
3. It was contended by ld. AR that on the principle of provisions of Section 23(2), the AO should not have taken the ALV of one house out of various houses owned by the assessee. As an alternate he submitted that the Smt. Shailaja S Hemdev Municipal ratable value of the said flat should be taken as ALV instead of rent of other flats adopted by the AO.
We have considered rival contentions and found that assessee has offered income from house property in respect of four flats. However, no ALV was offered in respect of house situated in Peace Heave Housing Cooperative Society Ltd.. As per provisions of Section 23(2), a house or part of the house 531/M/15(11-12) Shailaja Sunil Hemdev which is in the occupation of the owner for the purpose of his own residence, should be taken at Nil or a house which cannot actually be occupied by the owner by the reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at other place in a building not belonging to him. As per ld. AR, the AO should not have taken ALV of this house while computing the income from house property. Even though before the CIT(A) the assessee 3 has made the contention that annual value of this flat needs to be considered as Nil under Section 23(2) of the Act. However, there is no specific mention that this flat was either used by the assessee for his residence or could not be used due to his occupation at any other place. In the interest of justice, we restore this issue to the file of AO and direct the AO not to take annual value at Nil if he finds that out of the various flat owned by it, he has taken ALV of all the flats except one flat, value of which will be taken u/s.23(2) of the I.T.Act. We direct accordingly.
The next grievance of the assessee relates to non-deduction of maintenance charges while computing ALV. The issue is covered by the following decisions of Hon'ble Delhi High Court as well as coordinate bench : i) Aloo Bejan Daver Vs. ITO, ITA No.2381/M/10 ii) CIT vs. R.J.Wood P.Ltd. (20 taxmann.com 599)(Del HC) iii) Sharmila Tagore Vs. JCIT(150 Taxman 4); iv) Realty Finance & Leasing Pvt. Ltd. (5 SOT 3448); v) ITO Vs. Gopichand Godhwani (1 SOT 374) vi) Varma Family Trust (7 ITD 392); and vii) Bombay Oil Industries Vs. DCIT (82 ITD 626) wherein it has been held that maintenance charges is deductible while computing annual value under the head income from house property. Respectfully following the aforesaid judicial pronouncements, we direct the AO to allow maintenance charges while computing annual letting value." Respectfully following the same we decide the solitary ground in favour of the assessee, as the facts of the case under appeal are identical to the facts of assessment year 2009-10. As a result appeal filed by the assessee is allowed. 3.1.2. We hold that the maintenances charges collected by the assessee does not partake the character of the income in the hands of the Smt. Shailaja S Hemdev assessee in as much as the assessee is only custodian and the same had to be remitted back to the third party. It is well settled that the expression ‘income’ denotes some money whether convertible in cash or in kind which is left at the disposal of assessee to spend or to invest or incur expenses with the same. When assessee is only a pass through agency for the sake of administrative convenience and merely collecting the maintenance charges and in turn passing on to the third party, the said sum does not partake the character of income and hence, the same cannot be taxed as rental income under the head ‘ income from house property.’ 3.2. The ld. DR placed reliance on the decision of this Tribunal in the case of ITO vs. Barodawala Properties Ltd., reported in 83 ITD 467 wherein, it was held that the maintenance charges collected from the tenant and payable by the assessee to the Co-operative society is not allowed as deduction either u/s.23 or u/s.24. We find that this decision has been considered by the Co-ordinate Bench decision of this Tribunal in yet another judgment in the case of Aloo Bejan Daver vs. ITO in and 2382/Mum/2010 for A.Y.2005-06 and 2006-07 dated 29/04/2011 wherein the earlier decision relied on by the ld. DR has been duly considered and distinguished. Hence, the decision raised by the ld. DR does not advance the case of the revenue.
Smt. Shailaja S Hemdev 3.2.1. In view of the aforesaid findings and respectfully following the judicial precedents hereinabove, we dismiss the ground No.1(b) raised by the revenue. 3.3. With regard to ground No.2 raised by the revenue, it will be pertinent to address the basic facts involved in the same. During the year under consideration, the assessee sold residential property for Rs.14 Crores and after deducting the cost and related expenses she declared capital gain of Rs.12,52,76,407/-. Against this capital gain, the assessee claimed exemption u/s.54 of the Act to the tune of Rs.10,50,30,000/- and net capital gain of Rs.2,02,46,607/- was offered for tax. The Assessing Officer called for the details from the assessee and found that the new property in respect of which exemption u/s.54 of the Act was claimed was purchased from Sameer Bhojwani (HUF) represented by karta of HUF. Shri Sameer Bhojwani, who was assessee’s brother. Based on this, the ld. AO came to the conclusion that the transaction of purchasing new property was an arrangement to save tax by claiming exemption u/s.54 in the hands of the assessee. The ld. AO gave the following reasoning for drawing the aforesaid conclusion:- “5.1. Following important fact immerges from the transaction-
1. 1. Shailaja Hemdev is sister of Shri Samir Bhojwani a famous builder and Sarnir Narain Bhojwani HUF is the HUF represented by Karta Samir Bhojwani himself.
2. Shri Samir Bhojwani is the center point of all financial transaction of this family and major financial transaction ends with the transaction with Samir Bhojwani.
Smt. Shailaja S Hemdev 3. Shailaja Hemdev sold property at Rs. 14,00,00,000/- on 05.8.2011 and the funds were immediately transferred to Samir Bhojwani, The interest has been given on this fund by Shri Samir Bhojwani.
4. To claim deduction u/s. 54 a property was purchased by Shailaja Hemdev from Samir Bhojwani HUF on 31.07.2012 at Rs. 10,00,00,000.
5. The transaction of payment of sale consideration was completed by routing various cheques from Samir Bhojwani to assessee, assessee to Samir Narain Bhojwani HUF and from HUF to Samir Bhojwani back. This cycle of rotation of funds were made for five to six times to complete the amount of transaction.
6. Thus by using only one amount of fund entire transaction of 10 crores was completed by rotating the same fund and money remained with original person with whom it was.
7. To show that sale consideration has actually been passed, a circular transaction of transfer of funds was arranged.
8. By making this transaction deduction u/s. 54 was claimed by assessee and substantial tax relief was claimed by retaining fund as well as property within the group.
9. On verification of return of Samir Narain Bhojeani HUF it is found that even Samir Narain Bhojwani HUF did not have to pay any tax in A.Y. 2013-14 though property was sold to assessee. 10.Thus the transaction was an arrangement to save tax by claiming deduction u/s. 54 in the hands of assessee by arranging transaction of sale of property among various entities of a family. 11.The property purchased by Shailaja Hemdev from HUF was originally purchased by HUF from funds of Samir Bhojwani which was shown as loans of Shri Samir Bhojwani to Samir Narain Bhojwani HUF.
12. When assessee purchased property from HUF, funds given by assessee to Samir Bhojwani at the time of sale of property on 05.08.2011 were received back by the assessee and were given to HUF as a purchase consideration of the property. 13.Since the property sold to assessee was purchased by Samir Narain Bhojwani HUF from funds borrowed from Samir Bhojwani it was shown that the funds received by HUF on sale of property were returned back to Shri Samir Bhojwani.
Thus there was no genuine transaction of purchase of property, but it was only an arrangement with an intention to claim deduction u/s 54 and to avail tax benefit without actually parting with money or the property without incurring any further tax liability in the hands of seller. 15.The property remained in the family.”
3.3.1. Accordingly, the AO issued a detailed show-cause notice in this regard to the assessee. In the said show-cause notice, the ld. AO also reproduced the relevant portion of the return of income of Sameer Smt. Shailaja S Hemdev Bhojwani (HUF) for the A.Y.2013-14 wherein the said HUF has not paid any tax on the long term capital gain in respect of sale of property to the assessee in view of the fact that there was only resultant long term capital loss of Rs.2,49,222/-. The detailed computation in this regard is reproduced at page 12 of the assessment order as under:- Samir N Bhojwani (HUF) Long Term Capital Gains on Sale of Flat 10N1 and 10N3 in Samshiba Sale Consideration 100000000 Less: Expenses pertaining to sale Legal Expenses 5000 99995000 Less: Indexed Cost of 852 acquisition Year Cost Index Indexed Cost A.Y.2010-11 73525100 632 99119280 A.Y.2011-12 917940 711 1099979 A.Y.2012-13 23000 785 24963 100244222 Long Term Capital Gains 74466040 -249222 For A.Y.2013-14 (year of sale)
3.3.2. The assessee gave a detailed reply in this regard before the ld. AO. The ld. AO on going through the reply of the assessee concluded that the purchase transaction of property from Sameer Bhojwani HUF was not a bonafide transaction in view of the following:- “6.2 Nexus between financial transaction of Shailaja Hemdev and Samir Bhojwani The balance sheet of Shailaja Hemdev as on 31.03.2012 shows capital of Rs. 29,81,34,478/- the major part of which has remained invested/given to Samir Bhojwani in form of Deposits of Rs. 18,31,06,338/- Fixed assets also show investment in Bhojwani Enclaves of Rs. 3,93,31,512/- and others. Similarly balance sheet of assessee as on 31.03.2011 shows her capital account of R.s 15,11,30,622/- and deposit of Rs. 5,04,29,15s/-, investment in Bhojwani Enclave Rs. 390,39,572/- and other investment in Bhojwani Group.
Smt. Shailaja S Hemdev The entire amount of property sold by assessee was immediately given to Shri Samir Bhojwani on 17.08.2011, Thus all financial activities of the assessee moves around Shri Samir Bhojwani. 6.3 Circular Transaction of Funds for completing sale consideration As discussed earlier and as mentioned in detail in show cause noticed dated 16.01.2015, the funds were rotated among three different entities of the Samir Bhojwani group to create impression that the sales consideration is actually passed on to the seller of the property and there is an actual purchase transaction of property to claim deduction u/s 54. In fact, without any out flow of funds, an image was created that sales consideration has actually been passed to seller. But copy of bank accounts of all three entities scanned in earlier part of the order proves it beyond doubt that the sale consideration was passed on to the seller only by arrangement of circular transaction. By using the same fund, circular transaction was carried out. A cheque of Rs.2,00,00,000 was given by Samir Bhojwani to assessee and on same day a cheque of Rs.2,00,00,000 was given by assessee to Samir Narain Bhojwani HUF. Again on same day, cheque of Rs.2,00,00,000 was given by Samir Narain Bhojani HUF to Samir Bhojwani. Like this, several transactions were carried out to show that the sale consideration is actually passed on by purchaser to seller to create an impression that it is a bonafide purchase transaction. But the rotation of funds through circular transaction proves that there is no bonafide purchase transaction of property in this case.
From assessee to Samir From Samir Bhojwani HUF to From Samir Bhojwani to Bhojwani HUF Samir Bhojwani Assessee. Dt Chq No- Amt Dt Chq No. Anit Dt Chq No. Amt 28.7.12 537223 5000000 28.7.12 558781 5000000 1.8.12 537224 20000000 1.8.12 558782 20000000 1.8.12 277111 20000000 2.8.12 559857 15000000 2.8.12 558792 15000000 2.8.12 277117 15000000 2.8.12 559859 15000000 2.8.12 558793 15000000 2.8.12 277118 15000000 2.8.12 537225 20000000 2.8.12 558783 20000000 2.8.12 277110 20000000 3.8.12 559858 15000000 3.8.12 558794 15000000 3.8.12 277116 15000000 3.8.12 559860 10000000 3.8.12 558795 10000000 3.8.12 277719 10000000 From Samir Bhojwani to Assessee. Samir Bhojwani Brother of assessee Dt Chq No. Amt Samir Bhojwani HUF 1.8.12 27711! 20000000 Shailaja Hemdev, assessee and represented by Karta Samir sister of Samir Bhojwani Bhojwani brother of assessee 2.8.12 277117 15000000 2.8.12 277118 15000000 These Movement of Funds from Samir Bhojwani to assessee. from assessee to Samir Narain Bhojwani HUF and from Samir Narian Bhojwani HUF to Samir Bhojwani and repetition of identical transaction in form of circular transaction proves it clearly that this is not a bonafide purchase transaction of property but the aim of the transaction is to avoid the tax without actual outflow of the fund and retaining asset within the group. 6.4 Taxability of Samir Narain Bhojwani HUF in the year of sale of property. The assessee has purchased property from Samir Narain Bhojwani HUF Liihg the period relevant to AY 2013-14. The transaction is arranged in such a way that even the HUF don't have to pay tax. The details shows that there was no tax liability of Samir Narain Bhojwani HUF in the year in which property is shown as sold to assessee. Copy of the return filed for A.Y.2013-14 is scanned below:-
6.5 Thus without incurring additional tax liability in the hands of Samir Nar Bhojwani HUF tax liability of assessee was saved. This shows that the funds for purchase of flat was Smt. Shailaja S Hemdev provided by Shri Samir Bhojwani to Samir Narain Bhojwani HUF. No funds were returned back to Shri Samir Bhojwani during the period of three years for which the asset was held by Samir Narain Bhojwani HUF. The funds were shown as returned to Shri Samir Narain Bhojwani when the property was purchased by assessee from HUF. Thus the entire transaction of sale and purchase of asset was carried out by HUF without using its own funds and only with the funds of Shri Samir Bhojwani. 6.6 History of Property purchased by assessee from HUF On further perusal of details it is observed that the property which is purchased by assessee from HUF was not purchased by HUF from its own funds. The property was purchased by HUF from funds provided by Samir Bhojwani. The relevant years account of Samir Bhojwani in Samir Narain Bhojwani HUF is scanned below:-
This fund was never returned to Shri Samir Bhojwani in subsequent year. Copy of account are scanned below.
The funds were returned to Shri Samir Bhojwani only when the property was purchased by assessee from HUF and sales consideration was passed in HUF.
6.7 Thus the property purchased by assessee was purchased by Sarnir Narain Bhojwani HUF by using funds of Shri Samir Bhojwani. When the property is purchased by assessee from Samir Narain Bhojwani HUF the funds again went back to Shri Samir Bhojwani and account of shri Samir Bhojwani was squared off. 6.8 In view of the above discussion and in view of facts mentioned below, it is clear that the transaction of purchase is not a bonafide and genuine purchase transaction.
Shailaja Hemdev is sister of Shri Samir Bhojwani a famous builder and Samir Narain Bhojwani HUF is the HUF represented by Karta Samir Bhojwani himself.
2. Shri Samir Bhojwani is the center point of all financial transaction of this family and major financial transaction ends with the transaction with Samir Bhojwani.
3. Shailaja Hemdev sold property at Rs. 14,00,00,000/- on 05.8.2011 and funds were immediately transferred to Samir Bhojwani, The interest has been given on this fund by Shri Samir Bhojwani.
4. To claim deduction u/s. 54 a property was purchased by Shailaja Hemdev from Samir Bhojwani HUF on 31.07.2012 at Rs. 10,00,00,000.
5. The transaction of payment of sale consideration was completed by routing various cheques from Samir Bhojwani to assessee, assessee to Samir Narain Bhojwani HUF and from HUF to Samir Bhojwani back. This cycle of rotation of funds were made for five to six times to complete the amount of transaction.
6. Thus by using only one amount of fund entire transaction of 10 crores was completed by rotating the same fund and money remained with original person with whom it was.
To show that sale consideration has actually been passed, a circular transaction of transfer of funds was arranged.
By making this transaction deduction u/s. 54 was claimed by assessee and substantial tax relief was claimed by retaining fund as well as property within the group.
On verification of return of Samir Narain Bhojwani HUF it is found that even Samir Narain Bhojwani HUF did not have to pay any tax in A.Y. 2013-14 though property was sold to assessee. 10.Thus the transaction was an arrangement to save tax by claiming deduction u/s. 54 in the hands of assessee by arranging transaction of sale of property among various entities of a family. 11.The property purchased by Shailaja Hemdev from HUF was originally purchased by HUF from funds of Samir Bhojwani which was shown as loans of Shri Samir Bhojwani to Samir Narain Bhojwani HUF.
When assessee purchased property from HUF, funds given by assessee to Samir Bhojwani at the time of sale of property on 05.08.2011 were received back by the assessee and were given to HUF as a purchase consideration of the property. 13.Since the property sold to assessee was purchased by Samir Narain Bhojwani HUF from funds borrowed from Samir Bhojwani it was shown that the funds received by HUF on sale of property were returned back to Shri Samir Bhojwani.
Smt. Shailaja S Hemdev 14.Thus there was no genuine transaction of purchase of property, but it was only an arrangement with an intention to claim deduction u/s 54 and to ail tax benefit without actually parting with money or the property without incurring any further tax liability in the hands of seller. 15.The property remained in the family. Since no genuine purchase transaction of property took place, the assesee's claim of deduction u/s 54 of Rs. 10,50,30,000/- is not allowed. 6.9 It is pertinent to mention here that assessee had entered into transaction of purchase of asset which is duly registered with Sub Registrar and stamp duty of Rs.50,00,000 is also paid on the transaction. Thus, assessee tried to establish genuineness of transaction by paying stamp duty, but the transaction of purchase is absolutely not a genuine and bonafide purchase transaction as discussed above. It is carried out only with an intention to save tax liability by claiming deduction of Rs.10 crore u/s 54 with an intention to save substantially higher tax liability than the stamp duty paid by the assessee. In other words, the stamp duty paid by the assessee is negligible as compared to the tax saved by the assessee by claiming deduction u/s 54. As discussed above, the transaction is not a boanfide transaction of purchase and it is only a transaction entered into between various entities of same group with an intention to save tax. Though the sale deed has been executed, the property remained within the group and the money also remained within the group, still the assessee could save substantial amount of tax through deduction claimed u/s 54. Thus, facts of the case of Me Dowell & Co. Ltd. vs Commercial tax Officer 154ITR 148 decided by the Hon’ble Supreme Court are clearly applicable to this case. Therefore though the assessee has paid stamp duty on the transaction, the transaction is not treated as bonafide transaction of purchase of property and it is treated only as a colourable device to save the tax and therefore deduction claimed u/s 54 is not allowed to the assessee. Since the assessee has furnished inaccurate particulars of income, penalty proceedings u/s 271(l)(c) of the Act are initiated. (Addition : Rs. 10,50,30,000)
3.3.3. Accordingly, the ld. AO made an addition of Rs.10,50,30,000/- in the assessment. 3.4. The assessee filed a detailed written submission and various evidences that were already on record before the ld. CIT(A). The ld. CIT(A) duly appreciated these contentions and deleted the disallowance of claim of exemption u/s.54 of the Act made by the ld. AO. 4. Aggrieved, the revenue is in appeal before us. 5. We have heard rival submissions.
Smt. Shailaja S Hemdev A. At the outset, it would be pertinent to record the flow of funds from assessee to various parties and receipt of funds by the assessee from various parties as under: (i) The assessee out of the sale consideration of Rs.14 Crores gave loan of Rs.13.50 Crores to Sameer Bhojwani on 27/08/2011. The assessee received interest on this loan and offered the same for taxation in her returns. (ii) Shri Sameer Bhojwani advanced a sum of Rs.13.50 Crores to Sameer Bhojwani (HUF) wherein he is karta. (iii) The said HUF purchased a property in the name of HUF for Rs.7,35,25,100/-. The assessee later decided to purchase the duly acquired property by the HUF from Sameeer Bhojwani (HUF) for Rs.10 Crores. Since, assessee has already paid Rs.13.50 Crores to Sameer Bhojwani (individual) who inturn had advanced monies to Sameer Bhojwani HUF, the assessee demanded money back from Sameer Bhojwani (individual) (iv) Sameer Bhojwani (individual) paid the monies towards repayment of loan to assessee. Assessee out of the same, paid Rs.10 Crores to Sameer Bhojwani (HUF) being the purchase consideration for purchase of property. (v) Sameer Bhojwani(HUF) inturn repaid Rs.10 Crores to Sameer Bhojwani(individual).
Smt. Shailaja S Hemdev B. The aforesaid flow of funds would clearly demonstrate that the entire transaction carried out by the assessee with Sameer Bhojwani(individual) towards loan account and Sameer Bhojwani(HUF) towards purchase of property are genuine and bonafide and this by any stretch of imagination, cannot be construed, in our considered opinion, as sham transaction. Reliance placed by the ld. AO on the decision of Hon’ble Supreme Court in the case of Mc.Dowell & Co., reported in 154 ITR 148 is clearly misplaced in the facts of the instant case. C. There is absolutely no dispute on the purchase consideration of Rs.10 Crores in respect of the new property. No addition whatsoever has been sought to be made by the ld. AO towards the said purchase consideration of Rs.10 Crores in the hands of the assessee disputing the same or in the hands of Sameer Bhojwani (HUF) disputing the sale consideration of Rs.10 Crores. D. We find from the computation of long term capital loss in the hands of Sameer Bhojwani(HUF), the said HUF had made cash profit on sale of property to the assessee to the extent of Rs.2.65 Crores (Rs.10 Crores – Rs.7.35 Crores). The resultant long term capital loss had admittedly arose only due to indexation benefit that had been availed by the said HUF. When a particular benefit of indexation has been provided by the statute, the availing of the same cannot be doubted. There is no need that every transaction carried out by any assessee should result in any payment of Smt. Shailaja S Hemdev tax. Hence, the entire allegations levelled by the ld. AO stating that HUF has also not paid any tax of sale of property deserves to be dismissed. E. It is not in dispute that the assessee in turn earned interest income on the loan advanced to Sameer Bhojwani and the same was taxed accordingly in her hands. F. The new property purchased by the assessee actually got transferred in the name of the assessee by due registration documents and the name transfer had also been carried out in the records of condominium of the apartment and assessee has also been admitted as a member of the condominium to exercise all her rights as a member thereon. G. The ld. CIT(A) had also stated that electricity connection has been obtained by the assessee for the new property in her name and bills are being paid by her whenever the said property was not let out. H. The maintenance charges payable to the apartment association have been duly paid. I. The rental income from new property had been duly taxed in the hands of the assessee by accepting the assessee to be the owner of the new property under the head ‘income from house property’ and scrutiny assessment thereon had been framed in the hands of the assessee for A.Y.2013-14 u/s.143(3) of the Act. J. Property Tax and Water Tax of the new property has been paid by the assessee.
Smt. Shailaja S Hemdev K. Sameer Bhojwani (HUF) had given the property on leave and license basis to Citi Bank prior to its sale. Pursuant to registration of the said new property in the name of the assessee, a fresh agreement for leave and license has been signed by the assessee as the owner with Citi Bank. L. The new property purchased by the assessee is duly reflected in her balance sheet and in her wealth tax returns. M. Admittedly, the assessee is not a member of Sameer Bhojwani(HUF).
5.1. In view of the aforesaid facts, the transactions carried out by the assessee cannot be viewed with a jaundiced eye and rightly deserves to be appreciated. We also find that there is no harm in advancing loans to relative of the assessee (i.e., Sameer Bhojwani(individual)) and there is absolutely no harm in purchasing any property from a related concern of such relative (i.e., Sameer Bhojwani(HUF)). 5.2. We also find that the Co-ordinate Bench of this Tribunal in the case of Chandrakant S Choksi HUF vs. ACIT – 18(1), Mumbai reported in 67 SOT 311 dated 26/11/2014 had an occasion to consider similar matter on purchase of property from one of the members of HUF. The facts before the Mumbai Tribunal are as under:-
“2. Brief facts of the case are that the assessee earned long term capital gain on account of sale of shares of Hindustan Platinum Private Limited for an amount of Rs.5,07,86,320. Out of the sale consideration, the assessee invested Rs.50,00,000 in Rural Electrification Bonds and claimed deduction u/s 54EC, which has been allowed by the Assessing Officer. The assessee also claimed deduction u/s 54F for a sum of Rs.60,95,000, which Smt. Shailaja S Hemdev was invested for acquisition of rights in a property. The assessee had purchased 50% of the share of a farmhouse (used for residential purposes) constructed on the land belonging to the members of the HUF, from one of the members, Mrs.Indrani Chandrakant Choksi. From the records submitted before the Assessing Officer, he noted that a farmhouse has been constructed in the year 2001 on an agricultural land belonging to four members of the HUF in equal proportion. Though the land belongs to all the four members, however, the farmhouse was constructed by two members, namely, Smt. Indrani C.Choksi and Shri Chandrakant Choksi HUF for an amount of Rs.1,21,90,000. The farmhouse was constructed on the basis of Memorandum of Understanding (MoU) dated 31.01.1999 between the members of the family and HUF. There was a clause in MoU that Smt.Indrani C.Choksi had the right to withdraw herself from the ownership and in pursuance thereof, she had withdrawn the right and transferred the right to the assessee-HUF on a consideration made through cheque of Rs.60,95,000/- who had become the sole owner of the constructed property. The Assessing Officer observed that how the property can be sold without the land on which it was constructed. The assessee has claimed deduction u/s 54F for buying the one half share, that is, the right in the property from Smt.Indrani C.Choksi, who was one of the members of the HUF. Thus, the entire arrangement was made to avoid tax on long term capital gain and to get benefit u/s 54F. Thereafter he discussed the intention and purpose of section 54F and also referred to the decision of the Hon' ble Madras High Court in the case of CIT v. V.Pradeepkumar, reported in 290 ITR page 90. After detailed discussion he denied benefit of deduction u/s 54F for Rs.60,25,000.” The decision rendered thereon is as under:- “4.2 So far as the issue, whether the assessee can purchase fractional interest, that is, buying of share in the property and whether it can be held as purchase or not, we find that this issue, in principle, is settled by the decision of the Hon' ble Supreme Court in the case of CIT v. T.N.Aravinda Reddy(supra). In the case before the Hon' ble Supreme Court, four brothers were the members of HUF, who had partitioned a joint family property, leaving an undivided common house. The three brothers executed a release deed in favour of the elder brother for a consideration which was treated as purchase of the house by the elder brother. The elder brother had sold one of his houses and out of the sale proceeds, paid the consideration to his brothers to acquire their shares in the house. In this context it was held that the elder brother would be entitled to relief u/s 54(1). Similar view has been taken by the Hon' ble Delhi High Court in the case of CIT v. Chandanben Maganlal (supra), wherein the Hon' ble High Court held that sale proceeds invested for purchase of interest in the residential house owned by the assessee' s husband and son, amounts to purchase and hence entitled for exemption u/s 54F. Section 54F, per se, does not prohibit or bar that fractional interest or share in the property, Smt. Shailaja S Hemdev which has been purchased, will not be entitled for deduction u/s 54F. Thus, following the said proposition laid down by the Hon' ble Court, we hold that the assessee is eligible for deduction u/s 54F on the amount spent on acquisition of rights in a property from the other members of the family or HUF.
5.3. We also find in yet another decision of this Tribunal in the case of Smt. Maya A Ajwan vs. ITO -7(2)(4), Mumbai reported in 68 SOT 543 dated 10/04/2015. The operative portion of the said decision is as under:- “4.3 With this background, we may proceed to apply the law to the issue at hand. We find no provision in law for the assessee to continue to be regarded as the owner or even a part owner of the property (the Sion residential flat) gifted by her to her husband on 03.10.2008. Even if the same is for the purpose of enabling availing benefit under section 54F, we cannot by any score treat as not valid in the eyes of law. The law does not oblige a person to pay maximum taxes or authorize disregarding a lawful transaction if the same has the effect of reducing his tax liability. The transfer is by no means sham or bogus, notwithstanding that the assessee would continue to reside with her family, including her husband, in the said house, i.e., both before and after its gift to her husband. That is, true, the assessee, along with her family, including her husband, continues to reside in the Gope Niwas Bldg., both before and after the gift, so that the same has no purpose apart from the change of the ownership, which is to be reckoned as on the date of the transfer (of the original asset, i.e., 06.10.2008). Whether, therefore, the change of the ownership was effected a few days or, why, even a day earlier, to the relevant date, is of no moment. The gift deed, duly registered, has to be given its full legal fact, which is of a change in its ownership from the assessee to her husband, Shri Ashok Vishindas Ajwani. Pinning on some altruistic notion, as we observe the Revenue to, cannot entitle it to the read the law except in terms of its clear and unambiguous language, so that only what stands specifically provided is to be excluded. There is no stipulation in law with regard to the ownership pattern, or its quantification, i.e., of the assessee's other family members, including spouse, or even of the transferee/s. The same clearly provides for consideration of the ownership of residential house/s only of the assessee, and on a particular date.”
5.4. In view of the aforesaid findings and respectfully following the aforesaid judicial precedents, we find that assessee is duly entitled for Smt. Shailaja S Hemdev exemption u/s.54 of the Act which had been rightly granted by the ld. CIT(A) and hence the order of the ld. CIT(A) does not call for any interference. Accordingly, the grounds No.2 raised by the revenue is dismissed. 5.5. The ground Nos. 3 & 4 raised by the revenue are general in nature and does not require any specific adjudication.
In the result, the appeal of the revenue is dismissed.