Ramnikbhai Sheladia,, Ahmedabad vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL " B " BENCH, AHMEDABAD (BEFORE SHRI SHAILENDRA Kr. YADAV, J.M.& SHRI ANIL CHATURVEDI, A.M.)

I.T. A. No. 332 /AHD/2013 & C.O. No. 181/AHD/2013 (Assessment Year: 2008-09)

The D.C.I.T. (OSD), Circle- V/S M/s. Shri Ramniklal M. 9, Ahmedabad Sheladia 24, Pushpak Bunglows, B/H. Lad Society, Bodakdev , Ahmedabad (Appellant) (Respondent)

M/s. Shri Ramniklal M. V/S The D.C.I.T. (OSD), Circle- Sheladia 24, Pushpak 9, Ahmedabad Bunglows, B/H. Lad Society, Bodakdev , Ahmedabad (Appellant) (Respondent)

PAN: ADRPS 2492Q

Appellant by : Shri Roopchand, Sr. D.R. Respondent by : Shri Tushar Hemani

(आदेश )/ORDER

Date of hearing : 27-01-2015 Date of Pronouncement : 19-02-2015

PER SHRI ANIL CHATURVEDI,A.M.

1. This appeal filed by the Revenue and the C.O of Assessee are against the order of CIT(A)-XV, Ahmedabad dated 02.11.2012 for A.Y. 2008-09.

2. The Registry has informed that there has been a delay of 150 days on the part of Assessee in filing the C.O. Assessee vide letter dated 27.09.2013 has 2 ITA No 332/A/2013 & C.O. No. 181/A/2013 . A.Y. 2008-09

stated the reasons for delay and prayed for condonation. Ld. D.R. objected to the delayed filing of C.O.

3. We have heard the rival submissions and perused the material on record. Considering the submissions made by the Assessee, we are of the view that the Assessee had valid reason for delay and we therefore condone the delay on the part of Assessee in filing the C.O.

4. The relevant facts as culled out from the material on record are as under.

5. Assessee is an individual who filed his return of income for A.Y. 2008-09 on 30.09.2008 declaring total income of Rs. 75,11,580/-. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 24.11.2010 and the total income was determined at Rs. 1,77,11,370/-. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who vide order dated 02.11.2012 granted substantial relief to the Assessee. Aggrieved by the aforesaid order of CIT(A) Revenue is now in appeal before us and Assessee has filed the C.O. The grounds raised by Revenue reads as under:-

1. The Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.95,00,864/- out of total addition of Rs.1,02,01,791/- made on account of deduction claimed u/s.54F of the Act.

2. The Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts1 in admitting additional evidences in violation of Rule 46A.

3. On the facts and in the circumstances of the case, the Ld. Commissioner of Income-

Tax (Appeals)-XV, Ahmedabad ought to haye upheld the order of the Assessing Officer.

3 ITA No 332/A/2013 & C.O. No. 181/A/2013 . A.Y. 2008-09

4. It is therefore, prayed that the order of the Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad may be set-aside and that of the Assessing Officer be restored.

6. On the other hand the grounds raise by Assessee in the C.O reads as under:-

1. The Id. CIT(A) has erred in law and on the facts of the case in confirming the action of Id. AO in not allowing the revised additional claim of exemption u/s 54F of the Act in the sum of Rs.6,32,415/-. Ld. CIT(A) ought to have allowed exemption u/s 54F of the Act in the sum of Rs.1,01,33,279/- as against Rs.95,00,864/- allowed by him.

2. Ld. CIT(A) has erred in law and on facts in not appreciating that the addition claim of exemption u/s 54F was not a fresh claim but only due to computation mistake committed at the time of filing of the original computation.

7. Since the grounds raised by the Revenue and C.O of Assessee are interconnected, the appeal of Revenue and C.O of Assessee are considered together.

8. During the course of assessment proceedings, A.O noticed that Assessee had sold a piece of land on 08.08.2007 for Rs. 2 crores that was purchased by him on 16.03.2004 which resulted into long term capital gain of Rs. 1,56,11,524/-. He also noticed that Assessee had purchased in the year 2004 Plot No. 8A admeasuring 604.17 Sq. Yd. in Satyagrah Co-operative Housing Society with an old structure. During the year under consideration, Assessee had purchased adjoining Plot 8B admeasuring 604.16 Sq. Yd at a cost of Rs. 22,54,502/-. After demolishing the old structure, Assessee started construction of a new residential house on the said land and had stated to have incurred expenditure of RS. 79,47,291/-. A.O was of the view that the conditions prescribed for claiming exemption u/s. 54F of the Act was not 4 ITA No 332/A/2013 & C.O. No. 181/A/2013 . A.Y. 2008-09

fulfilled by the Assessee and therefore the Assessee was asked to justify his claim. The submission of the Assessee was not found acceptable to the A.O as the A.O was of the view that the part of land on which new house has been constructed is not owned by the Assessee as the conveyance deed for transfer of land from Assessee's HUF to Assessee has not been registered as per the provisions of transfer of property Act, the conveyance deed of sale of land is signed by the Assessee and his wife, the construction of the house is not a new asset but a renovation of the previously owned property, the expenditure of labour and material was incurred on the date of purchase of land i.e. on 31.03.2008 which is prior to the approval received from AUDA and Shri Ramniklal Sheladia, HUF had sold the property to the Assessee at the rate at which it had purchased the property and had not offered any capital gains thereon. The A.O therefore denied the claim of deduction of Rs. 1,02,01,791/- u/s. 54 of the Act. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A). Ld. CIT(A) after considering the submissions of the Assessee, the remand report from the Assessee and Assessee's reply to the remand report, granted partial relief to the Assessee by holding as under:-

5.4 The A.O.in the asstt. order at para 3 discussed the original computation for exemption of capital gain of Rs. 95,00,864/-. The A.O. at para 3.1 discusses the revised computation with investment of Rs. 1,02,01,791/-. In construction of bungalow and deposit of an amount of Rs. 27,80,000/- is discussed. But at para 3.3 it is noticed that while issuing show cause to appellant he took the figure of claim of exemption u/s 54F at Rs. 1,02,01,749/- instead of Rs. 1,01,33,279/-. The A.O. at para 3.10 disallowed Rs. 1,02,01,749/- as claim of deduction u/s 54F of the Act. It is therefore, appellant's ground in respect of improper computation of claim u/s 54F as well as total income succeed to this extent. The A.O. should have disallowed Rs. 1,01,33,279/- on the basis of revised computation.

5.5 In the case of appellant, matter was referred to A.O. during appeal proceedings for remand report, but as discussed above and also contended by both A.O. as well as appellant there was no additional evidences submitted by appellant requiring such remand report. I am therefore inclined to accept this contention that there was no case for additional evidences calling for remand report. All the evidences produced before 5 ITA No 332/A/2013 & C.O. No. 181/A/2013 . A.Y. 2008-09 A.O. were submitted before me during appeal proceedings. It is therefore the remand report and rejoinder to remand report become academic in nature and no significant cognizance be taken for both since it will amount to revision of asstt. order by A.O. in the form of remand report on the same submission of appellant as filed before him during asstt. proceedings.

5.6 As far as merit of the case based on details and written submission of appellant with supporting case laws, I am inclined with the contention of the appellant that he fulfilled all the eligibility conditions as required u/s 54 F of the Act for his claim. The contention of A.O. as summarized at para 3.9 of the asstt. order are founded on misconception and against the legal propositions. As per the settled legal proposition, income tax act recognizes an individual and his HUF as two different, distinct and separate assessable entity where an HUF is represented by Karta may be same as the individual capacity. There are permission and recognition of various kinds of business and other transaction between one's indusial account and HUF accounts. The A.O. has not disputed that plot No. 8/B is owned by appellant's HUF for which payment was made from the sources of HUF's account. The documents as discussed in earlier para clearly reflect that plot NO. 8 was subdivided as 8/A & 8/B and sold separately to appellant and his HUF. It is also not disputed that appellant through cheque from the sources of his individual capacity paid to his HUF the consideration of land and taken possession of said land and constructed a bungalow on joint land 8/A & 8/B as per approved plan admeasuring 773 sq. mtr. For which AUDA granted BU permission and the same construction cannot be made independently on land 8/A admeasuring only 604. 17 sq. yard. It is true that No Registered deed is there for such transfer and it is on the basis of family agreement the conveyances is done. In this situation, the genuinely of such transaction on the basis of available facts in the case of appellant cannot be doubted to treat it as colorable device. The appellant's HUF (PAN:

ADRPS2492Q) is assessed to tax and in his case the proceedings can be initiated for long term capital gain and applicability of section 50C of the Act if A.O. is satisfied that such transaction is under-invoiced. But, the appellant's claim u/s 54F of the Act considered the consideration as actually paid and therefore cannot be held as arrangement to avoid tax liability. The appellant vide submission dt. 09/03/12 submitted share transfer certificate and a certificate from Shri Satyagrah Chhawani Co. op. Hsg. Society' to show such transfer but being the same in the nature of additional evidences not considered. Even without these evidences, the contention of appellant that Registration is not required as far as claim u/s 54F of the Act is duly supported by legal preposition. The family settlement between an individual and his HUF can only be signed by himself in his individual capacity and himself in a capacity of karta with wife being only major member of coparcener of his HUF. The A.O.'s contention that construction of house is not new asset but a renovation of previously owned property is not factually supported. It is only on the assumption that appellant has not incurred any expenditure on demolition of bungalow and sale of scrape. The approved plan and B.U. permission are sufficient evidences that a new bungalow was constructed. As discussed in earlier para, various sales deed duly acknowledge that there was 400 sq. yard constructed old dilapidated building at plot No. 8/A. Further, now a day, scrape generated may not be sold as scrape but can be utilized in the new construction for which cost of construction get reduced to that extent. This reutilization was not denied by A.O.. The A.O. further made no inquiry

6 ITA No 332/A/2013 & C.O. No. 181/A/2013 . A.Y. 2008-09 to support his contention that construction of bungalow is an extension. As per settled legal preposition, investment in construction of extension of already existing house is also permissible for claim u/s 54F of the Act. similarly the date of incurring of expenditure on material and labour before the conveyance of land i.e. 31/03/08 does not justify the denial of claim u/s 54F of the Act. As per settled legal proposition what is required u/s 54F of the Act is either purchase or construction of a house with in stipulated time from the date of transfer of asset. It is not the date of purchase of material or labors, dt. of approval of plan, etc. I am also inclined by contentions of appellant that case laws relied on by A.O. are not applicable in his case while the ratio of cases relied on by appellant are squarely applicable.

The following legal proposition support contention of appellant: "Board Circular No. 471 dt. 15/10/86 and No. 672 dt. 10/12/93 'Even allotment of a flat or house by state housing boards or Co. Operative securities would tantamount to purchase as on the date of allotment itself. The supreme court in CIT Vs. T.N. Arvinda reddy (1979) 120 ITR 46 (SC) required that the purchase in the context of section 54 should be understood in a liberal sense without any undue restriction limiting the meaning to ' lexical legalese'. It should be understood in the sense in which "plainspoken people" would have understood it.

Reinvestment benefit u/s 54 would require purchase of a house to the extent of capital gain with in the period set out in the statute. Where the assessee is unable to register such purchase but all the same paid the consideration and obtained possession, there is no reason why the concession should not be given. In Balraj Vs. C.I.T (2002) 254 ITR 22 (Delhi), it was pointed out that the supreme court had already decided the issue in the tax payer's favor in CIT Vs. T.N Arvinda Reddy (1979) (supra). It is also pointed out that the Registration of document is not mandatory for recognition of transfer in various contexts as for asstt. on income under the head property in CIT Vs. Podar Cement Pvt. Ltd. (1997) 226 ITR 625 (SC) or for depreciation in Mysore Mineral Ltd. Vs. CIT (1999) 239 ITR 775 (SC). Hon'ble Karnatak High court in CIT Vs. P.R. Seshadri (2010) 329 ITR 377 (Karn.), after noticing the decision of the Madras High court in CIT Vs. V. Natrajan (2006) 287 ITR 271 (Mad.), held that the fact that the plot stood in the name of assessee's wife and that the loan for construction had also to be obtained in her name for mortgage purpose, because of the ownership of the plot, cannot by itself be a ground for derail of relief u/s 54 F when the fact that the construction was at the cost of the assessee has not been denied. It is not that it has been pointed out by revenue that any part of the investment come from his wife. It is under these circumstances, the denial of relief was found to be unjustified.

Where a person purchases an old building, demolishes it and construct a new building, the entire exercise could be understood as one of construction, so that relief need not be limited to the cost of old building, but the entire cost including cost of construction as held by the tribunal in M. Vijayakumar Vs. ITO (2008) 307 ITR (AT) 4(Banglore)." It is therefore, disallowance of appellant's claim u/s 54F of the Act by A.O. is not justified. The A.O. is directed to allow such claim of appellant u/s 54F of the Act. But, the other important factual question arises, how much claim is to be allowed ? As discussed in earlier para, the A.O. has not taken proper figure of Rs. 1,02,01,791/- while disallowing such claim on merit, it should have been the amount of Rs. 95,00,864/- as filed and claimed by the appellant in his original Return of income. This is supported by 7 ITA No 332/A/2013 & C.O. No. 181/A/2013 . A.Y. 2008-09 ratio of Hon'ble Supreme court judgment in the case of Goetze (India) Ltd. Vs. CIT (2006) 157 Taxman 1 (SC) where it has been held by Hon'ble supreme court that "Assessing authority has no power to entertain a claim made by assessee after filing of original Return otherwise than filling of revised Return." The appellant has not filed revised return of income for claim of enhanced deduction u/s 54F of the Act. It is therefore the A.O. is directed to allow claim of deduction u/s 54 F of the Act and delete the disallowance and addition of Rs. 1,02,01,791/- but the allowance of claim is restricted to Rs. 95,00,864/- as per original computation as filed by appellant with return of income. The appellant gets relief accordingly.

9. Aggrieved by the order of CIT(A), Revenue is now in appeal before us.

10. Before us, ld. D.R. pointed to the various observations made by the A.O in the assessment order. He thus supported the order of A.O. With respect to the ground raised by the Assessee in the C.O, the ld. D.R. supported the order of ld. CIT(A) and submitted that ld. CIT(A) was justified in considering he claim of deduction filed by the Assessee in the original return of income and not accepting the additional claim u/s.54F in view of the decision of Hon'ble Apex Court in the case of Goetze Ind. Ltd. vs. CIT (2006) 157 Taxman.com 1 (SC).

11. The ld. A.R. on the other hand submitted that during the year under consideration Assessee's share in the land that was sold was Rs. 2 crore. Assessee then made investment in the purchase of plot, construction of house and had claimed exemption of Rs. 95,00,864/- u/s. 54F in the original return of income. The claim was subsequently revised to Rs. 1,01,33,279/-. The ld. A.R. submitted that Assessee had bought plot no. 8A admeasuring 604.17 Sq. Yd. with old construction on it in 2004. Later on, Assessee entered into a family arrangement whereby he bought Plot No. 8B which was adjacent to Plot No. 8A from its HUF for Rs. 22,54,502/-. Assessee thereafter demolished the old construction on Plot No. 8A and constructed new residential house on the combined land for which necessary BU 8 ITA No 332/A/2013 & C.O. No. 181/A/2013 . A.Y. 2008-09

permission was also obtained by the Assessee. Assessee had claimed exemption u/s. 54F in respect of purchase of plot No. 8B from its HUF and the expenditure incurred on construction of the combined land and the aggregate investment was Rs. 1,29,81,794/-. The ld. A.R. submitted that A.O has neither denied the genuineness of expenditure incurred on material and labor nor the deposit made in the capital gain accounts claim. He further submitted that that registration of family arrangement as per the provisions of transfer of property Act is not an essential pre-requisite to establish ownership over any property. He further submitted that Section 54F makes no reference as to the registration of the transfer deed as per the provisions of Transfer of Property Act and it is a settled law that the registered ownership is not necessary to claim ownership of assets but what is necessary is the beneficial ownership and for this proposition he relied on the decision of Apex Court in the case of CIT vs. Poddar Cement Pvt. Ltd. 226 ITR 625 (SC) and the decision in the case of Mysore Minerals vs. CIT 239 ITR 775. The ld. A.R. further submitted that the allegation of the A.O that the construction on plots was renovation and was not a new asset is not supported by any documentary evidence. With respect to the A.Os observation with respect to incurring of expenditure of labour and material on the date of purchase of land i.e. on 31.03.2008 which is prior to the approval received from AUDA, he submitted that Section 54F merely requires that the expenditure on construction must be incurred within 3 years from a transfer of asset and a doesn't prescribe that construction cannot be before the approval from competent authorities. With respect to the order of ld. CIT(A) in restricting exemption to Rs. 95,00,864/- which was originally claimed by the Assessee, the ld. A.R. submitted that ld. CIT(A) had relied on the decision of Goetze India Ltd. (supra). He submitted that as per the 9 ITA No 332/A/2013 & C.O. No. 181/A/2013 . A.Y. 2008-09

decision of Goetze India, Assessing Authorities do not have power to entertain new claim made by the Assessee after filing original return without filing the revised return of income but there is no bar on the appellate authorities in accepting such claim and for that proposition he placed reliance on the decision of Gujarat High Court in the case of CIT vs. Arvind Mills Ltd. (Tax Appeal No. 1407/AHD/2011), CIT vs. Symphony Comfort System Ltd.( Tax Appeal No. 97/AHD/2010) and the decision in the case of CIT vs. Jai Parabolic Springs Ltd. 306 ITR 42 (Del). He further submitted that the claim made by the Assessee in the revised return was not an additional claim but was a revised claim which was merely an outcome of computational error which took place at the stage of filing to original return. He therefore submitted that ld. CIT(A) ought to have allowed entire claim of Rs. 1,01,33,279/- as against restricting the claim to Rs. 95,00,864/-.

12. We have heard the rival submissions and perused the material on record. We find that ld. CIT(A) after considering the remand report received from the A.O and the submissions of the Assessee had granted relief to the Assessee. While granting the relief, we find ld. CIT(A) has given a finding that Assessee has fulfilled all the conditions required u/s. 54F of the Act. He has further given a finding that Plot No. 8 of the land was sub-divided as Plot No. 8A and 8B and sold separately to the Assessee and his HUF, Assessee had paid through cheque to his HUF, the consideration of land and taken possession of land and constructed a bungalow on joint land on Plot numbers 8A and 8B as per the approved plan. He has further given a finding that the transfer was on the basis of family agreement and Assessee's HUF is also assessed to tax. He has also given a finding that the A.O's contention that the construction of house is not a new asset but a renovation of 10 ITA No 332/A/2013 & C.O. No. 181/A/2013 . A.Y. 2008-09

previously owned property is not supported factually. Before us, Revenue has been brought any material on record to controvert the findings of ld. CIT(A) and therefore find no reason to interfere with the order of ld. CIT(A) as far as in principle granting of deduction u/s. 54F is concerned. However, with respect to the restricting the claim of deduction u/s. 54F to Rs. 95,00,864/- as filed by the Assessee in original return of income is concerned, we find that ld. CIT(A) had relied on the decision in the case of Hon'ble Apex Court in the case of Goetze India (supra) . We further find that the Hon'ble Bombay High Court in the case of CIT vs. Pruthvi Brokers & Shareholders (P) Ltd. (2012) 349 ITR 336 (Bom) after considering the decision Jute Corporation of India Ltd. vs. CIT (1991) 187 ITR 688, Goetze (India) Ltd. vs. CIT (2006) 204 CTR (SC) 182, NTPC vs. CIT (1998) 228 ITR 383 (SC), CIT vs. Jai Parabolic Springs Ltd. (2008) 306 ITR 42 and other decisions concluded that even assuming that the A.O is not entitled to grant a deduction on the basis of a letter requesting an amendment to the return filed, the appellate authorities are entitled to consider the claim and adjudicate the same, . Considering the fact that it is Assessee's submission that the revised claim was merely an outcome of computational error which took place at the stage of filing of original return of income and which has not been controverted by Revenue and considering the aforesaid decision of Hon'ble Delhi Bombay Court and in the absence of any decision of jurisdiction authority brought before us, we are of the view that ld. CIT(A) was not justified in restricting the claim of Assessee u/s. 54F to the claim as per the return of income but should have considered the claim of the Assessee after the corrections made on account of computational error. We thus direct accordingly.

11 ITA No 332/A/2013 & C.O. No. 181/A/2013 . A.Y. 2008-09

13. In the result, the appeal of the Revenue is dismissed and C.O of the Assessee is allowed.

Order pronounced in Open Court on 19 - 02 - 2015.

Sd/- Sd/- (SHAILENDRA Kr. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad. Rajesh

Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) - 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER

Deputy/Asstt.Registrar ITAT,Ahmedabad