TaxTMI 
TaxTMI 
2013 (1) TMI 905
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....previous year relevant to A.Y. 2007-08 the property was sold for total consideration of Rs. 5,40,00,000/- and the share of the assessee herein was Rs. 2,70,00,000/-. While computing long term capital gains, arising in the hands of the assessee, it was shown that the assessee alongwith co-owner Mrs. Chhaya B. Parekh purchased Juhu Bungalow (new asset) on which both of them were entitled to claim deduction u/s. 54F of the Act. 3. Case of the Assessing Officer was that the old asset was held in the name of M/s. Parekh Brothers whereas agreement for purchase of Juhu Bungalow does not mention the name of M/s. Parekh Brothers and hence deduction u/s. 54F is not eligible to the assessees. The Assessing Officer further observed that during the course of assessment proceedings, in the case of another co-owner Mrs. Chhaya B. Parekh, spot inquiries were conducted which revealed that the said new asset was demolished within two years from the date of sale/purchase of the property and hence assessee is not entitled to claim exemption u/s. 54F on the so called new asset since residential house was demolished. According to the Assessing Officer section 54F(3) mandates that new asset should not b....
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....rdingly. Though learned CIT(A) observed that the demolition of bungalow took place in subsequent year and hence claim of deduction u/s. 54F cannot be denied in this year, learned CIT(A) set aside the matter to the file of the Assessing Officer based on the presumption that if superstructure of the house is demolished and the house does not exist at all, the assessee may not be entitled to claim deduction u/s. 54F of the Act. Since the assessee got a relief in principle, he did not prefer an appeal. However, the revenue filed an appeal by raising following grounds : "(1) On the facts and circumstances of the case and in law, learned CIT(A) has erred in directing the Assessing Officer to allow deduction u/s. 54F against the long term capital gain computed in the hands of the assessee. (2) The learned CIT(A) failed to appreciate the decision of the Hon'ble High Court Nagpur Bench in the case of Prakash v. ITO Ward 1(5), 312 ITR 40." 6. On receipt of the notice of appeal filed by the revenue the assessee filed cross objection wherein it was contended that in order to claim deduction u/s. 54F of the Act the date of purchase has to be taken into consideration. Since it was a res....
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.... the later decision of Hon'ble Apex Court in the case of Grace Collis ( supra) was explained by Hon'ble Madras High Court in the case of Neelamalai Agro Industries Ltd. v. CIT [2003] 259 ITR 651/[2002] 125 Taxman 582, wherein the Court observed as under : "Learned counsel for the Revenue, however, contended that the law declared by the apex court in the case of Vania Silk Mills Pvt. Ltd. [1991] 191 ITR 647, is no longer good law, and that that decision has been both expressly and impliedly been overruled by a three-Judge Bench in the case of CIT v. Mrs. Grace Collis [2001] 248 ITR 323(SC). In the case of Mrs. Grace Collis [2001] 248 ITR 323(SC), the court was concerned with the question as to whether there is a transfer of the shares when the amalgamation of the company whose shares are held by the assessee is ordered by the court with another company. The court held that the rights of the assessee in the capital asset, viz., the shares in the amalgamating company stood extinguished upon the amalgamation of the amalgamating company with the amalgamated company and that, (page 331) : "There was, therefore, a transfer of the shares in the amalgamating company within the m....
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....he assessee-owner in such assets. In the case of Mrs. Grace Collis [2001] 248 ITR 323(SC), at page 330 of the reports, the court noticed the submission made by counsel for the Revenue thus : "Learned counsel for the Revenue submitted that having held that the payment in settlement of the insurance claim was not in consideration of the transfer to the insurer of the damaged machinery and that, therefore, there was no transfer within the meaning of section 45, it was unnecessary for this court in Vania Silk Mills Pvt. Ltd.'s case [1991] 191 ITR 647to go on to consider the definition in section 2(47) and the meaning to be attached to the expression 'extinguishment of any rights therein'. In his submission, the decision in Vania Silk Mills Pvt. Ltd.'s case [1991] 191 ITR 647(SC) was to this extent obiter dicta." It is only to the extent of that obiter dicta, that the decision rendered in the case of Mrs. Grace Collis [2001] 248 ITR 323(SC) can be said to be at variance with the decision rendered in the case of Vania Silk Mills Pvt. Ltd. [1991] 191 ITR 647(SC). In the case of Mrs. Grace Collis [2001] 248 ITR 323(SC), the court considered the terms "extinguishment o....
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.... apex court in the case of Mrs. Grace Collis [2001] 248 ITR 323." 11. In the light of the decision of Hon'ble Madras High Court, learned counsel submitted that demolition of an asset does not amount to transfer since there is no transferee and there is no consideration; It cannot be treated as "extinguishment of rights". One cannot make loss or profit out of such transaction. It was thus contended that the decision of Hon'ble Apex Court in the case of Mrs. Grace Collis (supra) do not cover such situation in which event, decision of Co-ordinate Bench in the case of co-owner deserves to be followed. 12. On the other hand learned Departmental Representative relied upon the decision of Hon'ble Madras High Court in the case of CIT v. V. Pradeep Kumar[2006] 153 Taxman 138(Mad). It was also contended that the principle laid down by Hon'ble Apex Court, in the case of Grace Collis (supra), squarely applies in the circumstances of the case. 13. We have carefully considered the rival submissions and perused the record. The issue hinges around the meaning of the expression "transfer", provided in section 2(47) of the Act. The expression "extinguishment of any right therein&#....