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TMI Blog2016 (4) TMI 1195X X X X Extracts X X X X X X X X Extracts X X X X ..... y learned Commissioner of Income Tax (Appeals)- 32, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2007-08, , the appellate proceedings before the CIT(A) arising from the assessment order dated 23-12-2010 passed by the learned assessing officer(hereinafter called the AO ) u/s 143(3) read with Section 147 of the Income Tax Act,1961(Hereinafter called the Act ). 2. The grounds raised by the assessee in the memo of appeal filed with the Tribunal read as under:- 1. The learned CIT (A) erred in not following the judgment of the Hon'ble Bombay High Court delivered in the case of co-owner Mrs. Chhaya Parekh after the decision of Hon'ble ITAT in assessee own case, in respect of the same transaction wherein it was held that demolition of asset by assessee voluntarily would not amount to transfer under the Income-tax Act, 1961 and hence denial of exemption u/s.54F is bad in law. 2. The learned CIT (A) erred in concluding that the purchase of bungalow was symbolic and not real as the same was not occupied by assessee after purchase though the Appellant had filed all the relevant documents to show that the bungalow was in a habitable condition and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mention of M/s Parekh Brothers on the agreement drawn for purchase of the Juhu Bungalow. The A.O. observed that the assessee has intentionally treated the ownership of the shop and garage at Tirupati shopping complex of his own replacing the ownership of Association of Persons(AOP) i.e. M/s. Parekh Brothers. It has been evidently done to claim the exemption u/s. 54F of the Act which are available only to HUF and individual assessees. Since no exemption u/s. 54F of the Act is available to Association of Persons(AOP), the assessee and his associate sister-in-law have made the case in individual capacity to avail the benefit not legally available to them . The A.O. observed that though the agreement made for new bungalow at Juhu has been purchased within one year but investments out of the sale proceeds of shop and garage is shown in individual capacity of both associates i.e. assessee and Smt. Chhaya Parekh, which actually belonged to M/s. Parekh Brothers, an Association of Persons(AOP). Since exemption u/s. 54F of the Act cannot be considered in the hands of M/s. Parekh Brothers, the claim is made in case of individuals. The agreements and several documents mentioned earlier evident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Juhu Bungalow(new asset) has been demolished after purchase but within 2 years of the purchase while the requirement of the Act is that the new residential asset should not be transferred within 3 years and also the assessee has not constructed new bungalow till date. Thus, the AO rejected the claim of the assessee u/s 54F of the Act on the grounds that while the capital gains are assessable in the hands of the assessee and Mrs. Chhaya B Parekh as the association of person stood dissolved as the properties (shop and garage) at Tirupati Apartments was divided in the individual capacity after sale of the same and association of person(AOP) stood dissolved but the investment of sale consideration of the said premises of association of person does not qualify for exemption in individual hands of the assessee and Mrs. Chhaya B Parekh and also the new asset has been demolished and no construction has been done within 3 years and hence exemption claimed u/s 54F of the Act was denied by the AO , vide re-assessment orders dated 23.12.2010 passed by the AO u/s 143(3) r.w.s. 147 of the Act. 4. Aggrieved by the re-assessment orders dated 23.12.2010 passed by the AO u/s 143(3) r.w.s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had followed the decision in the case of Vania Silk Mills (P) Ltd. wherein it was held that the extinguishment of right on account of destruction or loss of asset does not amount to transfer. The Tribunal subsequently considered the decisions in the case of Neelamalai Agro Industries Ltd. v. CIT , (2003)259 ITR 651 (Mad. HC) relied upon by the assessee and in the case of CIT v. Pradeep Kumar (2006)153 Taxman 138 [Mad. HC) relied upon by the Revenue and observed that the issue hinges around the meaning of expression transfer 'provided in section 2(47) of the Act. The Tribunal observed that expression extinguishment of any right therein was the subject matter of consideration by the Hon'ble Supreme Court in the case of Mrs. Grace Collis (supra) wherein their lordships were concerned with the expression extinguishment in the context of amalgamating company by the order of the Court. The Tribunal further after considering decision of Hon ble Apex Court in the case of Vania Silk Mills Pvt. Ltd. (supra) as well as the later decision of Hon ble Madras High Court in the case of Neelamalai Agro Industries Ltd. (supra) arrived at that any extinguishment on account of act of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that demolition of an asset does not amount to transfer as there is no transferee nor there is any consideration. The assessee submitted that the CIT(A) in the first round of litigation held that there was violation of section 54F(3) of the Act on demolition of the bungalow as assessee was not the owner of the residential house for a period of three years as the residential house was demolished. The assessee contended that the interpretation adopted by the CIT(A) in first round of litigation was not correct as the assessee has purchased the bungalow with right to lease hold property and even after demolition , the said right was not transferred . The assessee submitted that the purchase of bungalow cannot be said to be symbolic as agreement clearly states that consideration was paid for purchase of bungalow and further the same was demolished in December, 2008 i.e. only four months before the completion of three years from the date of purchase. It was contended that the finding of the Tribunal that if the demolition was voluntary it will amount to transfer is contrary to the law laid down by the Hon ble Bombay High Court in the case of the co-owner Mrs. Chhaya B Parekh , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of jurisdictional High Court is binding on the tax-authorities. The CIT(A) after considering the submissions of the assessee rejected the claim of the assessee for deduction u/s. 54F of the Act and held that the said Juhu bungalow(new asset) after being acquired by the assessee was never occupied by the assessee and it was a symbolic purchase of residential property and no deduction u/s 54F of the Act can be allowed as it is not a real purchase of residential house property . Further, it was held that demolition of the bungalow took place at the behest of the assessee and it is not an act of god and hence demolition of the bungalow within three years amount to transfer in view of decision of Hon ble Supreme Court in the case of Grace Collis (supra) and accordingly the assessee is not entitled for deduction u/s. 54F of the Act. The decision in the case of co-owner Smt. Chhaya B. Parekh by the Hon ble High Court has been done without consideration of the later decision of the Hon'ble Apex Court in the case of Grace Collis and others (supra) wherein the decision in the case of Vania Silk Mills Pvt. Ltd. (supra) has been overruled by the three member bench of Hon'ble Apex Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial property and not real purchase of the residential property . The decision of the Hon ble Bombay High Court was available before the CIT(A) at the time of adjudication of the appeal in the case of the assessee. The CIT(A) refused to consider and follow the said decision of Hon ble Bombay High court in the case of Mrs. Chhaya B. Parekh on identical facts with respect to same transaction of sale of property (shop and garage) at Tirupati shopping complex, where-in the assessee was co-owner with said Mrs Chhaya B. Parekh as well with respect to purchase of Juhu Bungalow(new asset) which was also jointly purchased by the assessee along with the said Mrs. Chhaya B Parekh and thereafter the said bungalow was demolished after 2 years and 8 months after its acquisition by the assessee and said Mrs Chhaya B. Parekh who is sister-in-law of the assessee. 7. The ld. D.R. submitted that the destruction of asset was involuntary due to fire in the case of Vaniya Silk Mills Private Limited(supra) while in the case of the assessee it was a voluntary act of demolition of the bungalow. There was a transfer of asset hence it is an extinguishment of right of the assessee in the bungalow.The CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee are identical to the facts in the case of Mrs Chhaya B. Parekh as the transactions with respect to the sale and purchase of the impugned properties are same where both, the assessee and Mrs Chhaya B Parekh are co-owners. The judgment of Hon ble Bombay High Court in the case of Mrs. Chhaya B. Parekh as reported in 2013 TaxPub(DT) 1390 (Bom-HC) : (2013) 051 (I) ITCL 0292 whereby the Hon ble Bombay High Court dismissed the appeal of the Revenue and approving the orders of the Tribunal dismissing the appeal of the Revenue in the case of Mrs Chhaya B Parekh is reproduced hereunder: In this appeal by the revenue, the following question of law has been proposed for our consideration. Whether on the facts and circumstances of the case and in law, the Tribunal was correct in confirming the order of CIT(A) allowing the assessees claim of exemption u/s 54F of the Act even though the Juhu Bungalow which the Assessee had purchased as co-owner had been demolished much before completing 3 years of purchase and no new bungalow was constructed thereby violating the condition u/s 54F(3) of the Act that the new property should not be transferred within a period of three years and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Silk Mills (Supra) would squarely apply to the facts of the present case. 6. In view of the above, we see no reason to entertain the proposed question of law. Accordingly, the appeal is dismissed with no order as to costs. 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. The CIT(A) is bound to follow the decision of the Hon ble Bombay High Court in the case of the assessee s sister-in-law Mrs Chhaya B Parekh as the facts are identical in the case of the assessee to that of the assessee s sister-in-law Mrs Chhaya B. Parekh case, whereby Hon ble Bombay High Court has refused to admit the question of law referred by the Revenue and instead approve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2(47) of the Act as it stood at the commencement of the year 1976-77 read thus : transfer , in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law. The modes of transfer mentioned in this definition are : sale, exchange, compulsory acquisition, relinquishment of the asset, and extinguishment of any rights in the capital asset. The definition is an inclusive definition, and modes of transfer other than those referred to in the definition are also capable of being included in this definition. All the modes mentioned in the definition appear to have one thing in common viz., that the capital asset would continue to exist after the transfer by anyone of those modes. 8. Capital gains is dealt with in Chapter IV of the Act in sections 45 to 55A. Section 45 of the Act refers to profits or gains arising from the transfer of a capital asset. The section which brings the capital gains to charge of tax is section 45. What is to be taxed is the profit or the gain arising from the transfer of a capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the amount received from the insurer as capital gain. While doing so, the Court relied upon the observation of the Apex Court in the case of Vania Silk Mills (P.) Ltd. (supra) that, whatever the mode by which the transfer was brought about, the existence of the asset during the process of transfer was a precondition. Unless the asset existed in fact, there could not be a transfer of it. 12. Learned counsel for the revenue, however, contended that the law declared by the Apex Court in the case of Vania Silk Mills (P.) Ltd. (supra) is no longer good law, and that that decision has been both expressly and implidely been overruled by a three-Judge Bench in the case of CIT v. Mrs. Grace Collis [2001] 248 ITR 3231. In the case of Mrs. Grace Collis (supra), the Court was concerned with the question as to whether there is a transfer of the shares when the amalgamation of the Company whose shares are held by the assessee is ordered by the Court with another Company. The Court held that the rights of the assessee in the capital asset, viz., the shares in the amalgamating Company stood extinguished upon the amalgamation of the amalgamating Company with the amalgamated Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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. 17. In the case of Mrs. Grace Collis (supra), 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 in consideration of the transfer to the insurer of the damaged machinery and that, therefore, there was no transfer within the meaning of section 45, it was unnecessary for this Court in Vania Silk Mills (P.) Ltd. s case [1991] 191 ITR 647 to go on to consider the definition in section 2(47) and the meaning to be attached to the expression extinguishment of any rights therein . In his submission, the decision in Vania Silk Mills (P.) Ltd. s case [1991] 191 ITR 647 was to this extent orbiter dicta . It is only to the extent of that orbiter dicta, that the decision rendered in the case of Mrs. Grace Collis (supra) can be said to be at variance with the decision rendered in the case of Vania Silk Mills (P.) Ltd. (supra). In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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