B.RAJASEKARAN,SALEM vs. ITO, SALEM

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.

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.

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/-.

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