B.RAJASEKARAN,SALEM vs. ITO, SALEM

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ITA 1215/CHNY/2014Status: DisposedITAT Chennai05 August 2016AY 2009-105 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee's payment towards his own share of the property redeemed from the bank loan cannot be considered an investment for exemption under Section 54. Only the amount paid to acquire his brother's share could be considered an investment.

What were the facts?

The assessee claimed exemption under Section 54 for the entire amount paid to redeem an ancestral property mortgaged for a bank loan. The property was jointly owned by the assessee and his brother. The assessee paid the entire loan amount to redeem the property.

What were the issues?

Whether the entire amount paid to redeem a jointly owned ancestral property mortgaged for a loan qualifies for capital gains exemption under Section 54. Whether the redemption of one's own share in a mortgaged property constitutes an 'investment' for the purpose of Section 54.

Which sections of the Income-tax Act were involved?

Section 54,Section 50C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY

For Respondent: Shri Sahadevan, JCIT
Hearing: 08.06.2016Pronounced: 05.08.2016

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

1.

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Salem, dated 28.02.2014 and pertains to assessment year 2009-10.

2.

Shri G. Baskar, the Ld.counsel for the assessee, submitted that the assessee along with his family members sold a property by name Palace Theatre measuring 46124 sq.ft. for a total consideration of `4,61,62,020/- during the year under consideration.

The market value of the property for the purpose of capital gain was fixed at `5,86,14,700/- under Section 50C of the Income-tax Act, 1961 (in short 'the Act'). According to the Ld. counsel, the assessee was in receipt of 1/4th share of proceeds from the sale of the land. According to the Ld. counsel, the property was offered for security for a bank loan. When there was default in repayment of loan, the assessee cleared the entire due and took possession of the building. According to the Ld. counsel, the property belongs to assessee and his brother Late B. Radhakrishnan. It is an ancestral property for both. The assessee cleared bank debts on the family property. Therefore, according to the Ld. counsel, the assessee should be given exemption under Section 54 of the Act in respect of the entire claim.

3.

On the contrary, Shri Sahadevan, the Ld. Departmental Representative, submitted that the assessee and his brother Late Radhakrishnan offered the property in question as security for availing the loan. In fact, the loan could not be repaid and the assessee paid the entire amount and redeemed the property from the bank loan. The assessee claimed the entire payment of `52,50,000/- as exempted under Section 54 of the Act. According to the Ld. D.R., the property in question belonged to assessee and his brother in equal share. The assessee paid the amount for redeeming of his own share and his brother’s share. At the best, we can say that the assessee has purchased the house belonging to his brother Late Radhakrishnan to the extent of `26,00,000/-. In respect of another half share of the property, it remains with the assessee and the assessee has repaid the loan and redeemed the property, therefore, according to the Ld. D.R., the share which belonged to the assessee cannot be construed as purchased / investment in the residential house. At the best, the investment can be with regard to the share of his brother at `26,00,000/-, therefore, according to the Ld. D.R., the CIT(Appeals) has rightly restricted the claim at `26,00,000/-.

4.

We have considered the rival submissions on either side and perused the relevant material available on record. The assessee claimed exemption for `52,00,000/- in respect of repayment of loan to the bank claiming that it is an investment in the property. It is an admitted fact that the property is an ancestral house of the assessee and his brother. The same was offered as security for availing the loan. When the loan could not be repaid, the same was redeemed by the assessee by paying a sum of `52,50,000/-. The assessee now claims exemption under Section 54 of the Act for the amount of `52,50,000/-. The CIT(Appeals) found that the assessee is entitled to half share in the property, therefore, repayment of loan with regard to half the amount cannot be construed as investment or purchase of property. At the best, it can be construed as purchase of property with regard to half share of the property belonging to the assessee’s brother Late Radhakrishnan. The assessee appears to have obtained his brother’s share from his brother’s wife and sons on relinquishing their rights in the joint property for a consideration of `26,00,000/-. Therefore, this Tribunal is of the considered opinion that the investment has to be restricted only to `26,00,000/-.

In respect of other share, namely, the share belonging to the assessee, the payment was made to the bank only for the purpose of redeeming the property and it cannot be construed as investment. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

5.

In the result, the appeal filed by the assessee is dismissed.

Order pronounced on 5th August, 2016 at Chennai.

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