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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: Shri G S Pannu & Shri Pawan Singh
O R D E R Per G S Pannu, Accountant Member
The captioned four appeals pertain to two different assessees belonging to the same family and involve certain common issues therefore, they have been clubbed & heard together and consolidated order is being passed for the sake of convenience and brevity.
The cross appeals in the case of Abhishek Lodha in & 2260/Mum/2016 are being taken up as lead case in order to appreciate the controversy. These are appeals directed against the order of the CIT(A)-48, Mumbai, dated 04.01.2016, which in turn has arisen out of the order passed by the Assessing Officer u/s. 153A r.w.s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) relating to A.Y. 2009-10.
The respective grounds of appeal raised by the assessee and the Revenue read as under:
1) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance of deduction u/s 54F on the payment of Rs 50,00,000 made on 20/02/2010 as this amount was paid beyond the due date of filing return of income u/s 139(1), and the appellant had not deposited any amount in capital gain scheme; ignoring the fact that this amount was paid within three years of earning the Long term capital gain through sale of shares.
2) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance of deduction u/s 54F on the payment of Rs 75,00,000 made on 18/01/2012 as this payment was made beyond the period of three years of earning the Long term capital gain through sale of shares; ignoring the fact the appellant was wholly committed to making this payment on 01/04/2010, the day possession was taken. ITA No.2660/Mum/2016
"On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing exemption u/s 54F to the extent of Rs. 14,75,00,000/- without appreciating the fact that the assessee has purchased three flats which -were converted to one flat with a single kitchen and also purchased another house within the period of two years from the transfer of the shares as a fourth flat had been acquired by the assessee in lieu of surrender of tenancy rights. "
2. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing exemption u/s 54F to the extent of Rs. 14,75,00,000/- without appreciating the fact that the Supreme Court in the case ofT.N. Aravinda Reddy {120 ITR 0046} held that relinquishment of rights in lieu of a house amounted to purchase and as such, flat acquired on surrender of tenancy right is nothing but purchase of a new house. " 4. A perusal of the Grounds reveal the sum and substance of the dispute between the assessee and the Revenue arises from the assessee’s claim for exemption u/s. 54F of the Act amounting to ` 15,78,21,179/-. Before taking up respective stands, brief background of the dispute can be summarized as follows. In the course of assessment proceedings, the Assessing Officer noted that the assessee had declared a Long term capital gains of ` 15,78,64,479/- on sale of shares of M/s. Lodha Developers P. Ltd., against which it had claimed exemption u/s. 54F of the Act. The exemption u/s. 54F of the Act was claimed on the ground that three flats, being 1701, 1702 and 1703 in Lodha Costeria, Nepean Sea Road, Mumbai, were acquired by the assessee for a total consideration of ` 16 crore. On account of the purchase of such residential units, assessee claimed exemption u/s. 54F of the Act to the extent of Long term capital gains of ` 15,78,12,238/-. The Assessing Officer disallowed assessee’s claim for exemption u/s. 54F of the Act primarily on two grounds; firstly, qua the acquisition of new residential house, it was noted that the assessee had purchased three flats in Lodha Costeria, Nepean Sea Road, Mumbai, for a consideration of ` 16 crore and one more flat i.e. 1704 was also allotted to the assessee in lieu of tenancy right in Krishna Kunj Building, Nepean Sea Road, Mumbai. The claim of the assessee was that all the four units constituted one residential house, in as much as, the same were being used as a common house with common kitchen and common passage. The Assessing Officer however, disagreed and held each flat to be an independent residential unit and, according to him the assessee had purchased three residential houses and, therefore, was ineligible for exemption u/s. 54F of the Act. Secondly, the Assessing Officer noted that the fourth flat acquired by the assessee in lieu of tenancy rights was an independent new asset acquired within a period which was prohibited by the proviso to clause (a) (ii) of Section 54F(1) of the Act and, therefore, on this count also assessee was not eligible for deduction u/s. 54F of the Act. Pertinently, in the assessment order the aforesaid two reasons prevailed when the Assessing Officer denied claim of exemption u/s. 54F of the Act. However, in the course of appellate proceedings before the CIT(A), the Assessing Officer raised another objection which was to the effect that the assessee had used borrowed monies for purchase of three residential units and, therefore, for this reason also the claim of exemption u/s. 54F of the Act was not allowable.
The CIT(A) has since considered all the three objections and, has in principle, upheld assessee’s claim for deduction u/s. 54F of the Act. The order of the CIT(A) shows that he called for a remand report from the Assessing Officer with the object of verifying the fact as to whether the four flats are being used as one common house with common kitchen and common passage. In para 4.4 of his order, the CIT(A) has reproduced the relevant portion of the remand report of the Assessing Officer, which was based on his spot visit, in terms of which the Assessing Officer confirmed that the four flats were in the form of single dwelling unit consisting of long passage attached to the hall and bedroom and there is one kitchen unit in the four flats on same floor.
On the basis of the aforesaid remand report, the CIT(A) relied upon the judgment of Hon’ble Bombay High Court in the case of CIT vs. Devdas Naik (ITA 2483 of 2011) and held that multiple units purchased by the assessee would constitute one residential house for the purpose of section 54F of the Act, provided if there was only one kitchen. Since in the instant case it was factually found that there was only one kitchen, he therefore, did not find that the purchase of multiple flats by the assessee constituted any bar in claiming exemption u/s. 54F of the Act. Secondly, with regard to the stand of the Assessing Officer that the assessee has purchased one new residential house i.e. Unit No.1704 received in lieu of tenancy rights, the CIT(A) noted that factually assessee had not claimed exemption with respect to the cost of the said flat and, further, he noted that undisputedly, Unit No.1704 was not an independent residential unit but comprised of one residential house with common entrance and common kitchen as accepted by the Assessing Officer in the remand report. Thus, so far as the reasons taken by the Assessing Officer in the assessment order to deny the claim of exemption u/s. 54F is concerned, the CIT(A) disagreed with the Assessing Officer. This decision of the CIT(A) is challenged by the Revenue by way of aforestated Grounds of appeal
The third objection of the Assessing Officer taken during the appellate proceedings to the effect that borrowed funds were used by the assessee to acquire the three flats, also did not find favour with the CIT(A). On this aspect also the CIT(A) relied upon the judgment of Hon’ble Bombay High Court in the case of CIT vs. Dr. P S Parischa (ITA 1825 of 2009). As per the CIT(A) there is no requirement in law that only the original sale proceeds from the old asset were to be utilized for the purchase of the new residential house, and that the only requirement of law was that assessee should purchase the new residential house within specified period and that the source of funds is quite irrelevant. Notably, this aspect of the controversy has become final in as much as the Revenue has not raised any specific plea in the Grounds of appeal on this aspect.
8. Be that as it may, after disagreeing with the stand of the Assessing Officer to deny exemption u/s. 54F of the Act, the CIT(A) examined the schedule of payments made by the assessee for acquisition of the new flats. The CIT(A), in particular, noted that the requirement was to have invested the monies in acquisition of the new residential unit within a period of one year before or after two years from the date of transfer of the original asset. The CIT(A) also noted that the assessee was required to deposit the unspent money in the Capital gains scheme account before the due date of filing of return u/s. 139(1) of the Act. In the instant case, the CIT(A) found that the due date of filing the return specified u/s. 139(1) was 30.09.2009 and that assessee had not deposited any sum under the Capital gains scheme. Therefore, he found that the payments of ` 50 lacs and ` 75 lacs out of the total payment of ` 16 crore were made by the assessee on 20.02.2010 and 18.01.2012, which were beyond the stipulated dated i.e. 30.09.2009. Therefore, he held that assessee is eligible for exemption u/s. 54F of the Act only to the extent of ` 14,75,00,000/- i.e. ` 16 crore invested in purchase of residential unit minus ` 1,25,00,000/- (50 lacs + 75 lacs) paid beyond the date specified u/s. 139(1) of the Act. This partial denial u/s. 54F of the Act is the subject matter of the appeal preferred by the assessee before us.
9. As the aforesaid discussions show, the cross -Grounds relate to assessee’s claim of exemption u/s. 54F of the Act therefore, the same are being taken up together for adjudication. In so far as the Grounds raised by the Revenue are concerned, the learned DR has supported the same by referring to the reasoning adopted by the Assessing Officer in the assessment order, which we have already adverted to in the earlier paras and is not being repeated for the sake of brevity. Pertinently, the factual report submitted by the Assessing Officer in the remand proceedings before the CIT(A) clearly brings out that all the four units constituted one house having common entrance & common kitchen and, therefore, on the basis of the test laid down by the Hon’ble Bombay High Court in the case of Devdas Naik (supra), the CIT(A) has made no mistake in treating the same as a single residential unit for the purpose of section 54F of the Act. The aforesaid position continues to prevail before us and, therefore, we find no reasons to distract from the conclusion of the CIT(A) on this aspect, which is in line with the ratio of Hon’ble Bombay High Court in the case of Devdas Naik (supra). For the same factual reason that the four flats constitute one residential unit, the other plea of the Assessing Officer that Unit No.1704 was an independent residential unit is also not tenable. The remand report submitted by the Assessing Officer before the CIT(A) clearly establishes that the fourth unit is neither a single asset nor independent residential house and, in fact, in para 4.8 of his order, the CIT(A) categorically records that all the flats were allotted to the assessee on the same date i.e. 01.04.2010. Furthermore, the CIT(A) noted that the fourth flat was received by the assessee in lieu of surrender of tenancy rights and it was not acquired against “price in money”. In this situation, the CIT(A) referred to the judgment of Hon’ble Supreme Court in the case of CIT vs. T N Aravinda Reddy (120 ITR 46) to say that acquisition of fourth unit could not be construed as ‘purchase’ since it was not against “price in money”. For the aforesaid reasons, CIT(A) held that it could not said that acquisition of the fourth flat constituted new asset so as to deny the assessee’s claim for deduction u/s. 54F of the Act. Though the Revenue has contested the aforesaid decision of the CIT(A), we find no cogent reasons to interfere with the conclusion drawn by the CIT(A), which, in our view, is quite appropriate in the facts of the case and also on point of law. Thus, so far as the appeal of the Revenue s concerned, the same is hereby dismissed.
On the issue of quantum of exemption allowable to the assessee u/s. 54F of the Act, though the assessee has raised two grounds of appeal but at the time of hearing only one short point has been raised. The short point is to the effect that the CIT(A) while considering the total cost incurred by the assessee for acquiring the three flats wrongly noted the same at ` 16 crore whereas the correct amount is ` 16,81,77,850/-. In this context, the learned representative pointed out that though the assessee does not dispute the non-entitlement of deduction u/s. 54F of the Act qua the amounts of ` 50 lacs and ` 75 lacs, so however, on ` 81,77,850/- assessee would be eligible for the benefit u/s. 54F of the Act. The learned representative quite fairly submitted that this aspect has not been verified by the lower authorities and that the assessee would be satisfied if the same is set aside to the Assessing Officer to be verified by him and allowing of appropriate relief. On this prayer of the assessee, the learned DR had no objection in principle.
Having considered the rival stands, we find that the total cost of the new house claimed by the assessee is to the tune of ` 16,81,77,850/- as against ` 16 crore noted in the orders of the lower authorities. In our view, if the assessee is able to satisfy that spending of ` 81,77,850/- is also within the stipulated period and meets the other conditions prescribed u/s. 54F, the same deserves to be considered for computing the eligible exemption. Since this involves appreciation of factual aspects, for this purpose, we deem it fit and proper to restore the matter back to the Assessing Officer, who shall examine the said limited plea of the assessee and, thereafter compute the eligible exemption u/s. 54F of the Act as per law. Needless to mention, the Assessing Officer shall allow the assessee reasonable opportunity of being heard and thereafter pass an order limited to the aforesaid aspect as per law.
The appeal of the Revenue is dismissed and that of the assessee is partly allowed.
In so far as the other cross grounds in the case of Abhinandan Lodha in & 2661/Mum/2016 are concerned, it was on a common ground between the parties that the facts and circumstances of the case are identical to those in the case of Abhishek Lodha (supra). Therefore, our finding in the cross appeals in ITA Nos.1993 & 2660/Mum/2016 in the earlier paras shall apply mutatis mutandis in these appeals also.
Before parting, it is to be mentioned that the total investment in new property claimed by the assessee is ` 16,81,82,220/- as against ` 16 crore considered by the CIT(A). In this case also the CIT(A) restricted the claim of exemption to ` 14,75,00,000/- as against ` 15,78,12,288/- claimed by the assessee by holding that the amount of ` 1,25,00,000/- (50 lacs + 75 lacs) was paid beyond the period prescribed u/s. 139(1) of the Act. In this case also the Assessing Officer is directed to examine the assessee’s claim for exemption in the context of ` 81,82,220/- in the same manner as has been directed by us in the earlier para in the case of Shri Abhishek Lodha.
Resultantly, so far the Revenue’s appeals concerned, the same are dismissed those by the assessees are partly allowed.
Order pronounced in the open court on 30th May, 2018.