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TMI Blog2022 (7) TMI 1139X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 613 - DELHI HIGH COURT] which view has also been taken by the coordinate bench of Tribunal in Ashok G. Chauhan ( 2019 (4) TMI 1024 - ITAT MUMBAI] we are of the considered view that joint ownership of the assessee, in the present case, in 2 residential Flats, namely, Flat No. A 408 and B 504 on the date of transfer of original capital asset will not disentitled the assessee from claiming relief under section 54F. As the expression a residential house in section 54F, prior to its amendment vide Finance (No. 2) Act, 2014, w.e.f. 01/04/2015, includes more than one residential house purchased/constructed by the assessee, within the prescribed time. In the present case, as the properties were purchased by the assessee pursuant to transfer of long-term capital asset ( original asset ), the same will fall within the category of a residential house (or as referred in the section as new asset ) for the purpose of section 54F of the Act. As the aforesaid properties, fall within the category of new asset , same cannot be considered as residential house for the purpose of proviso to section 54F of the Act, which, as stated earlier, is other than the new asset . The proviso onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal, which is also supported by an affidavit sworn by the assessee. In the application, it has been submitted that the order passed by the learned CIT(A) was received by the assessee on 29/04/2015, and the said order along with all the papers were sent to the Chartered Accountant s office on 22/06/2015. It is further submitted that after perusal of the papers the Chartered Accountant advised the assessee to file the appeal against the impugned order, which advice was duly accepted by the assessee and instructions were given to the Chartered Accountant to file the appeal. In application it is submitted that pursuant thereto advice of Senior Counsel was also tried to be sought, however, due to paucity of time the same could not be availed within time. Accordingly, instructions were given to the Chartered Accountant to file the appeal without awaiting the advice from the Senior Counsel and eventually the appeal was filed on 03/07/2015, which resulted in delay of 5 days in filing the present appeal. In view of the above, the assessee has requested to condone the delay as the same is unintentional and due to circumstances beyond the control of the assessee. On the other hand, learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dual and is engaged in the business of trading in shares and securities. During the year, the assessee has derived income from salary, house property, business, capital gains and other sources. For the year under consideration, assessee filed his return of income on 15/10/2010 declaring total income of Rs. 39,15,433. During the course of assessment proceedings, assessee was asked to file the details of immovable assets. In reply, assessee submitted that the details of owning 2 flats namely, A 605 and A 608 at Harishchandra Apartment, Raheja Township, HIP, Malad (E), Mumbai 97. As the assessee was already having a residential property at B 504, Harishchandra Apartment, Raheja Township, Malad (E), Mumbai, therefore, the aforementioned properties were subjected to house property income by the Assessing Officer vide order dated 26/03/2013 passed under section 143(3) of the Act and income from house property was computed at Rs.1,87,793, after adopting annual value of said property at 8% of capital cost. 8. In appeal, learned CIT(A) vide impugned order upheld the annual value of the aforesaid 2 flats as determined by the Assessing Officer. Being aggrieved, assessee is in appeal befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same basis as noted above. In the event and as urged before us, the security deposit collected and refundable interest free and the monthly compensation shows a total mismatch or does not reflect the prevailing rate or the attempt is to deflate or inflate the rent by such methods, then, as held by the Delhi High Court, the Assessing Officer is not prevented from carrying out the necessary investigation and enquiry. He must have cogent and satisfactory material in his possession and which will indicate that the parties have concealed the real position. He must not make a guess work or act on conjectures and surmises. There must be definite and positive material to indicate that the parties have suppressed the prevailing rate. Then, the enquiries that the Assessing Officer can make, would be for ascertaining the going rate. He can make a comparative study and make a analysis. In that regard, transactions of identical or similar nature can be ascertained by obtaining the requisite details. However, there also the Assessing Officer must safeguard against adopting the rate stated therein straightway. He must find out as to whether the property which has been let out or given on leave a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determination of the fair rental value in respect of properties not covered by or covered by the Rent Control Act is to be undertaken in terms of the law laid down in the Full Bench decision of the Delhi High Court. 51] We quite see the force in the arguments of Ms. Vissanjee that ordinarily the license fee agreed between the willing licensor or a willing licensee uninfluenced by any extraneous circumstances would afford reliable evidence of what the landlord might reasonably be expect to get from a hypothetical tenant. She has in making this submission, answered the issue and summed up the conclusion as well. Then, it is but natural and logical that in the event, the transaction is influenced by any extraneous circumstances or vitiated by fraud, or the like that the Assessing Officer can adopt a fair rent based on the opinion obtained from reliable sources. There as well, we do not see as to how we can uphold the submissions of Mr. Chhotaray that the notional rent on the security deposit can be taken into account and consideration for the determination. If the transaction itself does not reflect any of the aforestated aspects, then, merely because a security deposit which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding with the same. If he desires to undertake the determination himself, he will have to go by the Maharashtra Rent Control Act, 1999. Merely because the rent has not been fixed under that Act does not mean that any other determination and contrary thereto can be made by the Assessing Officer. Once again having respectfully concurred with the judgment of the Full Bench of the Delhi High Court, we need not say anything more on this issue. 13. In another decision, Hon ble jurisdictional High Court in Smt. Kokilaben D. Ambani v/s CIT: [2014] 226 Taxmann 208 (Bombay), following the aforesaid decision in Tip Top Typography (supra), observed as under: 8. In our view, in the judgment in Tip Top Typography case (supra) after concurring with the conclusion of Delhi High Court, we have held that the assessing officer in the cases of properties, which are subject to Rent Control Legislation cannot ignore the same. If the standard rent has not been fixed under the Rent Control Legislation by the competent authority, it is the duty of the assessing officer to determine the same in of the Rent Control Legislation. The law has been crystallized in terms of the decision of the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operties, the assessee has not entered in to any agreement for purchase. He had only a right to acquire the property by way of the allotment letter. So what is surrendered is only the right to acquire the property and not the residential property as such. Being so, the claim of exemption u/s 54 of the I.T Act do not sustain, as the capital gain is not from sale of residential house. The payments towards acquisition of the 'right' is spread over from F.Y. 2004-05 to FY 2008-09, as per the details provided by the assessee. The assessee has not identified which are the payments made towards the right to acquisition of each property. Neither any computation of capital gain attributing cost individually to each property has been furnished Therefore, it is not possible to identify the property which was acquired and held for more than 36 months. As such, the compensation received as above amounting to Rs.59,29,200/- is assessed as short term capital gain. Since the income from surrendering the right to acquire the properties as above have been assessed as short term capital gain; the question of allowability of exemption u/s 54 of the I.T. Act do not arise. Penalty proceedings u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ership/ joint ownership in some other flats. Also the income from such flats are assessed under the head income from House Property. Hence, the exemption u/s 54F is clearly not allowable to the appellant. Being aggrieved, assessee in appeal before us. 19. During the course of hearing, learned AR submitted that assessee is a joint owner in two residential Flats (No. A 408 and B 504) on the date of transfer of original asset and no residential house was owned in a single name. The learned AR further submitted that prior to amendment by the Finance Act (No.2), 2014, there was no bar under section 54F from purchasing/constructing more than one residential house and thus assessee is entitled to claim relief under section 54F of the Act. 20. On the other hand, learned DR vehemently relied upon the orders passed by the lower authorities. 21. We have considered the rival submissions and perused the material available on record. Section 54F of the Act, as prevalent during the year under consideration, reads as under: 54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) constructs any residential house within a period of 3 years after the date of transfer of original asset. The proviso further requires that such residential house, other than the residential house owned on the date of transfer of original asset, is chargeable under the head Income from House Property and that residential house is other than the new asset. As per section 54F, the expression new asset refers to a residential house purchased or constructed by the assessee, within the prescribed period. 23. The meaning of expressions own and a residential house has been the subject matter of litigation in past. We find that while dealing with the issue whether the term own include the joint ownership also, Hon ble Madras High Court in Dr. Smt. P.K. Vasanthi Rangarajan vs CIT, [2012] 209 Taxman 628 (Madras) held that merely because taxpayer jointly owned another property on date of transfer of asset, its claim for exemption under section 54F could not be rejected in respect of capital gains earned from transfer of her individual property. In CIT vs Kapil Nagpal, [2016] 381 ITR 351 (Delhi), Hon ble Delhi High Court also took the similar view and granted reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Section 54F so as to include part ownership. Since, the legislature has consciously not amended the provision of section 54F, it has to be held that the word own in Section 54-F would include only the case where a residential house is fully and wholly owned by the assessee and consequently would not include a residential house owned by more than one person. 26. Thus, divergent views of the Courts are available as regards the meaning of the term own . No decision of Hon ble jurisdictional High Court was brought to our notice on this aspect. Thus, the difficulty arises as to which of the Hon'ble non jurisdictional High Court is to be followed by us in the present situation. It will be wholly inappropriate for us to choose views of one of the High Courts based on our perceptions about reasonableness of the respective viewpoints, as such an exercise will de facto amount to sitting in judgment over the views of the High Courts something diametrically opposed to the very basic principles of hierarchical judicial system. We have to, with our highest respect to both the views of Hon'ble High Courts, adopt an objective criterion for deciding as to which of the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s occurring in section 54(1) can include more than one or plural residential house, Hon ble Madras High Court in Tilokchand Sons v/s ITO, [2019] 413 ITR 189 (Madras), after considering the similar amendment vide Finance (No. 2) Act, 2014 in section 54 of the Act w.e.f 01/04/2015, observed as under: 19. A closer and bare reading of the aforesaid Explanatory Notes to the provisions of the said Act, clearly shows that the said amendment was intended to be specifically applied only prospectively with effect from A.Y.2015-2016. It took note of the judicial precedents for the period prior to 01.04.2015, giving a different and contra interpretation. Therefore this amendment cannot be held to be mere clarificatory so as to be applied retrospectively for A.Y.2005-2006 in the present case. 20. We have discussed about the two decisions from the Karnataka High Court, which, in our opinion, dealt with similar controversy as is raised before us herein. The only difference which we find is that the purchase of the residential houses in the present case is at different address in the same city of Madurai. In D. Ananda Basappa case stated (supra), two flats in question were admittedly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent case, in our opinion, complied with the conditions of Section 54 of the Act in its true letter and spirit and, therefore was entitled to the deduction under Section 54 of the Act for the entire investment in the properties and securities. Therefore, in our opinion, Judgment rendered by the Karnataka High Court in D. Ananda Basappa (supra) Khoobchand M. Makhija (supra) cited at bar by the learned counsel for the Assessee apply on all fours to the facts of the present case. 29. Similarly, in an earlier decision, while dealing with similar issue in respect of benefit claimed under section 54F of the Act, Hon ble Madras High Court in CIT vs Smt. V.R. Karpagam, [2015] 373 ITR 127 (Madras), observed as under: 10. The above-said amendment to Section 54F of the Income Tax Act, which will come into effect only from 01.04.2015, makes it very clear that the benefit of Section 54F of the Income Tax Act will be applicable to constructed, one residential house in India and that clarifies the situation in the present case, i.e, post amendment, viz., from 01.04.2015, the benefit of Section 54F will be applicable to one residential house in India. Prior to the said amendment, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case. Further, as it is not disputed that the aforesaid properties were purchased by the assessee within the prescribed time, therefore, we are of the considered view that assessee is entitled to claim benefit under section 54F of the Act. Accordingly, ground No. 6 raised in assessee s appeal is allowed. 32. The issue arising in ground No. 7, raised in assessee s appeal, is pertaining to addition of Rs. 16,25,000 as income from other sources. 33. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee while filing its return of income, for the year under consideration, included an amount of Rs. 16,25,000, in computation of income, in anticipation of refund of investment made in property and cancelled during the year. The Assessing Officer vide order passed under section 143(3) of the Act, in absence of any supporting evidence, treated the amount of Rs.16,25,000, as income from other sources. In appeal before the learned CIT(A), assessee submitted that during relevant financial year the assessee had booked another set of Flats no. A 1003 and 1004 in the same building in May 2009, this was subsequently cancelled on 07/07/2009. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 was wrongly declared as income under an anticipation of refund of investment in property which was made and cancelled during the year. As per the assessee, revised return also could not be filed as the time limit for filing the same was expired. Further, as per the assessee, the aforesaid amount was never realised and the investee with whom the investment was made refused to entertain any claim. It is well established that assessment proceedings before the taxing authority is to assess the correct tax liability and therefore no hypothetical income / profit could be brought to tax. In the present case, addition of Rs. 16,25,000 was made by the Assessing Officer and same was upheld vide impugned order without examining the submission of the assessee. Therefore, we deem it appropriate to remand this issue to the file of Assessing Officer for de novo adjudication after consideration of all the aspects. Accordingly, ground no. 7 raised in assessee s appeal is allowed for statistical purpose. 36. Ground no.9 raised in assessee s appeal is consequential in nature and therefore, same is allowed for statistical purpose. 37. Ground no.1 raised in assessee s appeal is general in natur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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