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TMI Blog2018 (4) TMI 1728X X X X Extracts X X X X X X X X Extracts X X X X ..... this property is being used for storing construction material during relevant period and if the assessee is able to do so than this property should not be considered as a residential house property owned by the assessee on the relevant date for deciding the eligibility of the assessee for deduction u/s 54F. Claim of the assessee about Apartment at Bangalore as per the AO, actual user is not relevant and we have held in Para 10 above that a house property can be considered as a residential house property only if it is being used for residential purpose by the assessee or the tenant and this decision of us is supported by the tribunal order rendered in the case of Sanjeev Puri vs. DCIT [ 2016 (8) TMI 907 - ITAT DELHI] . CIT (A) has noted the claim of the assessee that this property is being used as assessee's office at Bangalore and learned DR of the revenue could not bring any material before us to even create some doubt about this claim of the assessee that this property is used as office and is disclosed in balance sheet as stock in trade. Hence we hold that this property cannot be considered as a residential house property owned by the assessee on the relevant date. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has noted the contentions of the assessee that these five properties are used for business purposes and therefore, no addition u/s 22/23 is called for. Taxability u/s 22/23 - AO concluded that since these properties are not let out, addition of notional rent of these properties is to be made but he has not given any finding about the claim of the assessee that these properties are used for business purposes. As per section 22 of I. T. Act, for any property occupied by the assessee for the purpose of any business carried on by him, Annual value is not to be computed for taxing under the head Income from house Property. Since, we have upheld the order of CIT (A) on this aspect in respect of three properties out of five properties, we uphold the order of CIT (A) on this issue also in respect of those three properties but for remaining two properties, we have restored the matter back to CIT (A) for a fresh decision in respect of allowability of assessee's claim under section 54F. Hence on this aspect i.e. taxability u/s 22/23 also, in relation to these two properties, the matter is restored to CIT (A) for fresh decision with the direction that if it is found that these two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, the Ld.CIT(A) has failed to appreciate that the properties shown at SI. No.3 (a, b, c, e) are shown as investment by the assessee and disclosed in the fixed asset schedule of the Balance sheet. The purchase deed of the properties clearly shows that the properties are residential in nature. (6) Based on the facts and circumstances of the case, the Ld. CIT (A) ought to have appreciated that the properties at Sl.No.3 (a,b,c,e) are owned by the assessee and part of fixed asset schedule of the Balance Sheet and residential in nature. The assessee might be using these properties for different purposes but it does not make the properties as non residential. (7) Based on the facts and circumstances of the case, the Ld.CIT(A) has failed to appreciate that the section 54F does not talk about the use of the property. It just says that the assessee should not own more than one residential house other than the new asset. The assessee may use the residential house for any other purpose like storing the building material for the business purpose but it does not mean that the house property purchased by the assessee as per the purchase deed is not a residential proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e residential house other than the new asset on the date of transfer of the original asset. (14)Based on the facts and circumstances of the case, the Ld.CIT(A) has erred in deleting the notional rent from the unoccupied residential properties. These properties are owned by the assessee and have not been let out to anybody during the year. Hence notional rent U/s 23 of the IT Act should have been offered for taxation by the assessee. (15)Based on the facts and circumstances of the case, the Ld.CIT(A) ought to have appreciated that the notional rent from the unoccupied residential properties owned by the assessee are to be taxed U/s 24 by calculating the rent U/s 23 of the IT Act. (16)For the above and further grounds that may be urged at the time of hearing of the appeal, your appellant prays that the appeal may be allowed and justice rendered. 3. It was submitted by ld. DR of revenue that although several grounds are raised by the revenue but the issue involved is only one i.e. allowability of deduction claimed by assessee u/s. 54F and the main dispute is this as to whether the assessee was having more than one residential house other th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atipalla Village, Mangalore described in the gift deed dated 12.01.2009 as a property consisting of 10.2 acres of land with a building bearing No. Katipalla 9-27A, 27A-1 27B. The AO has noted that the assessee has explained it as an Agricultural property in the Balance Sheet. As per the AO, it does not change the character of the property that the agricultural land was having a building inside, which was fit to be used for residential purposes and this is also considered as a residential house on the relevant date. He further pointed out in Para 6 of the assessment order, the AO has noted that in addition to these, the assessee has also one unsold flat of 955 sq.ft. in 5H Project which is also a residential flat and agreement for sale was entered only on 28.04.2011 and hence, this flat was also there in the ownership of the assessee on the date of transfer of the original asset on 30.11.2010. On this basis, the AO has come to the conclusion that assessee owned more than one residential house on the relevant date and therefore, the assessee is not eligible for deduction u/s. 54F of IT Act. 4. Regarding the decision of CIT(A) as per which the CIT(A) has decided the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, which is self occupied, called 'Palemar' at Bejai Church Road, Mangalore. The address of this property is survey No.117-1A, 142/2A, Kodialbail, Mangalore. This has also been declared in the affidavit filed by the assessee before the Assembly Election of Karnataka 2013. 2) The assessee has a residential property at Chilimbi, which is shown in the schedule of fixed assets and explained by the AR as used for storing construction materials. The section 54F does not speak anything about the use of residential property. Moreover, assessee has not produced any evidence to prove his claim that the above property is used by him for storing construction material. This property has been demolished by the assessee and a multi-storied complex is coming up on the land of this property. Hence, it is not possible to verify the use of the property as on to-day by the assessee as claimed by him. A residential property can be used by the owner for any purpose, but it should be a residential property. There is no doubt from the description of the property in the purchasedeed that it is a residential property which has subsequently been demolishedby the assessee to use the land f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 955 sq.ft. in 5H Project which is also a residential flat and agreement for sale was entered only on 28-4-2011. Hence, this flat was also there in the ownership of the assessee on the date of transfer of the original asset on 30-11-2010. All the above properties are residential properties and the assessee might be using for some other purposes, but it does not make these properties as nonresidential properties. The proviso to Section 54F reads as under: Provided that nothing contained in this sub-section shall apply where the assessee owns more than one residential house, other than the new asset, on the date of transfer of the original asset...... 6.11 It is very clear from the above discussions that the assessee has more than one residential house other than the new asset on the date of transfer of the original asset. Hence, he is not entitled for the deduction u/s.54F of the LT.Act, 1961. Accordingly, the claim of deduction u/s.54F is disallowed and no deduction u/s.54F is given in the income computation sheet while calculating long-term capital gain. 6. The first proviso to section 54F is relevant for deciding this issue and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound No. 1 - Disallowance of exemption claimed u/s.54F: The first grounds of appeal of the appellant is disallowance of exemption claimed u/s.54F amounting to ₹ 5,88,69,688/- on long term capital gain on sale of property. As seen from the statement of facts and assessment order, brief facts of the case are that, the appellant had sold a property measuring 10 acres 2 guntas during the year for a consideration of ₹ 11.70 crores to M/s. Shobha Developers. After reducing the indexed cost of ₹ 2,01,19,289/- capital gain from the sale of said property was worked at ₹ 9,68,80,711/-. The appellant has invested a sum of ₹ 7,10,95,200/- in the purchase of new residential property. On the basis of this investment proportionate deduction u/s 54F was claimed amounting to ₹ 5,88,69,688/- and balance capital gain of ₹ 3,80,11,023/- was offered for tax as long term capital gain in the return of income filed. 6.1 During assessment proceedings the AO observed that, appellant has following house properties apart from what he has claimed exemption u/s.54F and his dwelling unit 'Palemar', situated at Kodialguthu East, Bejai Church ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Mangalore City Corporation is produced before me. Hence, he has argued that, it is not at all residential house property. He further argued that, apartment at Bangalore, which has been transferred to Mr.ManojKalya vide sale agreement dated 6.1.2009. The same could not be registered in the name of said Mr. Manoj Kalya since, there is a claim on the property by State Bank of Mysore. The said property is used for Appellant's office use at Bangalore. The same is disclosed in the Balance Sheet as on 31.3.2010 as stock-in-trade and as advance received in the Balance Sheet for the year under question. Copies of the Balance Sheets are submitted before me. AR has also stated that, the property at Katipalla Village is an agricultural property and there is no residential house in the said property. The Agricultural property is disclosed in the Balance Sheet of the Appellant under the Fixed Assets Schedule. He has pleaded before me that, flat at Ashoka Majestic has been agreed to be sold vide agreement dated 23.2.2010 and unsold flat 5H project has been sold vide sale deed dated 28.4.2011. The unsold flats are kept as stock-in-trade in the Balance Sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istake in wealth tax return, the issue in income tax cannot be decided against the assessee. This may be true that there is a mistake in Wealth tax return but this aspect has to be examined as to what is correct position. Hence, we feel it proper that this matter should be restored back to CIT (A) for a fresh decision after examining this factual aspect. 9. We also find that in Para 6.1 of his order, it is noted by CIT (A) that there are five properties which are residential houses in addition to one self occupied house property as per AO and assessee. The said Para 6.1 is reproduced above and the names of those five properties are available in that. In Para 6.2 of his order, learned CIT (A) has noted that this is the argument of the learned AR of the assessee that the property no. 1 3 are same property. This aspect was discussed by the AO also in the assessment order and the AO held that since property at Boloor village, Mangalore is purchased separately, it has to be considered that these are two properties even if the assessee is using these two as one property. In our considered opinion if two or more adjacent properties are combined together by the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee should produce evidence in support of this claim that this property is being used for storing construction material during relevant period and if the assessee is able to do so than this property should not be considered as a residential house property owned by the assessee on the relevant date for deciding the eligibility of the assessee for deduction u/s 54F. 11. Now we examine the claim of the assessee about Apartment at Bangalore. As per pages 17 18 of the assessment order, the entire discussion is about sale to Sri Manoj kalya on 06.01.2009 and the finding of the AO is this that the transfer did not take place and hence, this property is owned by the assessee only on the relevant date. After giving this finding, the AO has to show that this property is used for residential purposes but there is no such finding of the AO in the assessment order. We have already discussed above that as per the AO, actual user is not relevant and we have held in Para 10 above that a house property can be considered as a residential house property only if it is being used for residential purpose by the assessee or the tenant and this decision of us is supported by the tribunal ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... house and in spite of this finding of CIT (A) that this property is not used for residential purposes, the learned DR of the revenue did not bring any evidence before us in this regard to dislodge the claim of the assessee and finding of CIT (A) that this property is not a residential property and it is a business asset shown in the balance sheet as stock in trade. Hence, we hold that this property also cannot be considered as a residential house property owned by the assessee on the relevant date. 14. As per above discussion, it is seen that out of five properties in dispute, except for first and third properties, we have held that none of these three properties can be considered as a residential house property owned by the assessee on the relevant date. But for two properties i.e. first and third properties, we have restored the matter back to CIT (A) for fresh decision. Hence, this issue is partly decided in favour of the revenue for statistical purposes. 15. Regarding Ground No. 14 15, learned DR of the revenue supported the assessment order and learned AR of the assessee supported the order of CIT (A). In Para 7 of his order, learned CIT (A) has deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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