IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES " F ", MUMBAI
BEFORE SHRI VIJAY PAL RAO, J.M. AND SHRI N. K. BILLAIYA, A.M.
ITA No. : 4285/Mum/2009
Assessment Year : 2004-05
Shri Vasudeo Pandurang Ginde The Income Tax Officer-
House No.16, 10(3)(4), Room No.452,
Eternity Kanakia Spaces, Aayakar Bhavan,
Bh. Tata Motors, 4th Floor, M. K. Marg,
Teen Hath Naka, Vs. Mumbai-400 020
Thane (W) 400 602
PAN NO: AASPG 1787 G
(Appellant) (Respondent)
&
ITA No. : 4540/Mum/2009
Assessment Year : 2004-05
The Income Tax Officer-10(3)(4), Shri Vasudeo Pandurang Ginde
Room No.452, Aayakar Bhavan, House No.16,
4th Floor, M. K. Marg, Eternity Kanakia Spaces,
Mumbai-400 020 Bh. Tata Motors,
Vs. Teen Hath Naka,
Thane (W) 400 602
PAN NO: AASPG 1787 G
(Appellant) (Respondent)
Assessee by : Shri C. N. Vaze
Department by : Shri M. Rajan
Date of hearing : 21.05.2012
Date of Pronouncement : 06.06.2012
ORDER
Per N. K. BILLAIYA, A.M.:
These cross appeals by the Revenue and the assessee are directed
against the order of the Ld. CIT(A)-X, Mumbai dated 25.05.2009.
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ITA Nos : 4285 & 4540/Mum/2009
Shri Vasudeo Pandurang Ginde
ITA No. : 4285/Mum/2009
Assessment Year : 2004-05
2. The first appeal raised by the assessee. The solitary grievance of
the assessee is the denial of exemption claimed u/s.54 of the Act
amounting to `.1,23,90,428/-. Facts giving rise to this grievance show
that during the year under consideration, the assessee has made Long
Term Capital Gain on sale of shares at `.5,02,03,292/-. Out of the sale
proceeds, the assessee has invested `.1,33,48,000/- for purchasing row
house and claimed exemption u/s.54F of the Act. On going through the
purchase details, during the course of the assessment proceedings, the
A.O. found that the assessee has purchased two row houses one located
at the ground floor and the other located at the 1st & 2nd floor. The A.O.
further noted that both the houses were purchased along with Smt.
Manisha V. Ginde, wife of the assessee. The A.O. concluded that as the
assessee has purchased two row houses and that to in the joint name
along with his wife and as per the provisions of section 54F, the
exemption is available in respect of one residential house and that to in
the name of the individual. The assessee has violated both the
conditions, therefore, exemption u/s.54F is not available to him.
Accordingly, the A.O. denied the exemption as claimed by the assessee.
The assessee carried the matter before the Ld. CIT(A)
3. Before the Ld. CIT(A), the assessee submitted that the allegation of
the AO that assessee has purchased two houses is incorrect, as, the
assessee has purchased only one row house with two separate deeds and
the dwelling so purchased has only one entrance and is occupied by only
one family. To support his contention, the assessee filed the following
documents:-
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ITA Nos : 4285 & 4540/Mum/2009
Shri Vasudeo Pandurang Ginde
i. Account of the assessee in the account of the builder.
ii. Copies of civil contractor's bill
iii. Copy of ration card.
iv. Copy of telephone bill.
v. Copy of electricity bill.
vi. Certificate from society.
vii. Acknowledgment of return for A.Y. 2004-05 to prove that
the assessee's wife is separately assessed to tax.
viii. Copy of statement of account and balance sheet for the
A.Y. 2004-05 wherein the payment to the builder to the
tune of `.1 crore is shown in the balance sheet.
3.1 After carefully examining the submissions and the documents
submitted by the assessee, the Ld. CIT(A) held that the assessee has
purchased two row houses vide two separate agreements and as both the
agreements are separately registered with the authorities, even though
subsequently both the houses are used as one single unit , at the time of
purchase though were sold by the builder as two separate units. The Ld.
CIT(A) finally rejected the contention of the assessee and held that there
are two dwelling units and confirmed the findings of the A.O. As the Ld.
CIT(A) has held that the assessee has purchased two dwelling units, he
did not go into the issue of joint ownership.
4. Aggrieved by this finding of the Ld. CIT(A), the assessee is before us.
5. The learned Counsel appearing for the assessee reiterated its stand
that the two row houses purchased by two separate deeds are nothing but
one dwelling unit and, therefore, exemption u/s.54F cannot be denied.
The counsel relied upon the decision of ITO vs. Ms. Sushila M. Jhaveri
reported in 292 ITR 0001 TBOMS, wherein a similar matter was before
the Bench, wherein the Bench has observed that the intention of the
legislature is that investment should be made in one residential house.
So long as the house purchased is one even after conversion, the
exemption would be available. On the other hand, if the investment is
made in two independent residential houses, even located in the same
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ITA Nos : 4285 & 4540/Mum/2009
Shri Vasudeo Pandurang Ginde
complex, then, in our opinion, exemption cannot be allowed for
investment in both the houses. The Counsel further drew our attention to
the decision of the Hon'ble Karnataka High Court in the case of CIT and
Another vs. Ananda Basappa reported in [2009] 309 ITR 0329, wherein
the Hon'ble High Court has observed as under :-
"On facts, it is shown by the assessee that the apartments are
situated side by side. The builder has also stated that he has
effected modification of the flats to make it as one unit by
opening the door in between two apartments. The fact that at
the time when the inspector inspected the premises, the flats
were occupied by two different tenants is not the ground to
hold that the apartment is not a one residential unit. the fact
that the assessee could have purchased both the flats in one
single sale deed or could have narrated the purchase of two
premises as one unit in the sale deed is not the ground to hold
that the assessee had no intention to purchase the two flats as
one unit."
6. The learned DR supported the order of the lower authorities.
7. We have heard the rival parties and carefully perused the orders of
the lower authorities. The facts in dispute have given rise to two
questions.
(i) whether on facts, the assessee has purchased one
residential unit entitling him for exemption u/s.54F and ;
(ii) whether the purchase of the residential unit jointly with
wife entitles the assessee for the exemption u/s.54F.
So far as the first question is concerned, we find that from the agreements
of purchase of house, the assessee has purchased House 16A for a
consideration of `.45 lakhs and House 16B for a consideration of `.30
lakhs vide two separate purchase deeds. We also found that the assessee
has entered into two separate agreements for providing further amenities
with the builder for a consideration of `.20 lakhs each for the two row
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ITA Nos : 4285 & 4540/Mum/2009
Shri Vasudeo Pandurang Ginde
houses. Be that as it may, what is important to be determined is whether
these are two row houses, or one single dwelling unit purchased by two
different purchase deeds. We find that House 16B is the 1st and the 2nd
floor of house 16A which itself show that both are the part of same
building. We find that the A.O. at the assessment stage has rejected the
claim and the submissions of the assessee. Without making any physical
verification, we are of the opinion that this issue requires some due
diligence on the part of the A.O. We, therefore, restore this matter back to
the files of the A.O. The A.O. is directed to verify whether the dwelling
unit bears a single municipal number. The A.O. is further directed to
verify whether the dwelling units have only one access and common
entrance. If the answers to both the aforesaid questions are in
affirmative, then the ground floor and the first and second floor cannot be
regarded as a separate residential house and to be treated as a single
dwelling unit entitled for exemption u/s.54F. This would be in line with
the findings of the decision of ITO vs. Ms. Sushila M. Jhaveri reported in
292 ITR 0001 TBOMS and to the decision of the Hon'ble Karnataka High
Court in the case of CIT and Another vs. Ananda Basappa reported in
[2009] 309 ITR 0329
7.1 On the second issue raised by the A.O. that the dwelling units so
purchased are also in the joint name with his wife, the counsel relied
upon the decision of the ITAT, Mumbai Benches in the case of ITO vs.
Arvind T. Thakkar in ITA No.7338/Mum/2005 vide order dated
29.04.2011 and on the order of the ITAT, Delhi Bench in the case of
Ravinder Kumar Arora vs. ACIT in ITA No.4998/Del/2010 vide order
dated 11.03.2011. The counsel further relied upon the decision of the
Hon'ble Karnataka High Court in the case of DIT vs. Mrs. Jennifer Bhide
reported in [2011] 15 taxmann.com 82 (Kar.) and claimed that in all the
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ITA Nos : 4285 & 4540/Mum/2009
Shri Vasudeo Pandurang Ginde
above cited cases even where the property has been purchased in the
joint name, the exemption u/s.54F was allowed.
8. We have perused the orders supplied by the learned counsel. We
find force in the contention of the counsel. We find that in the present
case, the name of the wife has been added only for the sake of
convenience. We also find that the total consideration has been met from
the account of the assessee. We also drew support from the provisions of
section 45 of the Transfer of the Property Act which provides that the
share in the property will depend on the amount contributed towards the
purchase consideration and as in the present case, the total contribution
has come from the assessee, the exemption cannot be denied.
9. Here we would like to make it clear that the entitlement of
exemption under section 54F would depend upon the verification by the
A.O. as per the directions given at para 7 here in above
10. In the result, the appeal filed by the assessee is allowed for
statistical purposes.
ITA No. : 4540/Mum/2009
Assessment Year : 2004-05
11. The Revenue has shown its grievance against the findings of the Ld.
CIT(A) that the assessee is entitled for the set off of Short Term Capital
Loss of `.1,29,94,149/-. The facts giving rise to this dispute shows that
the assessee has purchased Sundaram Bond Saver Units on 26.12.2003.
On the very same date, the assessee received a dividend of
`.1,16,03,049/-. On 29.03.2004, the assessee redeemed the units for a
sum of `.1,70,05,850/- and thereby, booked a short term capital loss of
`.1,29,94,149/-. This transaction was not accepted by the A.O. He was
of the opinion that the loss on sale of redemption of units clearly shows
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ITA Nos : 4285 & 4540/Mum/2009
Shri Vasudeo Pandurang Ginde
that it is a case of dividend stripping and is covered by the provisions of
section 94(7) of the Act. The A.O. based his findings solely on the ground
that the cheque of `.3 crores for the purchase of units of Sundaram Bond
Saver was actually realised on 30.12.2003 and, therefore, the period of
holding before the redemption of the said units on 29.03.2004 was only
88 days i.e. less than 3 months. Therefore, the case of the assessee was
hit by the provisions of section 94(7) of the Act. The A.O. was also of the
view that the entire transaction of sale and purchase of mutual fund
units was nothing but a colourable device for setting off of the capital
gains arising on sale of shares. The A.O. denied the set off of Short Term
Capital Loss and completed the assessment. The assessee assailed this
finding of the A.O. before the Ld. CIT(A).
12. Before the Ld. CIT(A), the assessee strongly contented that the date
of purchase of bond should be taken as 26.12.2003 and not as
30.12.2003 when the cheque was actually realised and is as per SEBI
guidelines / Mutual Fund guidelines which permits the issue of units
prior to the redemption of the cheque and, therefore, according to the
assessee the date should be taken as 26.12.2003 and if this stand is
taken, transaction of the assessee is clearly outside the purview of section
94(7) of the Act. The Ld. CIT(A) considered the submissions and the facts
of the case and also the provisions of section 94(7) of the Act. The Ld.
CIT(A) thus held as follows :-
"2.5 The first case of the A.O is that the cheque for the
purchase consideration was redeemed on 30.12.2003, i.e.
after the record date 26.12.2003 and therefore, the loss needs
to be disallowed. Apparently, the A.O has wrongly interpreted
the provisions of section 94(7). The provisions of this section
lay down the conditions for disallowance of loss. If the
securities have not been purchased within three months prior
to the record date, as made out by the A.O, then obviously
condition No. (i), supra, has not been fulfilled. As all the three
conditions are cumulative, then in any case the provisions of
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ITA Nos : 4285 & 4540/Mum/2009
Shri Vasudeo Pandurang Ginde
section 94(7) would not be applicable. The second argument of
the A.O is that the appellant has sold the securities within
three moths of their purchase. The A.O has based his
reasoning on the fact that the units should be deemed to have
been purchased on 30.12.2003, and not 26.12.2003, the date
on which the cheque was redeemed. However, I find that the
Asset Management Co., managing the above mentioned
scheme, vide their letter dated 29-12-2008, have very clearly
submitted that the units were allotted on the basis of `time
stamp'; on the basics of confirmation received from the bank.
They have also stated that this is as per SEBI guidelines. The
only argument of the A.O is that the prospectus of the mutual
fund scheme mentions that the dividend will be paid only
when the cheque is realised. Be that as it may, the fact is that
the mutual fund accepted 26.12.2003 as the date on which
they have allotted the units to the appellant on the basis of a
"time stamp". In the circumstances, the second condition is
also not fulfilled."
and on the point raised by the A.O. that the entire transaction is a
colourable device to evade tax, the Ld. CIT(A) further observed as under:-
"2.7 Now let us examine, whether the entire transaction is a
colorable one. The A.O has relied upon the decision of the
Punjab & Haryana High Court in the case of Vineet Jam. Now
there is no doubt that in that case the transaction of dividend
striping was held to be a colorable device. The decision of the
Punjab & Haryana High Court, referred to hereinabove, has
been set aside by the Apex Court, reported in 294 ITR 435
(S.C.) and the matter has been remanded back for de novo
consideration. Therefore, reliance placed on the' decision of
Punjab & 1-laryana High Court, in the case of Vaneet Jam
(supra), is misplaced. Further, I find that the Bombay High
Court in the case of CIT vs. Walfort Share & Stock Brokers Pvt.
Ltd., Appeal No. 18 of 2006, have taken a contrary view on
similar facts and held:
"It is pertinent to note that the Apex Court in the case of
Azadi Bachao Andolan (supra) has held that every
transaction or arrangement which is perfectly
permissible in law, but has the effect of reducing the tax
burden of the assessee cannot be treated as illegitimate
and ignored. In the present case, the assessee has
demonstrated that the units were purchased for earning
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ITA Nos : 4285 & 4540/Mum/2009
Shri Vasudeo Pandurang Ginde
dividend income and that the sale of the units
immediately after receiving the dividend was a
commercial decision taken by the assessee. Even the
majority decision in the case of Griffiths (supra,)
supports the case of the assessee that the transaction in
question was a trading transaction and in the absence of
any allegation that it was a sham transaction, the ass
was entitled to claim set off of the loss irrespective of the
fiscal impact."
and finally, the Ld. CIT(A) concluded that as the conditions of section
94(7) have not been fulfilled, no disallowance was permissible in that
section. The appeal on this ground is allowed.
13. The learned DR supported the assessment order.
14. The learned Counsel for the assessee relied upon the findings of the
Ld. CIT(A).
15. We have heard the rival submissions and perused the orders of the
lower authorities. We find that here the whole issue revolves around the
date of purchase of units which according to the assessee should be
taken as 26.12.2003 i.e. the date on which the cheque is tendered and
according to the A.O. should be taken as 30.12.2003 the date on which
the cheque was actually realised. We are more inclined towards the
submission of the assessee and the findings of the Ld. CIT(A) that the
date of tendering the cheque i.e. 26.12.2003 should be taken as the date
of the purchase of units. Once this date is taken for consideration, then
the provisions of section 94(7) would ultimately not apply on the facts of
the transaction. Further on the issue of treating the whole transaction as
a colourable device, we find that the Ld. CIT(A) has clearly distinguished
facts of the case with the decision of the Hon'ble Punjab and Haryana
High Court as relied upon by the A.O. We do not find any reason for
interference with the findings of the Ld. CIT(A) on this ground.
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ITA Nos : 4285 & 4540/Mum/2009
Shri Vasudeo Pandurang Ginde
16. The appeal by the appeal filed by the Revenue is dismissed.
Order pronounced on this 06th day of June, 2012.
Sd/- Sd.-
( VIJAY PAL RAO ) ( N. K. BILLAIYA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
MUMBAI, Dt: 06.06.2012
Copy forwarded to :
1. The Appellant,
2. The Respondent,
3. The C.I.T.
4. CIT (A)
5. The DR, - Bench, ITAT, Mumbai
//True Copy//
BY ORDER
ASSISTANT REGISTRAR
ITAT, Mumbai Benches, Mumbai
Roshani
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