ITO 12(3)(4), MUMBAI vs. MAHENDRA A GANDHI, MUMBAI

घोषणा क� तार�ख /Date of Pronouncement: 22.06.2016 आदेश / O R D E R PER AMARJIT SINGH, JM:

This order shall disposed of the above mentioned appeals filed by the assessee as well as by the revenue against the order dated 21.11.2012 passed by the Commissioner of Income Tax (Appeals) 23, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009-10. These appeals are being taken up together for adjudication being these appeals have been arose by the single order vide which the parties are also the same and the matter of controversy can conveniently be adjudicated by a single order.

"1. The learned CIT(Appeal) erred in not allowing WDV of fixed assets worth Rs.7,23,907/- against sale consideration of tenanted property. The Learned CIT has not considered or refer letter dated 06.03.2012 of M/s.Dhwani Mercantile Pvt. Ltd. stating “that consideration of surrender paid to him was inclusive of furniture fixtures fitting etc lying the aforesaid office premises of no communication value to us.”

"1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,31,91,5550/- without appreciation the fact that the assessee has paid full cost of acquisition of the new asset for which the deduction u/s.54F has been claimed.

2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs.1,31,91,550/- without appreciating the fact that the assessee can claim exemption u/s.54F with respect to one residential house which has already been purchased by the assessee and there is nothing left on which the assessee can claim the exemption u/s.54F. Hence, the assessee will &1206/M/13 A.Y. 2009-10 not be able to claim the deduction u/s.54F. Hence, the assessee will not be able to claim the deduction u/s.54F on the amount deposited in the Capital Gain A/c. Scheme.

3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,31,91,550/- without appreciating the fact that the assessee has not / could not subsequently utilized this amount for the purpose of the new asset on which deduction u/s.54F has been claimed.

4. On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) is right in holding that assessee will be entitled for exemption u/s.54F on the balance amount deposited in the Capital Gain A/c Scheme left after when the assessee has already purchased a new asset and full cost of acquisition of new asset purchased has been paid by the assessee.

5. Issue no.1 raised by the assessee is in connection with the disallowance of Long Term Capital Gain to the tune of Rs.7,23,907/- in connection with the furniture and fixtures attached with the transfer of tenancy rights. The Assessing Officer noticed that the assessee transferred tenancy rights in a property for a total consideration of Rs.2.75 crore against whom he claimed cost of furniture at Rs.7,23,902/-. It was also noticed by the Assessing Officer that the &1206/M/13 A.Y. 2009-10 property was in possession of M/s.A.K.Industires, a partnership firm in which assessee was a partner along with his father Shri Amritlal Kersardas Gandhi. The rent receipt was originally in the name of his father. By virtue of family arrangement, an agreement dated 4th December, 1997, the tenancy right was confirmed to be belonging to Shri Mahendra Amritlal Gandhi which was also indemnified subsequently by all family members in the declaration cum indemnity bond executed on 12th May, 2008. The tenancy right was transferred to the landlord M/s.Dherani Finance and Investment (P) Ltd. vide agreement dated 12th May, 2008. It has specifically mentioned in the agreement that the above consideration was paid for surrendering of tenancy right and no other assets. In view of this, the assessee was asked to justify the claim of cost of furniture at Rs.7,23,902/- against receipt of tenancy rights. The explanation of the assessee is that tenancy property was given with all the structure as it was and hence only cost was adjusted against furniture. The furniture is taken separately, it would not have given any value and had to be scraped. There was no possibility of having any short term capital gain on sale of furniture. Since the Assessing Officer was not satisfied, therefore declined the claim of the assessee which was also confirmed by the CIT(A). The tenancy right has only been surrender in the property and there is no transfer of any kind of furniture and fixture in the lease deed. Transfer of furniture and fixture is not part and parcel of the agreement entered into by the appellant with the landlord. There is no &1206/M/13 A.Y. 2009-10 bifurcation of the value of surrendering of furniture and fixture. Earlier the tenancy property was in possession of A.K. Industries in which assessee was a partner with his father. No doubt at this time the furniture and fixture if any was belonging to the partnership firm. The assessee has no right to claim the ownership of furniture and fixture of the partnership firm. Since agreement dated 12th May 2008 nowhere speaks about the transfer of furniture and fixture, therefore, in the said circumstances the claim of the assessee with regard to the furniture and fixture does not seem justifiable, therefore, CIT(A) has no doubt rightly confirmed the order passed by the Assessing Officer which does not require to be interfere with at this appellate stage. Hence, this issue is decided in favour of the revenue and against the assessee.

I.T.A. No.131/M/13 (Revenue’s Appeal):-

“4.3 I have carefully perused the assessment order and appellant’s submission. The assessee has received consideration of Rs.2,75,00,000/- on transfer of tenancy right and after claiming brokerage he received the net consideration at Rs.2,71,50,000/-, out of which a sum of Rs.30 lac was invested in REC bonds and an amount of Rs.1,07,58,450/- was invested in the house property. The balance amount of Rs.1,31,91,550/- which remained unutilized was deposited in Capital Gain Saving Account Scheme which will be taxed after the expiry of three years after the date of transfer of long term capital asset i.e. on 17.05.2011 relevant to assessment year 2012-13 as per the provision of sub section 4 of section 54F of the I.T.Act. The appellant has stated that he has already paid tax of Rs.25,68,337/- on 29.08.2011 consequent to the withdrawal of the money from his Capital Gains Deposit Saving Account. Proviso (i)(a) and (b) of sub section (4) of section 54F reads as under:

&1206/M/13 A.Y. 2009-10

“that if the amount deposited under this sub-section is not utilized wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then –

(i) the amount by which – (a) the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1), exceeds (b) the amount that would not have been so charged had the amount actually utilized by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset, shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw the unutilized amount in accordance with the scheme aforesaid.

Hence, the action of the A.O. in restricting the exemption u/s.54F without considering the fact, that the balance amount remained with the assessee after the purchase of house property &1206/M/13 A.Y. 2009-10 was deposited in Capital Gains Deposit Saving Account, is not in accordance with the provisions of Income Tax Act. Hence, this ground of appeal is allowed.”

6.1 In view of the finding mentioned above apparently, the assessee has received consideration of Rs.2,75,00,000/- on transfer of tenancy right and after claiming brokerage he received the net consideration to the tune of Rs.2,71,50,000/-, out of which a sum of Rs.30,00,000/- was invested in REC Bonds and amount of Rs.1,07,58,450/- was invested in house property. The balance amount of Rs.1,31,91,550/- remained unutilized was deposited in Capital Gain Saving Account Scheme which will be taxed after the expiry of three years after the date of transfer of Long Term Capital Asset i.e. on 17.05.2011 relevant to assessment year 2012-13 as per the provisions of sub section 4 of section 54F of the Act. The appellant paid the tax to the tune of Rs.25,68,337/- on 29.08.2011. Consequently, the withdrawal of the money from his Capital Gain Deposit Saving Account nowhere attract the tax. No doubt in the said circumstances the CIT(A) has rightly decided these issues in favour of the assessee and against the revenue and these issues are also does not require to interfere with at this appellate stage hence these issues are decided in favour of the assessee and against the revenue.

Order pronounced in the open court on 22nd June, 2016.