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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI D.KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the assessee against the order of CIT(A)-3, Pune, dated 22-11-2017 for the A.Y. 2013-14.
Grounds raised by the assessee are extracted as under :
“1. On the facts and in the circumstances of the case and in law the Ld.CIT(A) was not justified in upholding the addition of Rs.1,58,25,000/- made by the A.O. on account of sale consideration received by assessee on account of sale of Land which was subject to Long Term Capital Gain and computation was submitted before A. O. Both the authorities erred in not considering and appreciating the submissions made before them. The order of assessment and that of the Ld. CIT(A) be set aside for denovo consideration. 2. On the facts and in the circumstances of the case and in law the sale of Rs. 1,58,25,000/- which was the asset of the HUF of the assessee also belonged to the said HUF. The authorities were not justified in treating the submissions of the appellant as 'afterthought' to deny the exemption claimed u/s 54F of the Act. The status of HUF as per personal law of the assessee was not created by him but was out of his statutory rights. That cannot
be denied to it. The status of HUF being separate and independent statutory position the said HUF was entitled for exemption u/s 54F of the Act.
On the facts and in the circumstances of the case and in law the assessee/appellant and his brother received some property as per partition Deed executed on 24-9-1985 of ancestral property. After the death of his brother in the year 20-7-2011 the widow of late Ratnakar, Brother of the assessee, made gift of the property that is subject land originally being ancestral property in favour of the appellant. The assessee showed this sale transaction in his individual income. The incorrect declaration of the status that is 'Individual' instead of HUF does not obliterate the rightful ownership of the HUF. In the circumstances and sale consideration having invested in the residential property the assessee was entitled to exemption u/s 54F as claimed. It be allowed accordingly.
On the facts and in the circumstances of the case and in law the long term capital gain was assessable in the hands of HUF with statutory indexation of the cost of acquisition of land to be adopted FMV as on 1-4-1981. This legal position though brought to the notice of the authorities was ignored. The serious type of prejudice is caused to the assessee. The directions be issued to authorities below to follow the correct legal position by setting aside the assessment order.
On the facts and in the circumstances of the case and in law the property that is subject land was gifted to 'bounty' of the HUF by the widow of Ratnakar (since deceased) and as per the Hindu Succession Act, 1956 it became the property of the HUF. The sale of land was of the HUF property and accordingly the Long Term Capital Gain belonged to HUF. Its investment in the residential house was entitled to be exempted u/s 54F of the Act. In view of this the Ld. CIT(A) was not justified in confirming the addition of Rs. 1,58,25,000/- in the hands of individual status. The addition be deleted.
On the facts and in the circumstances of the case and in law the authorities below considered only the legal position existent on the statute after 01-04-2015. Before amendment that is prior to 01-04-2015, the assessee was entitled to exemption u/s 54F even if he owned more than one house in addition to new asset. The Legal position was not properly appreciated. It be held accordingly.
The appellant craves to leave, add/amend or alter any of the above grounds of appeal.”
Briefly stated relevant facts are that the assessee is an
individual and is engaged in the business of Food processing of
fruits and vegetables. Assessee filed the return of income declaring
total income of Rs.54,94,550/- and reported earning of capital
gains and investment of the same partly in the new residential
house at Pristine Fontana, Bavdhan, Pune and claimed exemption u/s.54F of the Act in respect of said reinvestment. Contents of Para 7 of the assessment order are relevant. At the end of the assessment proceedings, the AO determined the income at Rs.1,50,94,550/-. In the assessment, the allowability of exemption u/s.54F of the Act was the bone of contention.
Giving brief facts of this issue, Ld. Counsel for the assessee submitted that the assessee owns a house at Vatsal Apartment, Mayur Colony, Pune and the same is held in the name of the assessee-individual. Further, assessee also has a share of property in the flat located at Pristine Fontana, Bavdhan, Pune. During the year under consideration, assessee sold agricultural lands at Nashik for a sum of Rs.1,58,25,000/-. Out of the same, Rs. 91 lakhs was reinvested in another house again located near Mayur Colony, Pune (new asset). In the return of income, assessee claimed deduction u/s.54F of the Act in respect of the investment of Rs.91 lakhs made in this year. However, the AO denied the said exemption on the ground that assessee already owns more than one residential house other than the new asset. Discussion given in Para Nos. 6 and 7 of the assessment order is relevant. Aggrieved with the order of AO assessee filed an appeal before the CIT(A).
In the First Appellate proceedings, assessee mentioned that he is a shareholder in the residential house at Pristine Fontana, Bavdhan, Pune and the said flat was purchased out of the HUF funds. Therefore, it constitutes a HUF property and not owned by the assessee-individual. Therefore, the same should not be considered as another house owned by the assessee. However, CIT(A) rejected the said submission of the assessee and proceeded
to confirm the same as per the discussion given in Para Nos. 5.3.2
to 5.3.5 of his order.
Aggrieved with the order of CIT(A) the assessee filed the
present appeal before the Tribunal with the grounds extracted
above.
During the proceedings before us, the issue relating to the
ownership of the flat at Pristine Fontana, Bavdhan, Pune was the
dominant issue in the debate. It is the claim of the assessee’s counsel
that the said residential house is not owned by the assessee in his
individual capacity. The flat is registered in the name of the assessee
and his wife but in their capacity as HUF. The said flat was purchased
out of the HUF funds. Elaborating the same, Ld. Counsel for the
assessee submitted that the HUF has agricultural lands and the said
amount gave rise to agricultural income. The said HUF income was
shared among the co-parceneries. Out of HUF income, the said income
was given by his brother-kartha by depositing in the bank account of
the assessee. The same constitutes the source for purchase of the flat
at Pristine Fontana, Bavdhan, Pune. From these facts and perspective,
the said flat do not belong to the assessee individual. Therefore, the
assessee is entitled to claim deduction u/s.54F of the Act in respect of
the investment of Rs.91 lakhs.
However, bringing our attention to the contents of Para No.5.3.2
of the order of CIT(A), Ld. DR for the Revenue submitted that there are
number of lacunae in the above explanation of the assessee. The facts
about furnishing the return of income by the HUF, earning of
agricultural income by HUF and transferring of the same to the bank
accounts of the HUF, facts relating to the undertaking of the
agricultural activities in the said HUF lands etc., were not demonstrated
by the assessee. Therefore, when an exemption is claimed, the onus is
on the assessee to discharge the same by furnishing the credible
evidences/explanation in support of his claims.
On hearing both the parties on this limited issue if the residential
house at Pristine Fontana, Bavdhan, Pune belongs to the assessee
individual or HUF, as mentioned in the court, we find this issue
requires remanding to the file of AO. Ld. Counsel for the assessee
submitted that he shall file relevant data relating to the issue discussed
above before the AO in the remand proceedings. He also mentioned that
in case assessee failed to do so, the AO may repeat the additions by way
of denial of exemption u/s.54F of the Act in respect of the new asset
purchased during the year under consideration. Accordingly, we
remand the issue to the file of AO and set aside grounds to the file of AO
for fresh adjudication. Needless to say, AO shall grant reasonable
opportunity of being heard to the assessee in accordance with the set
principles of natural justice. Thus, grounds raised by the assessee are
allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical
purposes.
Order pronounced in the open court on this 26th day of March, 2018.
Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य
पुणे Pune; �दनांक Dated : 26th March, 2018 सतीश
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत
अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A)-3, Pune 4. CIT-3, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “B Bench” Pune; 5. गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune