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TMI Blog2012 (7) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... uilding. The assessee’s Great Grand Father had utilized the entire permissible area available for construction, for constructing the residential house. In such circumstances, it is obvious that the nomenclature of the asset predominantly falls in the category of residential building though large extend of the premises consist of land. - Decided in favor of assessee. The earnest effort taken up by the co-owners and the probable joint developers to convert the property into a commercial property cannot be construed to hold that the property is converted as a commercial property. - ITA No. 2378 & 2192/Ahd/2010 - - - Dated:- 8-6-2012 - SHRI D. K. TYAGI, AND A. MOHAN ALANKAMONY, JJ. Assessee by Shri B. R. Popat, AR Department by Shri B. L. Yadav, Sr. DR O R D E R PER A. MOHAN ALANKAMONY: These cross appeals are directed against the order of the learned CIT(A)- XVI, Ahmedabad dated 17th May, 2012 in appeal No. CIT(A)- XVI/DCIT.Cir-10/121/09-10 for assessment year 2007-08. Both the appeals were heard together and shall be disposed of by this common and consolidated order as under. ITA No.2192/Ahd/2010 (Assessee s appeal) 2. The assessee in its appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On examination of the valuation report as on 01-04-1981 the AO noticed that the total area of plot of land is 3.85 acres which includes the property having built up area of 1266.13 sq. yards in the plot of land admeasuring 18634 sq. yards and that the value of the property is assessed at Rs.4.89 Crores in which the value of the land is estimated at Rs.4,67,50,000/- and the value of the building is estimated at Rs.21,45,000/-. The AO further noticed that the valuation report as on the date of sale of the property has not been produced. However, the AO observed from the sale deed that the consideration of Rs.148,93,93,500/- was towards the property bearing Plot No.2, Block No.15, New Capital of Delhi which is known as 5, Mansingh Road, New Delhi admeasuring 3.85 acres of land including construction thereon. 3.2 Regarding claim of reimbursement of expenses to Indian Hotels as consideration for vacating part of the property, on examination of the documents furnished by the assessee the AO found that there was tripartite agreement amongst (i) Patani Family, (ii) Indian Hotels C. Ltd. and (iii) Minerals Management Services India Ltd. - the buyer of the property in respect of join ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Prabhashankar D. Pattani was allotted a plot of land admeasuring 3.85 Acres by a Perpetual Lease Deed dated 20-08-1921 and thus the capital asset came into existence was a plot of land admeasuring 3.85 Acres. Thereafter, construction was carried out on 6.79% of the plot of land and the value of the land was estimated at Rs.4,67,50,000/- as on that date and the value of the building was estimat4ed at Rs.21,45,000/- which constitutes 4.58% of the total value of the property. The AO also observed that the present sale deed was primarily for transfer of 3.85 acres of land and not for transfer of the building constructed thereon. The AO accordingly held that the assessee is not entitled for exemption u/s 54 of the Act on capital gain realized on transfer of the property. 3.7 With regard to point (iii) above, the AO observed that as per the letter written by The Indian Hotels Co. Ltd. the Pattani Family entered into an agreement with the said Hotel Group for development of the property and the property was under possession of The Indian Hotels Co. Ltd. and as per terms of the understanding on payment of Rs.97,00,000/- The Indian Hotels Co. Ltd. would hand over peaceful vacant pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed in that area. 4.2 It was further submitted by the assessee that the AO passed order u/s 143 (3) disallowing deduction of Rs.1,00,00,000/- on the grounds that: (i) The appellant is not the owner, the property belongs to the Estate of Late Shri Prabhashankar Patani (ii) The property cannot be considered as residential house but commercial premises (iii) The property is not a residential house with land appurtenant thereto. 4.3 It was further contended before the learned CIT(A) that first and third issue above, were not confronted to the assessee during assessment proceedings. The assessee also filed copy of the paper book filed before the AO as the same was not considered by him. Since the paper book contained only the reply to points No.1 3 above, the same was considered by the learned CIT(A) 4.4 Regarding transfer shall be by individual or a HUF the assessee contended that the AO failed to appreciate that the assessee acquired 3.125% share in the property of Estate of Late Prabhashankar Patani who was her great grand father and that the AO s view that the property belongs to estate of deceased is based on the fact that the property was not distributed betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty got buyer who was interested to buy the property as heritage home for residential purpose and for that purpose the coowners of the property got a comfort letter from The Indian Hotels Co. Ltd. and that for getting the comfort letter the coowners had to reimburse the expenses incurred by The Indian Hotels Co. Ltd. during the period. It was further submitted that the property was occupied by the Patani Family and was not used for any commercial purpose. 4.7 Regarding chargeability of wealth tax, it was submitted by the assessee that that since the self occupied property is exempt u/s 5 (vi) of the Act the same is not required to be taxed under Wealth Tax Act and that since the assessee was not having any residential house, notional rent is not required to be paid. It was, therefore, submitted by the assessee that the property was not handed over to The Indian Hotels Co. Ltd. and the same was used for residential purpose and that the condition that the property is residential house has been fulfilled as per section 54 of the Act. 5. The learned CIT(A) considering the facts of the case, the submission of the assessee and the remand report of the AO ultimately held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Patni constructed his residential house utilizing the maximum permissible area allowed for construction on the large extent of 3.85 Acres plot which works out to 6.79% of the total area of the plot. The assessee had come out with various documents to establish these facts and the revenue has not disputed the same. Further, from the sale deed it is evident that Shri Prabhashankar D. Patni passed away and the property devolved on his two sons Shri A. P. Patni and Batukbhai P. Patni. Thereafter, the rights in the property further devolved through successive demise of the members of the family. In July, 1976 an oral partition was effected which was recorded as memorandum on 03-08-1976. This was also recognized by the revenue by order u/s 171 of the Act dated 15-05-1979 passed by the ITO-I, Bhavnagar which is placed in the paper book before us in page 26. Subsequent to the oral partition, there was further devolution in the property. As a result, the assessee had become owner of 3.125% share of the residential house which is apparent from the sale deed. Thus, it is established that all the parties mentioned in the sale deed had become joint owners of the residential property. This f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be used for any other purpose other than to remain as an integral part of the residential building. Considering the facts of this case we are of the considered view that the large extent of land of 3.85 Acres is land appurtenant to the residential house and both the land and the building are not divisible. The assessee has rightly relied on the decision of the Hon ble Andhra Pradesh High Court in the case of CIT, A. P. II, Hyderabad Vs Zaibunnisa Begum, 151 ITR 320 wherein it is held that Section 54 of the I. T. Act, 1961, grants a concession where capital gains arise from the transfer of buildings or lands appurtenant thereto used by the assessee in the two years immediately preceding the date of transfer as his own or his parent s residence, if he constructs a house property or purchases one for purposes of residence within the time specified in the provision. The expression land appurtenant thereto occurring in s. 54 has not been defined. It must, therefore, be understood in its popular and non-technical sense. It is not possible to accept the contention that cl. (b) of the Explanation to s. 5 (1) (ivc) of the W. T. Act, 1957, defining land appurtenant for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder s. 22 of the I. T. Act, then the extent of such land does not qualify to be treated as land appurtenant to the building; and (5) any material pointing to be attempted user of the building for purposes other than the effective and proper enjoyment of the house would also afford a safe guide to determine the extent of surplus land and not qualifying to be treated as land appurtenant to the building. The above tests are illustrative and by no means exhaustive. It is for the tax authorities to apply their mind properly to the facts of each case and to devise tests suitable and appropriate to each case. With the above discussion we hold that the asset transferred by the assessee is her share in the residential building along with land appurtenant thereto as envisaged in the Act and therefore the assessee is eligible to claim deduction U/s 54 of the Act subject to the compliance of the other provisions of the Act. 7.3 On the third grouse of the learned AO that the property in question was not a residential house based on a letter from M/s. India Hotels Co. Ltd.; also does not appear to be justifiable. During the endeavor for sale of the property the owners of the property were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sitation to hold that the relevant property always stood as a residential building with land appurtenant thereto. Further from the facts before us it is evident that the residential building and the large extend of land of 3.85 acres are an integral unit and the same is undividable or inseparable. Thus this issue is also decided in favor of the assessee. 7.4 To sum up, from our above discussions and findings we hold that by virtue of oral partition the assessee is the individual owner of the 3.125% undivided share in the residential building with 3.85 acres of land appurtenant thereto. Further the entire asset always remained in the nomenclature of Residential building along with land appurtenant thereto as envisaged in the Act. Thus the conditions prescribed to claim the benefit under section 54 of the Act with respect to ownership of the asset and the asset to be a residential building with land appurtenant thereto is fulfilled. Therefore both the grounds raised by the assessee are allowed needless to mention that the assessee will be entitled to claim the benefit u/s 54 of the Act subject to compliance of all other conditions prescribed under the Act. ITA No.2378/Ahd/2010( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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