9911796707
TMI Blog2024 (10) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The assessee has made investment in the aforesaid property with his own funds, then simply because the assessee has registered the property jointly with his wife, son or any other close relative, should not, in our view take away the case of the assessee from the restrictions/conditions imposed u/s. 54F of the Act. If this view were to be accepted as correct then the assessees would conveniently register the property in joint names and take the case outside the purview of the restrictions imposed u/s. 54F, which is to the effect that the assessee should not be owning more than one residential property at the time of investment in new immovable property. Another notable is fact that the assessee purchased new property at Colaba, Mumbai for which deduction u/s. 54F of the Act was claimed, which was also jointly registered by the assessee along- with with his wife. However, the assessee has taken complete deduction of the entire amount of investment despite the fact that the assessee is only 50% of the owner of such property (since the new investment is jointly held by the assessee and his wife). Therefore, evidently even in event of subsequent sale of property of Colaba, Mumbai, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by the Commissioner of Income Tax (Appeals)12, Ahmedabad, as against the Assessment order passed under section 143(3) of the Income Tax Act, 1961 (here in after referred to as the Act ) relating to the Assessment Year 2017-18. 2. The assessee has raised the following Grounds of Appeal: All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other. 1. The learned Commissioner of Income Tax (Appeals) -12, Ahmedabad [ CIT(A) ] erred in fact and in law in confirming the action of the learned Deputy Commissioner of Income Tax, Central Circle-3, Vadodara [ the AO ] in disallowing the claim of deduction u/s. 54F of the Income Tax Act, 1961 ( the Act ) amounting to Rs. 14,14,55,783. 2. The learned CIT(A) erred in fact and in law in confirming the action of the ld. AO in invoking proviso to section 54F for making disallowance of deduction u/s 54F despite that the Appellant did not own more than one residential house at the time of transfer of the capital asset. 3. The learned CIT(A) erred in fact and law in confirming the action of the ld. AO in invoking proviso to section 54F and consequently disallowing the claim of deduction u/s. 54F without pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year, the assessee had transferred shares of Excel Corp Care Ltd. and Transpek Industris Ltd. for a consideration of Rs. 15,77,30,705/- and offered net capital gain of Rs. Nil as the assessee has reinvested the consideration in a residential property at Colaba, Mumbai u/s. 54F of the Act of Rs. 14,14,55,783/-. On verification of the claim of the assessing officer held that the assessee already owned two residential properties namely (i) House no. 1028, Bhaili Road, Raipura, Vadodara ( the Raipura House ) and (ii) Vishubaug Farm property at Kharakhadi ( the Farm ). 3.1. The assessee claimed that the Farm property is an agricultural land used for carrying out agricultural activities wherein there is a Manager s office, storehouse for farm equipments and agricultural produce stored there. Further the farm property also has a cow shed with 66 cows. The milk from these cows is sold and income is from generated the same. Thus the farm is exclusively used for agricultural purposes and it s not a residential building and the employees of the assessee are carrying out the agricultural activities. The assessee also claimed that he is one of the co-owners of the above land along with h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ug property consists residential residential houses outhouses for the two families permanently residing there Attached behind their outhouses (where two servant families reside), the assessee has a storage/garage for tractor and agriculture implements. Further, unattached with the outhouses/store, a cow shed is constructed at a distance of 50 let away the outhouse. The Cowshed is having a separate boundary, shed and open area for cattle presently existing there. The office of the manager of the farm house Mr. Sangram Singh Bharvad is also constructed separately from cowshed and outhouses and is in sound and perfect condition. None of these mentioned constructed buildings are in a dilapidated condition and are all separate entities. The office is mad the entrance gate of the property and is around 50 to 100 feet away men other properties existing in the farm house. Most important of all, which makes the calm of the Assessee outrageously incorrect la the fact that apart from these three properties the Assessee is having a separately built beautiful residence, a Bungalow, surrounded with all around verandah and covered boundary. It is situated inside the Vishubaug property and is more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a 22 acres land which is jointly owned by him, his wife and daughter. Thus, he claims that he does not have an exclusive right on Vishubaug property as he is only 33.33% shareholder in the land building of Vishubaug karkhadi. On the basis of such assertion it is being claimed that he being only a co-owner with a family members, therefore he has fulfilled the conditions stipulated in section 547 of the Act as he had only one residential house at Raipura, Vadodara. In support of his claim the assessee has quoted another case-law CIT Vs Dr. Smt. P.K. Vasanthi Rangarajan [2012] 23 taxmann.com 299 (Mad) where it has born held that joint ownership of a property could not be held to stand in her way of claiming exemption u/s. 54F of the Act . However, the case of the assessee is distinguishable from the quoted case in that case the assessee had not owned any property in status of any individual, as on date of transfer. She was only a joint owner in one property. Thus the quoted case law is not at all applicable to the facts of the assessee's case. In the proviso of section 54F the claim of deduction barred the person who punt more than one residential house, other than the new ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) held that Vishubag Property is also the second residential property of the assessee s residence property and therefore assessee is not eligible for deduction u/s. 54F of the Act as well as the assessee having failed to declare any agricultural income from the Farm property, on that count also the claim of the assessee that the Farm property as a commercial property was rejected by the Ld.CIT(A) as follows: 5.6 The thrust of appellant's arguments are that - a. The Farm is not a residential house and is only used for carrying out agricultural activities and commercial activities. b. The income, if any, from the building on the Farm would not be chargeable to tax under the head Income from House Property and hence, proviso to section 54F is not applicable. c. The Appellant is not personally carrying out any agricultural activity and he is not required to reside at the Farm and therefore he does not reside at the Farm. d. The Appellant has made heavy investment in constructing his elegant bungalow at Raipura and the same is mainly for residential purpose and it cannot be assumed that the Appellant would reside at the Farm instead of the House at Raipura. e. Without prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to Income-tax. 5.10 As per Section-2(1 A), the agriculture income among other things also means (c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on: Provided that - if the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of his connection with the land, requires as a dwelling house, or as a store-house, or other out-building and the land is either assessed to, land revenue in India or is subject to a local rate assessed and collected by the Officers of the Government or where the land is not so assessed is situated in any area which is comprised within the jurisdiction of the Municipal Corporation or in any area within the specified distance from the local limits of any Municipality. 5.11 No dispute has been created by the AO as to 22 acres of land not being agricultural land. Thus it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces because the appellant is not protected by the case laws relied upon in this regard because the appellant also has a full-fledged residential property (1028, Raipura). I am also of the considered view that sec.54F allows only one residential property and the benefit ceases if the assessee has more than one residential property and the appellant definitely has more than one residential property. 5.15 In the facts and circumstances of the case the appellant is found to be-owner of more than one residential house other than the new asset (residential property at Colaba, Mumbai) on the date of transfer of the original asset (shares). I find no basis to interfere with the assessment order impugned in the appeal by the appellant. The addition is confirmed and the related grounds are dismissed. 6. Before us, Ld. Counsel for the assessee submitted that the lower authorities failed to consider that there is only residential property available with the assessee namely Raipura House wherein the assessee is residing. The Vishubag Farm property is jointly held by the assessee with his wife and daughter as co-owners which is nothing but a commercial property. The net result of such commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alow, the lettable value of the same is not considered for the purpose of computation of House Property Income (Deemed Rent) as the bunglow is located in agricultural land. 8. Per contra, ld. D.R. appearing for the Revenue submitted that the Field Inspection carried out by the Department and the photographs is reproduced in the assessment order clearly depict that there is a residential house namely a bungalow in the property which is habitable in nature, other than the one Raipura House. The assessee s claim of agricultural activity and dairy activity is not substantiated with proof of evidence and not declared in the Return of Income filed by the assessee. In the absence of the same, the assessee s claim of Vishubag Farm property as a commercial property cannot be accepted. The Hon ble Orissa High Court in the case of State of Orissa vs. Ramchandra Chaudhary 46 ITR 246 has held that dairy farming will not be an agricultural operation and income from dairy farming will also not be agricultural income. Therefore income from milk derived from milk booth maintained by the assessee, is not an agricultural income . Thus assessee failed to prove and disclose the agricultural income in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year for assessment year 2018-19. 10. The second argument of the Counsel for the assessee is that the assessee is not the exclusive owner of the property and the property is held jointly by the assessee, his wife and his daughter. The counsel for the assessee relied on several judicial precedents, in support of the contention that in order to be denied the claim of deduction u/s. 54F of the Act, the assessee should be exclusive owner of the property and joint ownership in the property would not disentitle the assessee from claim of deduction u/s. 54F of the Act. In our view, certain points in this regard are noteworthy. Firstly, it has not been denied by the assessee that the entire investment in the property at Vishubaug was made by the assessee himself and only for the purposes of registration that the property had been jointly registered in the name of his wife and his daughter. Accordingly, in our view, the case laws cited by the assessee would not come to the rescue of the assessee for the simple reason that if the entire investment is made by the assessee, then simply by putting the name of other co-owners being the close relatives say wife, daughter, son, etc., would not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the Counsel for the assessee that the assessee does not use the Farm for the purpose of his residence. However, this aspect was discussed in detail by Ld. CIT(A) and on facts, it was observed that the assessee was clearly using the Farm of Vishubaug for residential purposes as well. The assessing officer while framing the assessment order has given a categorical finding that the immovable property situated at Vishubaug had a separately built bungalow, surrounded with verandah and covered boundary and all the furniture/furnishings of a house. Accordingly, on facts, the Department has clearly established that the property situated at Vishubaug was capable of being used and was also used by the assessee for his residential purposes. 12. Accordingly, looking into the facts, we are of the considered view that Ld. CIT(A) has correctly observed that the property at Vishubaug was a residential house of the assessee. Accordingly, in the instant facts, we are of the view that the property situated at Vishubaug is a residential house and not a commercial property. Accordingly, looking into the instant facts, we find no infirmity in the findings of the Ld. CIT(A) so as to call for any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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