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TMI Blog2015 (9) TMI 613X X X X Extracts X X X X X X X X Extracts X X X X ..... stands supported by the documents placed on record by the Assessee. The Court is satisfied that the prior to 10th April 2007 the Assessee was not the owner of another residential house and therefore the exemption under Section 54 read with Section 54F of the Act could not be denied to him. - Decided in favour of the Assessee. - ITA 609/2014 - - - Dated:- 11-9-2015 - Dr. S. Muralidhar And Vibhu Bakhru, JJ. For the Appellant : Mr. N.P. Sahni, Senior Standing counsel with Mr. Nitin Gulati, Advocate For the Respondent : Dr. Rakesh Gupta with Ms. Poonam Ahuja and Mr. Rohit Kumar Gupta, Advocates JUDGMENT Dr. S. Muralidhar, J 1. This appeal under Section 260 A (1) of the Income Tax Act, 1961 ( Act ) by the Revenue is directed against the impugned order dated 29th January 2014 passed by the Income Tax Appellate Tribunal ( ITAT ) in ITA No. 5077/Del/2011 for the Assessment Year ( AY ) 2007-08. Background Facts 2. The background facts are that the Respondent-Assessee filed his return of income for the AY 2007-08 declaring his income of ₹ 2,78,53,090. The case of the Assessee was selected for scrutiny and notice under Section 143 (2) of the Act was iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pril 2007 was within two years from the date of transfer from the long term capital assets, i.e. shares of VPPL on 8th November 2006; that the Assessee had therefore violated the conditions for claiming exemption under Section 54F of the Act and therefore, the Assessee was required to show cause why exemption claimed under Section 54F amounting to ₹ 2,21,69,090 should not be disallowed and why penalty under Section 271 (1) (c) should not be imposed. 5. The explanation offered by the Assessee was that on the date of the transfer of the shares of VPPL, i.e., 8th November 2006 the Assessee had one house at Village Fatehpur Beri which he had purchased on 22nd July 2006 and only 15% share in the house property at Gadaipur. It was clear that the Assessee had purchased 85% share in Gadaipur house on 10th April 2007, thus becoming the full owner of the said house. It is accordingly claimed on the sale of share, i.e., 8th November 2006 the Assessee did not have the full ownership of the residential house at Gadaipur and was only a co-owner along with his father. The ownership of 15% in the Gadaipur house would not constitute the exclusive ownership of a residential house under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er deed (for the purchase of share by the Assessee from Mr. Shyam Kumar Bagga) did not contain the proper share transfer stamp. The stamp duty was found to have been paid by using revenue stamp. It appears that the date of purchase of shares by the Assessee from Mr. Shyam Kumar Bagga had been manipulated to qualify the shares as long term capital asset. 7. As regards the sale of the said shares sold to Mrs. Falguni Nayar on 8th November 2006 by the Assessee, the AO observed that the date of transfer of shares was not found mentioned in the Share Transfer Register. Further the duty on transfer was paid through revenue stamps rather than share transfer stamps. A perusal of the bank statement of the account held by the Respondent-Assessee, Vijaya Bank, showed that the Assessee had already received advance sale consideration of ₹ 50 lakhs on 22nd August 2006 and ₹ 1.75 crores on 27th September 2006 for the sale of the shares to Mrs. Falguni Nayar. Therefore, 60% of the sale consideration received by the Respondent-Assessee by 27th September 2006. It is only the balance 40% consideration that exchanged hands on 8th November 2006. The AO observed that no person would par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly at ₹ 60,000. The copies of sale deeds in favour of Sh. Prem Nath Nagpal, the father of the Appellant to prove that the portion of land bearing Khasra Nos. 75, 76 and 90 were purchased by his father and the constructed portion existed on such land. (d) The copies of Khasra Girdawri to prove the fact that the land bearing Khasra Nos. 75 and 90 was merely used for agricultural operation and further to prove that the constructed house was exclusively situated on the land bearing Khasra No. 76 which was wholly purchased by the father of the Appellant. (e) The copy of the agreement dated 21st April 1999 between the Appellant and Sh. Prem Nath Nagpal, father of the Appellant to prove that both the parties agreed to let out the entire property belonging to them with the understanding that 15% of the rent would be given to the Appellant for use of the land belonging to him while 850/0 of the rent would be enjoyed by the father of the Appellant for use of his portion of the land and the constructed property belonging to him. (f) The copy of the lease-deed dated 21st November 2000 to prove the fact that the entire land and constructed property was let out to Zerox ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the parties on 25th October 2005 and the shares were registered in the name of the Appellant on that date, it was established beyond doubt that the Assessee had purchased the shares on that date. (d) As regards the sale of shares again the confirmation certificate showed that the shares were in fact delivered by the Assessee to Mrs. Falguni Nayar on 8th November 2006. In view of the decision of the Supreme Court in V.R. Shelat v. P.J. Thakar 1974 AIR 1728 and certain other judgments of the High Courts and of the Tribunal, the conclusion was that the sale of shares took place only on 8th November 2006 and therefore, the nature of capital gain was long term capital gain. (e) As regards the ownership of Gadaipur house in terms of the sale deed dated 13th March 1996 the property under transfer was only a small piece of agricultural land (1 bigha) in Khasra Nos. 75 and 90. There was nothing in the sale deed which suggested that any structure existed on the said land. (f) The sale deed in favour of Mr. Prem Nath Nagpal, father of the Assessee showed that he had purchased land in Khasra Nos. 75, 76 and 90. The vendor had got the building plan for the farm house sanct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l house and was also owner of another residential house? (ii) Whether under the circumstance of the case Income Tax Appellate Tribunal was correct in holding that sale of shares constitute long term capital gain? 15. This Court has heard the submissions of Mr. N.P. Sahni, learned Senior standing counsel for the Revenue and Dr. Rakesh Gupta, learned counsel for the Assessee. Question (ii) 16. The facts concerning the transfer of shares have been set out in considerable detail. It has been factually found by the CIT (A) and concurred with by the ITAT that the shares were held for more than 12 months and it was therefore long term capital asset. The fact of purchase of shares by the Assessee on 25th October 2005 and their sale to Mrs. Falguni Nayar on 8th November 2006 have been sufficiently proved by the Assessee by producing the requisite evidence. The conclusion of the AO was that sale of the shares took place at a time earlier 8th November 2006 since 60% of the consideration was already paid by them is inconsistent with the legal position. In V.R. Shelat v. P.J. Thakar (supra) it was emphasized that there was a distinction between the title to get on the register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wrong in holding that for the purpose of applicability of Section 54, registration of document is imperative. In Dr. P.K. Vasanthi Rangarajan v. CIT (2012) 252 CTR 336 the Assessee and her husband were co-owners to the extent of 50% share in a building that had a clinic and a residential house. It was held that since the entire property was not an exclusive residential property and 50% of the ownership was with reference to the clinic on the ground floor, the harshness of the proviso to Section 54 F cannot be applied unless and until there are materials to show that the Assessee is the exclusive owner of the residential property. 20. In the present case, as pointed out by the CIT (A), the sale deed dated 13th March 1996 does show that what was purchased by the Appellant (Assessee herein) is an agricultural land bearing Khasra Nos. 75 and 90. Khasra Girdawri also clarifies that while there is a kothi, i.e., house on Khasra No. 76 (purchased by the Assessee's father), the land in Khasra Nos. 75 and 90 purchased by the Assessee was used only for agricultural purpose. The explanation by the Assessee that only the rental income from letting out the constructed portion property ..... X X X X Extracts X X X X X X X X Extracts X X X X
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