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TMI Blog2013 (1) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... nt : Dr. K. Shivaram and Rahul K. Hakani ORDER D. Manmohan (Vice-President) These cross appeals pertain to A.Y. 2007-08 and they are directed against the order dated 4.7.2011 passed by learned CIT(A)-32, Mumbai. Denial of exemption u/s. 54F of the Act in respect of investment made by the assessee, co-owner in the Juhu Bungalow, is the subject matter of dispute before us. 2. Facts necessary for disposal of the appeal are stated in brief. Shop No. 6 and Garage No. 6A in the building 'Tirupati Shopping Complex' were owned by the assessee jointly with Mrs. Chhaya B. Parekh. Though the aforementioned property was known by the name 'M/s. Parekh Brothers', it is not in dispute that the said property was held jointly as co-owners, each of them having half share in the said property. During the previous year relevant to A.Y. 2007-08 the property was sold for total consideration of ₹ 5,40,00,000/- and the share of the assessee herein was ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars after the date of purchase, to enable the co-owners to construct a new building, would not disentitle the assessees to claim deduction u/s. 54F of the Act. Demolition cannot be treated as 'transfer' within the meaning of section 54F(3) of the Act. 5. Learned CIT(A) observed that in the case of co-owner i.e. Mrs. Chhaya Parekh, ITAT already held that the income from the property in Tirupati Complex was assessable to tax in the hands of the co-owners only. The Tribunal further held that each co-owner is assessable to tax under the head 'long term capital gains'. Having regard to the circumstances, learned CIT(A) observed that there is no reason to deny the claim of deduction u/s. 54F of the Act in respect of the investment made in the property in the name of the appellant. The Assessing Officer was directed accordingly. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... house and thus demolition of superstructure cannot be considered to be at par with transfer of residential house within three years. He strongly relied upon the order of ITAT B Bench, Mumbai (supra ). 9. After hearing the matter the Bench noticed that the decision of Hon'ble Apex Court in the case of Vania Silk Mills (P) Ltd. v. CIT [1991] 191 ITR 647/59 Taxman 3was over ruled by the Three member Bench of Hon'ble Apex Court in the case of CIT v. Grace Collis [2001] 248 ITR 323/115 Taxman 326, whereas, in the case of co-owner, the Tribunal followed the decision in the case of Vania Silk Mills (P.) Ltd. (supra) to hold that extinguishment of right on account of destruction or loss of asset does not amount to transfer. Therefore, case was refixed for clarification. 10. Learned counsel appearing on behalf of the assessee submitted that 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 declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue to exist, now under the owner-ship of the amalgamated company, and may provide added value to the shares of that company. The extinguishment of rights in the capital asset referred to in the definition of transfer in section 2(47) of the Act, therefore, would clearly apply to a case where the rights in the shares in the amalgamating company are extinguished on amalgamation to be replaced by shares in the amalgamated company, which after amalgamation is the owner of the assets transferred to it as a consequence of the amalgamation, and which will thereafter have the ownership, use and benefit of those assets. The case of amalgamation of companies and the extinguishment of rights of the shareholder in the amalgamating company is no way comparable to the destruction of the assets which as a consequence brings about the extinguishment of the rights of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as statutory provisions. Situations which did not arise for consideration and were, in fact, not considered are not to be regarded as having been considered. It is significant that the argument advanced for the Revenue before the court in the case of Mrs. Grace Collis [2001] 248 ITR 323(SC) was not that the case of Vania Silk Mills Pvt. Ltd. [1991] 191 ITR 647(SC) was wrongly decided. On the other hand, the argument before the court was that though that decision on facts was correct, certain observations which were not necessary for the case and which the Revenue considered to be erroneous had been made, and were required to be overruled. The law laid down in Vania Silk Mills Pvt. Ltd.'s case [1991] 191 ITR 647(SC), that extinguishment of rights in a capital asset as a necessary consequence of destruction of the asset does not amount to transfer, has not been overruled by the 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 exti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with law in the light of our above observations. 14. No doubt the assessee raised the ground, by way of cross objection, that subsequent transfer would not effect the eligibility to claim deduction u/s. 54F of the Act because the disallowance, if any, can only be made in the year of transfer, if it is within the period, but the fact remains that at that time, when purchase of house was made, there was a building in existence which satisfied the conditions laid down u/s.54F of the Act. It is not out of place to mention here that in the case of Pradeep Kumar (supra), Hon'ble Madras High Court observed as under: construction must be real one. It should not be a symbolic construction. Drawing analogy from the aforecited decision, in the case of the assessee, the deduction u/s. 54F is available to purchase of residential house and such house should be real and not symbolic. If old house is only meant for demolition, it may not satisfy the test of purchase of residential house, more particularly when it was demolished within two years. Thus it may be a symbolic purchase of bunglow which may not pass the test of 'purchase' u/s. 54F of the Act or if it is treat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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