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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ NEW DELHI
Before: SH. N.K.SAINI & SH.K.N.CHARY
Appellant by Sh. Raj Kumar Gupta, CA & Sh. Sumit Respondent by Sh. S.P.Gupta, Sr.DR Date of Hearing 14.09.2017 Date of Pronouncement 16.10.2017 ORDER
PER K.N.CHARY, JUDICIAL MEMBER
This appeal preferred by the assessee is directed against the order dated 05.05.2017 in appeal No.121/15-16 passing by the Commissioner of Income Tax (Appeal) [in short “CIT(A)”]-35, New Delhi for 2012-13 Assessment Year wherein Ld.CIT(A) confirmed the addition of Rs.67,83,383/- while denying the deduction u/s 54 of the Income Tax Act, 1961 (in short “Act”).
Briefly stated facts are that the assessee is an individual and filed the return of income for AY 2012-13 on 29.03.2013 declaring a total income of Rs.4,56,170/- after claiming the deduction of Rs.1,15,000/- u/s VIA of the Act. During the scrutiny u/s 143(3) of the Act, the AO found that during the year under consideration, the assessee sold property located at Model Town, Delhi deduction of Rs.67,83,383/- u/s 54 of the Act. After affording an opportunity of being heard to the assessee, the AO returned a finding that the property purchased by the assessee was not a residential property qualified for exemption u/s 54 of the Act, as such, while disallowing the same, the AO proceeded to add the said sum of Rs.67,83,383/- to the total income of the assessee. In the appeal preferred by the assessee, Ld. CIT(A) found that what the assessee had purchased was a farm land wherein he constructed a small area for guarding purpose, and the evidences like electricity bills, photographs of water payments etc. in no way proved that in the farm land there is a dwelling house, and distinguished it from a house for business, storage, guard/ security purpose. Ld. CIT(A) further found that there was no electricity connection existing at the property at the time of purchase of the same and electricity connection was obtained subsequently. On this aspect, reliance was placed on Smt. Usharani Kalidindi v. ITO [2013] 25 ITR (Trib.) 409 [Hyderabad]; Saleem Fazelbhoy v. Dy.CIT [2007] 106 ITD 167 [Mum.]; Mrs. Sonia Gulati v. ITO [2001] 115 Taxman 232 [Mum.]; and ITO v. Smt. Rohini Reddy [2009] 313/ ITR (AT) 346 (Hyderabad) and Ld.CIT(A) held that the AO was justified in making addition as such no interference was required. She, therefore, dismissed the appeal. Hence, the assessee is before us in this appeal on the following ground:-
“That under the facts and circumstances, both the lower authority grossly erred in law as well as on facts in not allowing the exemption u/s 54 for LTCG of Rs.67,83,383/- on sale of Residential house at Model Town, New Delhi.”
Ld.AR, at the outset, submits that the assessee was the owner of 50% in the residential property at Model town, Delhi whereas other 50% belongs to his brother namely Sh. Lalit Sabharwal. The property i.e. the farm house at Bijwasan, Delhi was purchased by both the brothers on 08.12.2011 for a total consideration of Rs.1,32,50,000/- with each brother having 50%, the AO allowed the exemption u/s 54 of the Act to the brother while scrutinizing the return of income u/s 143(3) and though the property sold, property purchased and attended circumstances are identically placed, he has chosen to deny the exemption in case of the assessee which is not correct on the part of the AO.
While placing reliance reported in Radha Swami Satsang vs CIT 193 ITR 321 (SC) [RP 329], Ld.AR submitted that a similar view had to be taken in the matter wherein the facts are identical, and Rule of Consistency shall not be violated without any compelling reasons. On merits, it is the submissions of the Ld.AR that the Sale Deed dated 08.12.2011 under which the assessee and his brother purchased the property clearly shows that there exists same structure and the report dated 23.03.2015 of the Government approved architect shows that such a structure is an RCC residential unit consisting of two bed rooms, kitchen, toilet, lobby and open varanda. He further submitted that prior to purchase of the property by the assessee, the RCC structure was under the occupation of Sh. Nand Kishore who was residing there with his family. According to the assessee, there existed electricity connection to the property purchased by the assessee and his brother on the name of the earlier owner and it is only for a new connection the assessee applied and obtained in the month of March 2015. Ld.AR submitted photographs to show the existence of a habitable residential unit with electricity power, water and sanitation in the property purchased under the Sale Deed dated 08.12.2011. Insofar as the observation of the AO, basing on the reports of the Income Tax Inspector and the Sub-Divisional Magistrate, is concerned, it is the submissions of the Ld.AR that the Income Tax Inspector is not qualified person to certify the structural soundness or the habitability of any house and it is only the architect that is competent to perform such duties. As a continuation of these submissions, Ld.AR stated that the Government Approved Valuer/Architect, by report dated 23.03.2015, provided a plan relating to the constructed area thereby, establishing the existence of the RCC residential unit consisting of two bed rooms, kitchen, toilet, lobby and open varanda with the facility of electricity and water. According to him, all these facilities establish beyond any doubt that the structure is fit for human dwelling and when once this is believed, the question whether or not the assessee resides in such building becomes irrelevant because it is not the requirement of law u/s 54 of the Act for claiming exemption. On the aspect of the report dated 12.01.2015 of the SDM, Kapashera, New Delhi, Ld.AR submits that the report only says that according to the record available with them, property was registered as an agricultural land and there is no whisper therein as to the existence or non-existence of any structure thereon. In this context, it is the submission of the Ld. AR that the observations of the AO as to the non-availability of approved plan of construction are of no consequence at all, since no condition is attached u/s 54F of the Act that the building plan of the residential house constructed, should be approved by the Municipal Corporation or any other Competent Authority.
Ld.Sr.DR vehemently relied on the orders of the authorities below and submitted that the structure meant for business, search, guard/security purpose is not qualified for exemption u/s 54F of the Act and after considering the material in the shape of the electricity bills, photographs etc., Ld. CIT(A) rightly reached the conclusion that the alleged structure in the property purchased by the assessee, was meant for the security/guards and not for the residence of the assessee. He, therefore, submits that there are no reasons to interfere with the orders of the authorities below.
We have carefully gone through the record. Report dated 13.01.2015 of the Sub-Divisional Magistrate placed at page No.41 of the Paper Book only says that the property was registered as agricultural land. It does not speak anything as to the existence or non-existence of any structure or habitable thereof. However, Assessment order itself reads that there exists a structure.
It is based on the report of the Inspector posted in the Ward. Now the dispute revolved around the question whether such a structure is habitable or not with reference to its eligibility for exemption u/s 54 of the Act. According to the authorities below, such a structure is not a house, has not been used by the assessee for his residential purpose, but it is only a small constructed area for guarding purposes. First of all, whatever may be the use the structure is put to, relevant question is whether it is useful for the purpose of dwelling, whether by the assessee or his guards. In view of the decisions reported in Amit Gupta vs DCIT 6 SOT 403 (Del.); Smt. Pushpalata Kanodia vs WTO 92 ITD 500 (Hyd) wherein it is held that in order to certify that a house is fit for human habitation, it is not necessary that there should be of modern amenities that are required for posh and luxurious living or that the assessee should reside therein. It is further held that the term “house” commonly means a room covered by walls and a roof. In this context, we proceed to examine whether the so-called structure in the property purchased by the assessee could be a house within the meaning of section 54F of the Act.
By way of Page No.80 to 82 of the Paper Book, 12 photographs are produced on behalf of the assessee and these are attested by the Government of India Approved Valuers by name Chadha & Associates. These photographs clearly show the existence of the RCC Unit with the rooms, roof, kitchen facility, windows and one varanda. One of the photographs clearly shows the existence of toilet in this unit. There is a well and a pathway with plant fencing on either side. One borewell with pipes is also sent. Further ceiling fans and arrangements for sitting in front of the structure are there. Page 19- 20 of the Paper Book are the architectural plan and the report of the architect who are the Government of India Approved Valuers. The architect/govt. approved valuer report dt. 23.03.2015 shows the plan of constructed area which clearly shows the existence of RCC residential unit consisting of two bedrooms, kitchen, toilet, lobby and open varanda. This certificate remains undisputed. The architectural plan shows the existence of two bed rooms for the said structure. The report shows that there has been a domestic electricity connection and also availability of a tube well which is the main source of water supply of their unit. There exists the facility for the disposal of the sewage. Page No.18 of the Paper Book shows that there was an electricity bill for the disconnected electricity connection and the date of print out of such bill was on 11.03.2015. It clearly shows that there existed electricity connection prior to the electricity connection obtained by the assessee as on 13.03.2015. and other sanitation clearly makes out a case for the assessee that there exists a structure in the property and it was fit for human dwelling. When once the assessee established that there existed a human dwelling in the property purchased by them, whether or not other facilities befitting the lifestyle of the assessee are available, or whether the assessee is residing there or not, are totally irrelevant considerations to deal with the matter for exemption u/s 54F of the Act, in view of the decision rendered to above. Further in Shyam Sunder Mukhija vs ITO [1991] 38 ITD 125 (JP), a Co-ordinate Bench of this Tribunal held that a farm house can also to be treated as residential house and thus eligible for exemption u/s 54F of the Act. Apart from this, it is the observation of the AO as well as the Ld.CIT(A) that guards were residing in the structure, existing in the property purchased by the assessee.
Further there is no denial from the Revenue that the report of income of the brother of the assessee i.e. once Sh. Lalit Sabharwal was scrutinized u/s 143(3) of the Act and exemption u/s 54 of the Act, was allowed to him. It is not the case of the Revenue either the property that was sold or the property that was purchased by two brothers stand on different footings. It is only the matter of extent of ownership. In both the properties, the assessee and his brother claimed 50% of ownership. In view of the decision in the case of Radha Swami Satsang vs CIT 193 ITR 321 (SC) [RP 329], rule of consistency, therefore, demands that identical view has to be taken in cases of identical facts.
With this view of the matter, we are of the considered opinion that the assessee established that the structure existing in the property purchased under Sale Deed dated 08.12.2011 answers the description of expression “residential house” and the assessee is entitled to claim exemption u/s 54 of the Act. We, therefore, find it difficult to sustain the view taken by the authorities below, as such we direct the AO to delete the addition made on this ground.
In the result, the appeal of the assessee is allowed.
The order is pronounced in the open court on 16th October, 2017.