2019 (3) TMI 700 - AT - Income Tax

Tribunal rules in favor of assessee on deductions; rejects improper valuation reference.

Smt. Delilah Raj Mansukhani Versus I.T.O., 26 (2) (3), Mumbai (Presently 35 (1) (3).

The tribunal allowed the appeal in part, ruling in favor of the assessee on the issue of deductions under Section 54/54F for both residential units and ... Claim of deduction u/s 54/54F - second flat as the assessee has purchased two units, whereas as per the A.O. the Section states that “a” residential house should be purchased/constructed” - The Assessing Officer observed that both the units have separate main doors for each and the units were not adjoined together - HELD THAT:- On the facts of the case, the two residential units constructed by the Developer for the Assessee is “a” (one) residential house only, we observe that in any case, the Board having accepted all the decisions wherein courts have interpreted that the word “a” qualifies residential house and not the quantum/number of houses, for all years prior to the amendment deduction/benefit is available on multiple houses, this controversy does not survive. This is an acceptance by the Legislature that prior to the amendment deduction u/s. 54/54F is available on purchase of more than one residential unit also and that it has accepted the interpretation of the courts in this regard. The relevant assessment year under consideration is 2010-11 which is prior to the A.Y. 2015-16 wherein an amendment has been brought by the Finance Act, 2014. AO was not justified in declining the claim of exemption to the assessee in respect to two units of the house property allotted by the developer to the assessee. AO is directed to allow exemption in respect of both the units. Capital gain computation - Determination of the FMV as on 1.4.1981 - valuation to DVO - Action of the CIT(A) for referring the matter back to the DVO for determination of fair market value as on 01/4/1981 - HELD THAT:- Revenue makes a reference, to the DVO, in term of Section 55A of the Act, it should be of the opinion that the value determined by the Registered Valuer as the FMV of the property as on 1st April, 1981 is less than its FMV. Only on having formed the above opinion, it is entitled to call upon the DVO to submit a report with regard to its FMV as on 1st April, 1981. In the Assessee’s case neither the FMV as per the registered valuer’s valuation report was less that the FMV estimated by the DVO, nor is it a case where the FMV of the asset claimed by the Assessee is not supported by a registered valuer’s valuation report. Accordingly reference to the DVO was bad in law. We direct accordingly. Issues Involved:1. Partial deduction u/s 54F/54.2. Computation of sale consideration.3. Determination of fair market value as on 01.04.1981.4. Adoption of fair market value by DVO.5. Enhancement of assessment on account of rental income.6. Taxability of rent received for alternate accommodation.7. Levy of interest u/s 234B and 234C.8. Initiation of penalty proceedings u/s 271(1)(c).Issue-wise Detailed Analysis:1. Partial Deduction u/s 54F/54:The assessee claimed deductions under Section 54/54F for two residential units. The Assessing Officer (AO) allowed the deduction for only one unit, interpreting the law to mean 'a' residential house should be singular. The tribunal, however, referred to various judicial precedents, including CIT v. Syed Ali and CIT v. D. Anand Basappa, which held that multiple units could be considered as one residential house if they serve a single residential purpose. The tribunal concluded that the assessee was entitled to deductions for both units as they constituted one residential house.2. Computation of Sale Consideration:The CIT(A) directed the AO to take the cash component at Rs. 2,59,97,500 instead of Rs. 2,53,00,000 for computing the sale consideration. The tribunal did not provide a separate detailed analysis on this point, implying acceptance of the CIT(A)'s direction.3. Determination of Fair Market Value as on 01.04.1981:The AO accepted the valuation report from the registered valuer, which determined the fair market value (FMV) of the property as on 01.04.1981. The CIT(A) later referred the matter to the DVO for revaluation, which the tribunal found unnecessary since the AO had already accepted the valuation report.4. Adoption of Fair Market Value by DVO:The tribunal found that the CIT(A)'s direction to refer the matter to the DVO was not justified. It referenced the Bombay High Court decision in CIT v. Puja Prints, which held that Section 55A, applicable at the time, allowed reference to the DVO only if the value claimed by the assessee was less than the FMV. Since the AO had accepted the FMV provided by the assessee, the tribunal ruled that the reference to the DVO was bad in law.5. Enhancement of Assessment on Account of Rental Income:The CIT(A) enhanced the assessment by including rental income for alternate accommodation. The tribunal did not provide a separate analysis, implying acceptance of the CIT(A)'s enhancement.6. Taxability of Rent Received for Alternate Accommodation:The CIT(A) held that the rent received for alternate accommodation was taxable. The tribunal did not provide a separate analysis, implying acceptance of the CIT(A)'s decision.7. Levy of Interest u/s 234B and 234C:The CIT(A) held that the levy of interest under Sections 234B and 234C was consequential in nature. The tribunal did not provide a separate analysis, implying acceptance of the CIT(A)'s decision.8. Initiation of Penalty Proceedings u/s 271(1)(c):The CIT(A) confirmed the AO's initiation of penalty proceedings under Section 271(1)(c). The tribunal did not provide a separate analysis, implying acceptance of the CIT(A)'s decision.Conclusion:The tribunal allowed the appeal in part, particularly on the issue of deductions under Section 54/54F for both residential units and the improper reference to the DVO for revaluation of FMV. Other decisions by the CIT(A) were implicitly accepted. The order was pronounced in the open court on 12/03/2019.