TaxTMI 
TaxTMI 
TaxTMI 
2009 (5) TMI 563
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....disallowed the exemption under s. 54F on the ground that the assessee has only constructed additional floor on his existing house property but the exemption under s. 54F is available only for purchase or construction of a new property and in cases where the assessee does not own a house other than the new property. The assessee preferred an appeal against this revision and the CIT(A) allowed the appeal in favour of the assessee for the reason that the point is debatable and action under s. 154 is beyond the scope. The AO thereafter issued notice under s. 148 and completed the assessment under s. 143(3) r/w s. 147 by order dt. 18th Jan., 2006. In doing so, the AO disallowed the claim of Rs. 10,22,862 as exemption under s. 54F for the reason that the assessee was already owning a house on co-ownership basis and has only extended the co-owned, bequeathed property and no new asset had come out of the investment, as per the assessee's claim. 2.3 Assessee appealed before the learned CIT(A), both on the matter of initiation of reassessment proceedings and the merits of the case. Upon consideration of assessee's submissions, the learned CIT(A) upheld the reopening. As regards the merits o....
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....wn an identifiable residential unit." "In the instant case it can be said that the assessee on the date of purchase of 1/5th share from her son in the flat did not have any other identifiable different unit. Consequent upon the purchase also assessee had only one identifiable residential unit. She simply got the bigger share in the said unit by making the purchase. The fact that the assessee had interest in the same unit prior to the date of purchase is not the condition aliunde to which deduction under s. 54F can be denied to the assessee. Sec. 54F was inserted in the statute with an intent to provide incentive to the house building activity. In a welfare State it is necessary to see that citizens get proper shelter. To facilitate the task the section was enacted. It is a benevolent provision, therefore, should not be construed too technically. Take an example. X constructs a house on a plot owned by him. First year he sells shares and constructs ground floor of the house. Next year again he sells the shares and constructs first floor. Benefit under s. 54F cannot be denied just because X in the first year owns ground floor of the house. The meaning of the word 'owns' on the date ....
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.... the previous year as well as in the year under appeal. Accordingly, the order of the CIT(A) on this issue is set aside and the AO is directed to allow the claim of the assessee." (3) CIT vs. P.V. Narasimhan "Capital gains-Exemption under s. 54-'House property' within the meaning of s. 54 takes into account an independent residential unit and not necessarily an independent and complete house. Thus, where the assessee sold his one house and constructed first floor (as independent residential unit) on his another old house after demolishing the old structure, he was entitled to exemption under s. 54-Since exemption under s. 54 was available, the question whether s. 48 r/w s. 55(b) is applicable or not, will not arise." (4) Addl. CIT vs. Vidya Prakash Talwar "Capital gains-Exemption under s. 54-Sale of house property used for residence by assessee-Assessee constructing first floor and Barsati on ground floor within two years of the sale of the original property-Assessee occupying first floor and Barsati for his residence-Reinvestment in residential property need not be in a complete house-It is sufficient if reinvestment is made in an independent residential unit even though a par....
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....ent cases are identical with the facts of the case of Smt. Kalwanti D. Alreja vs. ITO (1996) 54 TTJ (Bom) 593, we respectfully following the above referred order of the Tribunal, Bombay, hold that t he assessee will be entitled to grant deduction under s. 54F on the facts and circumstances of the case. The AO is directed to grant deduction under s. 54F in all the three cases." From the above precedents, it follows that ownership of house property on the date of investment would mean ownership of single identifiable unit. Further, the investment in the first floor by the assessee to live with his family is a sufficient investment as the investment can be part of an existing house. In the background of aforesaid precedents and discussions, it is clear that on identical facts, Tribunal Benches, Hon'ble High Courts including the Hon'ble jurisdictional High Court have held that assessee was entitled to exemption under s. 54F. Rule of precedence demands that under such circumstances, assessee's plea has to be accepted. 2.7 The learned Departmental Representative, on the other hand, relied upon the decision of this Tribunal in ITA No. 1753/Mad/2004 in the case of Dr. (Smt.) P.K. Vasanth....
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....re before the Court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, Courts must carefully try to ascertain the true principle laid down by the decision." 3.5 Moreover, AO reopened the order which was passed under s. 143(1) and not the order under s. 154. Hence, on the anvil of Hon'ble apex Court decision in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 210 CTR (SC) 30 : (2007) 291 ITR 500 (SC) wherein it was held that an intimation under s. 143(1)(a) cannot be treated as an assessment order and hence reopening matter cannot be agitated on that account, the issue raised by the assessee is liable to be dismissed. Hence, the cross-objection by the assessee is dismissed. 4. In the result, this appeal by the Revenue in ITA No. 231/Mad/2008 is dismissed and cross-objection by the assessee in C.O. No. 116/Mad/ 2008 is also dismissed. V.B.S. BEDI, J.M.: 31st Dec., 2008 5. Despite best persuasion of myself. I have not been able to agree with the findings and the conclusions as drawn by th....
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....n in the existing property. 2.1 The learned CIT(A) erred in holding that the assessee did not own any other property in his name other than the new asset as on the date of application of long-term capital gains for house building. 2.2 The learned CIT(A) has failed to note that the assessee's submission that the property tax enhanced after construction of additional space establishes clearly that the assessee had one residential property even though as a co-owner as on the date of transfer of original asset viz. shares. 2.3 The learned CIT(A) ought to, have appreciated that as per the then existing provisions of the Act (before amendment w.e.f. 1st April, 2001), exemption under s. 54F is not available if the assessee owns any residential house on the date of transfer of the original asset. 2.4 The learned CIT(A) has failed to appreciate that exemption under s. 54F is available only for purchase/construction of a new property whereas in the present case, the assessee has only made addition to the existing house property by putting up additional floors. 2.5 The learned CIT(A) ought to have followed the decision of Hon'ble Madras High Court in the case of CIT vs. V. Pradeep Kumar ....
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....visions of law as applicable during the year under consideration and the material on record as well as precedents relied upon by rival sides. It is undisputed fact that assessee at the time of sale of original asset was owning share in the residential house jointly owned by the assessee along with his brother and having lifetime interest of their mother, and the net consideration from the sale of the original asset was indisputably spent on construction of additional floor in the said jointly owned residential house property within the stipulated period. But, proviso to s. 54F mandates by putting a restriction that exemption under s. 54F would not be available to the assessee, if assessee already owns residential house, other than the new asset on the date of transfer of original asset, that means, owning of house disentitles the assessee from such exemption. In this case, the assessee owned share in joint residential house on which the entire net consideration was invested to construct additional floor on the same house. Similar situation arose before Chennai "A" Bench in the case of Dr. (Smt) P.K. Vasanthi Rangarajan vs. Dy. CIT and vide order dt. 25th July, 2005, the Tribunal co....
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.... we uphold the action of the authorities below and reject the plea of the assessee. The assessee fails before us on all the grounds taken by her." 5.2.1 As would be seen, Chennai "A" Bench has taken exactly the same view with respect to exemption under s. 54F as taken by the AO in the case of the assessee and ill view of the Hon'ble jurisdictional High Court decision in the case of CIT vs. L.G. Ramamurthi & Ors. 1977 CTR (Mad) 416 : (l977) 110 ITR 453 (Mad), the decision of Hon'ble Supreme Court in the case of Sundarjas Kanyalal Bhatija & Ors. vs. Collector (1990) 183 ITR 130 (SC), in the case of Union of India vs. Paras Laminates (P) Ltd. (1990) 87 CTR (SC) 180 : (1990) 186 ITR 722 (SC) and Honda Siel Power Products Ltd. vs. CIT (2007) 2 13 CTR (SC) 425 : (2007) 295 ITR 466 (SC), it becomes incumbent upon the Members of the Tribunal and the Bench to follow and apply such decision of Co-ordinate Bench which is direct on the point rather than choosing to avoid application of such decision. 5.2.2 Even otherwise, this issue is also found to be squarely covered by the decision of the Hon'ble Madras High Court in the case of CIT vs. V. Pradeep Kumar, in the context of exemption under ....
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....s involved in such proceedings. The launching of proceeding contrary to the law laid down by the High Court would be invalid and proceedings themselves would be without jurisdiction-East India Commercial Co. Ltd. vs. Collector of Customs AIR 1962 SC 1893. Not to follow the decision of the High Court within that jurisdiction by the AO would tantamount to committing contempt of that Court-Siemens India Ltd. & Anr. vs. K. Subramanian, ITO (1983) 34 CTR (Bom) 23 : (1983) 143 ITR 120 (Bom). In order to give a word of caution, while applying the precedent, the Hon'ble Supreme Court in the case of State Financial Corpn. vs. Jagdamba Oil Mills AIR 2002 SC 834 has opined in para 19 as under: "Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed." And further in para 21 the Hon'ble Supreme Court observed as under: "Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper." 5.2.4 In a lately decided case of Honda Siel Power Produc....
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....THIRD MEMBER): 25th May, 2009 This appeal came before me as a Third Member to express my opinion on the following question: "Whether, in view of facts and circumstances, exemption under s. 54F of IT Act, 1961 could be allowed to assessee or not?" 2. I have heard the rival submissions in the light of material placed before me and the precedents relied upon. The assessee got share in the house property, as per the will of his father. He became the joint owner of the property along with his brother. After becoming the joint owner of the said property the assessee sold shares for the purpose of construction of an additional floor in the house for him and the cost of the construction was claimed as exempted under s. 54F. 3. Sec. 54F exempts tax on long-term capital gains arising from transfer of any long-term capital asset (not being a residential house) invested in a residential house. This exemption cannot be availed if there is a house in existence on the date of transfer. In the facts of the present case, ....