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2016 (4) TMI 1195 - AT - Income TaxDenial of deduction u/s 54F - symbolic purchase of residential property - Held that - The facts in the case of the assessee is identical to the facts in the case of Mrs. Chhaya B. Parekh and hence the assessee cannot be denied the entitlement to deduction u/s. 54F of the Act on the purchase of same Juhu bungalow property(new asset) on pretext that the same was symbolic purchase of residential property and not the real purchase of residential property on the allegation that the same was never occupied after its acquisition by the assessee and the said co-owner Mrs Chhaya B. Parekh till demolition of the said bungalow after 2 years 8 months of its acquisition.
Issues Involved:
1. Non-following of the judgment of the Hon'ble Bombay High Court in the case of co-owner. 2. Determination of whether the purchase of the bungalow was symbolic or real. 3. Denial of exemption under Section 54F of the Income Tax Act, 1961. 4. Applicability of Section 54F(3) regarding the year of demolition of the asset. Detailed Analysis: 1. Non-following of the Judgment of the Hon'ble Bombay High Court: The assessee contended that the CIT(A) erred in not following the judgment of the Hon'ble Bombay High Court in the case of co-owner Mrs. Chhaya Parekh. The High Court had ruled that the voluntary demolition of an asset does not amount to a transfer under the Income Tax Act, 1961, and thus, denial of exemption under Section 54F was incorrect. The Tribunal noted that the CIT(A) should have adhered to this binding precedent, as the facts of the assessee's case were identical to those of Mrs. Chhaya Parekh. 2. Determination of Whether the Purchase of the Bungalow was Symbolic or Real: The CIT(A) had concluded that the purchase of the bungalow was symbolic and not real, as the assessee did not occupy it after purchase. However, the Tribunal observed that the assessee had provided all relevant documents showing the bungalow was in a habitable condition and had filed an affidavit explaining the reasons for not occupying it. The Tribunal found that the CIT(A) failed to appreciate these facts and incorrectly concluded that the purchase was symbolic. 3. Denial of Exemption Under Section 54F: The AO denied the exemption under Section 54F on the grounds that the ownership of the sold property was with M/s. Parekh Brothers (an Association of Persons) and not the individual assessee. The Tribunal noted that the CIT(A) in the first round of litigation had allowed the exemption, holding that the property was held on a co-ownership basis and not as an AOP. The Tribunal emphasized that the CIT(A) should have followed this settled position, especially considering the Bombay High Court's ruling in the case of Mrs. Chhaya Parekh, which allowed the exemption under similar circumstances. 4. Applicability of Section 54F(3) Regarding the Year of Demolition: The CIT(A) held that the demolition of the bungalow within three years of purchase amounted to a transfer, thus violating Section 54F(3). However, the Tribunal referred to the Bombay High Court's decision in the case of Mrs. Chhaya Parekh, which clarified that demolition does not constitute a transfer. The Tribunal noted that the CIT(A) should have applied this ruling, as the facts were identical. The Tribunal also pointed out that the CIT(A) had no basis to distinguish the High Court's decision by referring to the Supreme Court's ruling in the case of Grace Collis, as the High Court's decision was binding and directly applicable. Conclusion: The Tribunal concluded that the CIT(A) erred in not following the binding precedent set by the Bombay High Court in the case of Mrs. Chhaya Parekh. The Tribunal held that the assessee was entitled to the exemption under Section 54F of the Income Tax Act, 1961, as the demolition of the bungalow did not amount to a transfer. The appeal filed by the assessee was allowed, and the order of the CIT(A) was set aside.
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