ITO (IT)-2(1), MUMBAI v. DR. GIRISH M. SHAH, MUMBAI

ITA 3582/MUM/2009 | 2004-2005
Pronouncement Date: 17-02-2010 | Result: Dismissed

Appeal Details

RSA Number 358219914 RSA 2009
Assessee PAN AVTPS0452Q
Bench Mumbai
Appeal Number ITA 3582/MUM/2009
Duration Of Justice 8 month(s) 15 day(s)
Appellant ITO (IT)-2(1), MUMBAI
Respondent DR. GIRISH M. SHAH, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 17-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 17-02-2010
Date Of Final Hearing 03-02-2010
Next Hearing Date 03-02-2010
Assessment Year 2004-2005
Appeal Filed On 02-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI R.K. PAND A (AM) ITA NO.3582/MUM/2009 ASSESSMENT YEAR : 2004-05 INCOME TAX OFFICER(INTL. TAXATION)-2(1) ROOM NO.14 SCINDIA HOUSE BALLARD PIER MUMBAI-400 038. ..( APPELLANT ) VS. DR. GIRISH M. SHAH C/O. SHRI R.R. WAMIKAR C-7 NAV PARMANCE HSG. SOCIETY CHEMBUR MUMBAI. ..( RESPONDENT ) P.A. NO. (AVTPS 0452 Q) APPELLANT BY : SHRI MOHD. USMAN RESPONDENT BY : SHR I PARAS SAVLA AND SHRI RANGESH BANKA O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 12.3.2009 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2004-05. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIAN ORIGIN AND SETTLED IN CANADA SINCE 1994. THE ASSESSEE HA D PURCHASED A FLAT IN APRIL 1984 IN MUMBAI UNDER THE BHDB SCHEME FOR ITA NO.3582/M/09 A.Y: 04-05 2 RS.1 31 401/-. THIS FLAT WAS SOLD FOR RS.16 00 000/- ON 16.12.2003. THE COST OF INDEX WAS CLAIMED TO BE AT RS.4 83 556/-. TH E COST OF IMPROVEMENT WAS INDEXED AT RS.2 01 048/-. THUS THE ASSESSE E HAD CLAIMED COST OF INDEX AND IMPROVEMENT AT RS.7 05 199/-. THUS GROSS CAPITAL GAIN WAS WORKED OUT AT RS.8 94 801/-(16 00 000 7 05 199). AS AGAINST THIS EXPENDITURE OF RS.97 000/- WAS ALSO CLAI MED ON ACCOUNT OF ARCHITECT FEE BROKERAGE SOCIETY CHARGES AND PROFESSIONAL FEE. THUS NET CAPITAL GAIN WAS WORKED OUT AT RS.7 97 8 01/- (RS.8 94 801 RS.97 000). THE ASSESSEE FURTHER CLAIMED THAT IT PURCHASED A HOUSE AT 667 ATWATER AVENUE MONTREAL QUE BEC H3Y2L9 CANADA FOR INDIAN RS.64 75 000/-. THE ASSESSEE HAS ALSO FILED PROOF THAT THE AMOUNT OF SALE CONSIDERATION RECEIVED IN INDIA WAS REPATRIATED TO CANADA UNDER NOC DTD. 22.01.2004. THUS ACCORDING TO THE ASSESSEE SALE PROCEEDS WERE UTILIZED OUTSIDE INDIA FOR PUR CHASING NEW HOUSE IN CANADA ELIGIBLE FOR DEDUCTION U/S.54 OF THE INCOME TAX ACT 1961(THE ACT) AND HENCE HE CLAIMED DEDUCTION U/S.54 O F THE ACT. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF THE TRI BUNAL IN MRS. PREMA P. SHAH VS. ITO 282 ITR (AT) 211 (MUM) IN SUPPORT OF HIS CLAIM OF EXEMPTION U/S.54 OF THE ACT. THE ASSESSEE ALSO FIL ED A COPY OF A SALE DEED DTD. 30.01.2004. THE ASSESSING OFFICER EXAM INED THE CLAIM OF ASSESSEE. THE ASSESSING OFFICER NOTED THAT THE ASSESSE E HAS SOLD HIS FLAT FOR RS.16 00 000/- BUT THE VALUE OF TH E SAID FLAT WAS ITA NO.3582/M/09 A.Y: 04-05 3 ADOPTED AT RS.21 11 560/- BY STAMP DUTY AUTHORITY. THEREFORE THE ASSESSING OFFICER HAS CONSIDERED THE SALE CONSIDERATION AT RS.21 11 560/- AS PER PROVISIONS OF SECTION 50 C(3) OF TH E ACT. THE ASSESSING OFFICER COMPUTED COST OF INDEXATION U/S.48(II)(A) AT RS.4 83 556/- WORKED OUT BY THE ASSESSEE. THE ASSESSING OFF ICER ALSO COMPUTED COST OF IMPROVEMENT AT RS.1 46 308/- (RS.39 500 X 463/125) AND RS.53 740/- (48 000X 463/406). THE CLAIM OF EXPENSES OF RS.97 000/- WAS EXAMINED BY THE ASSESSING OFFICER. T HE ASSESSING OFFICER IS OF THE VIEW THAT A SUM OF RS.25 000/- CLAIMED ON ACCOUNT OF PROFESSIONAL FEES RS.25 000/- BEING PAID TO CHARTERED A CCOUNTANT WAS NOT ALLOWABLE AS THE SAID EXPENSES DOES NOT FALL U/S.48 (I) OF THE ACT. THUS THE ASSESSING OFFICER CALCULATED LONG TERM CAPITAL GAI N AS UNDER: SALE VALUE AS PER SECTION 50C(3) OF THE ACT. RS.21 11 560 LESS: (I) PURCHASE PRICE INDEXED AT RS.4 86 709 (II)COST OF IMPROVEMENT INDEXED AT RS.2 01 048 (146308 + 53740) -------------- RS. 6 87 757 --- ------------ RS.14 23 803 LESS: ALLOWABLE EXPENSES. ARCHITECT FEE RS.15 000 BROKERAGE RS.32 000 SOCIETY CHARGES RS.25 000 PROFESSIONAL FEE RS.-NOT ALLOWED. (RS.25 000 NOT ALLOWED) ------------- RS. 72 000 -- ------------- NET CAPITAL GAIN RS.13 51 803 ========= THE ASSESSING OFFICER FURTHER EXAMINED THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE INVESTED THE SALE CONSIDERATION IN PURCHASE OF A NEW HOUSE FOR RS.64 75 000/- ($ 185000) IN CANADA. THE A SSESSEE HAS ITA NO.3582/M/09 A.Y: 04-05 4 PLACED RELIANCE ON PREMA P. SHAH (282 ITR 211) (MUM). THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS PURCHASED HOUSE J OINTLY WITH RASHMI WAMORKAR AS PER SALE DEED FILED. BUT THE BASIC DETAILS SUCH AS NEW HOUSE IS A RESIDENTIAL PROPERTY CORRECTNESS OF NEWLY ACQUIRED PROPERTY NOT FIELD. THE ASSESSING OFFICER FURT HER NOTED THAT THE ASSESSEE HAS NOT GIVEN ASSURANCE THAT IF THE TRANSFE R OF NEW PROPERTY HAS TAKEN PLACE THEN HE WILL BE ENTITLED TO PAY CAPITAL GAIN. ASSESSING OFFICER CONCLUDED THAT THE OBVIOUSLY NOT SO AS THE I.T. ACT IS NOT APPLICABLE TO TRANSACTION OUTSIDE INDIA. THE ASSESSI NG OFFICER ALSO DOUBTED THAT WHETHER CENT PER CENT OF THE CAPITAL GAIN S PROCEEDS HAVE BEEN UTILIZED IN NEW ACQUIRED PROPERTY. WITH REGARD TO MUMBAI TRIBUNAL DECISION IN PREMA P. SHAH VS. ITO (282 ITR (AT) 211) THE ASSESSING OFFICER HAS OBSERVED WITH DUE RESPECT TO THE HONO URABLE TRIBUNAL THAT THIS DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN APPEAL U/S.260A IS FILED FOR WHICH IT NEEDS NO COMMENTS. THE ASSESSING OFFICER HOWEVER PLACED RELIANCE ON THE DECISION IN LEENA J. SHAH VS. ACIT CIR.1(2) BARODA (ITA NO.2467/AHMD/20 00 (DATED 10.11.2005) WHEREIN IT HAS BEEN HELD THAT SINCE THIS A CT IS APPLICABLE IN INDIA THE PROVISION OF THIS ACT ARE ALSO APPLICABLE IN INDIA SAME ARE REQUIRED TO BE READ ACCORDINGLY. THUS SECTION 54F IS AL SO REQUIRED TO BE READ ACCORDINGLY. THE WORD PURCHASE/CONSTRUCTION OF A RESIDENTIAL ON PLAIN AND SIMPLE READING MEANS THAT THE PURCHASE/CON STRUCTION OF A ITA NO.3582/M/09 A.Y: 04-05 5 RESIDENTIAL/HOUSE MUST BE IN INDIA AND NOT OUTSIDE IND IA. IN THE LIGHT OF SETTLED RULINGS OF INTERPRETATION OF TAX STATUTES A RESIDENTIAL HOUSE PURCHASED/CONSTRUCTED MUST BE IN INDIA AND NOT OUTSIDE INDIA. THIS INTERPRETATION IS STRONGLY SUPPORTED BY THE MARGINAL N OTE SECTION 54 INSERTED BY THE FINANCE ACT 1982 W.E.F. 01.04.1983. THE ASSESSING OFFICER ALSO REFERRED THE COMMENT OF LEGAL EXPERTS AS RE PORTED IN 263 ITR 119/ARTICLES ON THE ABOVE DECISION OF MUMBAI TRIBU NAL AND CAME TO THE CONCLUSION THAT WHEN NON-RESIDENT CANNOT BE TAXED IN INDIA IN RESPECT OF INCOME RECEIVED OUTSIDE INDIA THEN HOW CAN DE DUCTION BE GRANTED IN RESPECT OF AN ACTIVITY DONE OUTSIDE INDIA. H E THEREFORE DENIED THE BENEFIT OF SECTION 54 TO THE ASSESSEE AND ACCORD INGLY COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF RS.13 51 800 /- BEING LONG TERM CAPITAL GAIN VIDE ORDER DTD.28.08.2006 PA SSED U/S.143(3) OF THE ACT. 3. ON APPEAL THE LD. CIT(A) ON THE OBSERVATION OF T HE AO THAT THE ASSESSEE HAS NOT GIVEN ASSURANCE THAT IF THE TRANSFER OF NEW PROPERTY HAS TAKEN PLACE THEN HE WILL BE ENTITLED TO PAY CAPIT AL GAIN OBSERVED THAT REASONS ADVANCED FOR DISALLOWANCE OF THE CLAIM BY THE AO ARE ILL-FOUNDED. HE FURTHER OBSERVED THAT THE SALE CONSIDE RATION WAS AT RS.16.00 LACS WHEREAS NEW ASSET PURCHASED IS WORTH RS.64.75 L ACS AND THE APPELLANTS 50% SHARE COMES TO RS.32.37 LACS THUS TH E WHOLE CONSIDERATION HAS BEEN UTILISED IN THE PURCHASE OF NEW ASSE TS AND ITA NO.3582/M/09 A.Y: 04-05 6 HENCE CAPITAL GAIN IS NOT CHARGEABLE U/S.45 OF THE ACT. HE FURTHER OBSERVED THAT SECTION 54F DOES NOT SPECIFY THAT THE NEW A SSET SHOULD BE SITUATED IN INDIA. THEREFORE IN VIEW OF THERE B EING NO SPECIFIC RESTRICTION ON LOCATION OF NEW ASSET THE BENEFIT OF SEC. 54F CANNOT BE DENIED PROVIDED IF ALL OTHER CONSIDERATIONS ARE SATISFI ED. SINCE THE APPELLANT HAS FULFILLED ALL OTHER CONDITIONS OF SEC.54F THE LD. CIT(A) WAS OF THE VIEW THAT THE APPELLANT IS ENTITLED TO BEN EFIT OF SEC.54F OF THE ACT. THE LD. CIT(A) WHILE OBSERVING THAT THE AP PELLATE AUTHORITIES ARE BOUND TO FOLLOW RATIO LAID DOWN BY THE JURISDICTI ONAL TRIBUNAL AS HELD IN OM PRAKASH TRIVEDI VS. UNION OF INDIA AND ANO THER (2006) 287 ITR 11 (ALL.) RELIED ON THE DECISION OF THE JURISDICTI ONAL TRIBUNAL IN MRS. PREMA P. SHAH VS. ITO(2006) 282 ITR (AT) 211(M UM.) WHEREIN IT HAS BEEN INTERALIA HELD THAT SEC.54 DID NOT EXCLUDE THE RIGHT OF THE ASSESSEE TO CLAIM THE BENEFITS OF THE SECTION IN RELATION T O PROPERTY PURCHASED IN A FOREIGN COUNTRY IF ALL OTHER CONDITIONS LAID DOWN IN THE SECTION WERE SATISFIED MERELY BECAUSE THE PROPERTY ACQU IRED WAS IN A FOREIGN COUNTRY DIRECTED THE AO TO ALLOW DEDUCTION U /S.54F OF THE ACT. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING EFFECTIVE GROUND OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE A O TO ALLOW THE CLAIM OF EXEMPTION UNDER SECTION 54F OF T HE INCOME TAX ACT 1961 IN RESPECT OF THE INVESTMENT M ADE ITA NO.3582/M/09 A.Y: 04-05 7 IN NEW RESIDENTIAL HOUSE IN CANADA OUT OF THE CAPITA L GAINS ARISING ON SALE OF RESIDENTIAL HOUSE IN MUMBAI . 5. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE ORD ER OF THE AO AND THE DECISION OF THE TRIBUNAL RELIED BY THE AO. 6. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE WH ILE RELYING ON THE ORDER OF THE LD. CIT(A) FURTHER SUBMITS THAT T HE ISSUE IS DIRECTLY COVERED BY THE DECISION OF THE MUMBAI BENCH OF THE TRIB UNAL IN THE CASE OF MRS. PREMA P. SHAH (SUPRA). HE FURTHER SUBMITS TH AT THE HONBLE BOMBAY HIGH COURT ON THE REVENUES APPEAL FIL ED IN THE CASE OF PREMA P. SHAH HAS DISPOSED OF THE APPEAL VIDE ORDE R DATED 11.12.2007 AFTER OBSERVING THAT THE TAX INCIDENCE IS LESS THAN RS.4.00 LACS. HE ALSO PLACED ON RECORD THE SAID DECISION OF HONBLE HIGH COURT. HE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE LD. C IT(A) BE UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS THERE IS NO DISPUTE THAT T HE ASSESSEE IS A NON-RESIDENT INDIAN. THE ASSESSEE SOLD HIS FLAT FOR RS. 16.00 LACS ON 16.12.2003 WHICH WAS PURCHASED IN APRIL 1984 AND HAS SH OWN THE NET CAPITAL GAIN AT RS.7 97 801/- AND CLAIMED THAT SINCE H E HAS PURCHASED A HOUSE IN CANADA FOR INDIAN RS.64 75 000/- AFTER REP ATRIATING THE SALE ITA NO.3582/M/09 A.Y: 04-05 8 CONSIDERATION UNDER NOC DATED 22.1.2004 HE IS ELIGIBLE FOR DEDUCTION U/S.54 OF THE ACT. IT WAS DENIED BY THE ASSESSING OFFICER F OLLOWING THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN LEE NA J. SHAH VS. ACIT IN ITA NO.2467(AHM) OF 2000 DATED 10.11.2005 WH EREIN THE ASSESSEES CLAIM OF DEDUCTION U/S.54F WAS NOT ALLOWED ON THE GROUND THAT THE PURCHASE/CONSTRUCTION OF RESIDENTIAL HOUSE MUST BE IN INDIA AND NOT OUTSIDE INDIA. HOWEVER ON APPEAL THE LD. CIT (A) FOLLOWING THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN MRS. PREMA P. SHAH (SUPRA) HAS ALLOWED THE DEDUCTION U/S.54 OF THE ACT. 8. IN MRS. PREMA P. SHAH AND SANJIV P. SHAH VS. ITO ( SUPRA) IT HAS BEEN HELD (PLACITUM 29 PAGE 223 OF THE REPORT): IN SHORT WE ARE OF THE CONSIDERED VIEW FOR THE REASONS STATED HEREINABOVE THE ASSESSEE IS ENTITLE D TO THE BENEFIT UNDER SECTION 54 OF THE ACT. IT DOES N OT EXCLUDE THE RIGHT OF THE ASSESSEE TO CLAIM THE PROP ERTY PURCHASED IN A FOREIGN COUNTRY IF ALL OTHER CONDIT IONS LAID DOWN IN THE SECTION ARE SATISFIED MERELY BECAUSE T HE PROPERTY ACQUIRED IS IN A FOREIGN COUNTRY 9. WE FURTHER FIND THAT THE HONBLE JURISDICTIONAL HIG H COURT HAS DISMISSED THE REVENUES APPEAL VIDE ORDER DATED 11.12.2 007 AS UNDER: 1. AS THE TAX INCIDENCE IS LESS THAN RS.4 LACS TH E LEARNED COUNSEL SEEKS LEAVE TO WITHDRAW THE APPEAL. LEAVE DISMISSED AS WITHDRAWN. 2. QUESTION OF LAW IF ANY IS KEPT OPEN FOR CONSIDER ATION. 3. . 4. . ITA NO.3582/M/09 A.Y: 04-05 9 10. AS REGARDS THE DECISION OF THE TRIBUNAL IN THE CASE O F LEENA J. SHAH (SUPRA) COPY OF WHICH IS NOT AVAILABLE TO US WE FIND THAT IN THAT CASE DEDUCTION U/S.54F WAS CONSIDERED WHEREAS IN THE CASE B EFORE US THE STATUS OF THE ASSESSEE IS NON RESIDENT INDIAN AND THE I SSUE IS WITH REGARD TO THE DEDUCTION U/S.54 OF THE ACT. FURTHER THE ORDER OF THE JURISDICTIONAL TRIBUNAL HAS MORE BINDING EFFECT. THERE FORE THE DECISION RELIED ON BY THE REVENUE IS NOT APPLICABLE TO THE FA CTS OF THE PRESENT CASE. 11. THAT BEING SO AND KEEPING IN VIEW THAT IT IS SETT LED LAW THAT IF THERE ARE TWO VIEWS THE COURT HAS TO ADOPT THAT INTER PRETATION WHICH FAVOURS THE ASSESSEE VIDE CIT VS. VEGETABLE PRODUCTS (19 73)88 ITR 192(SC) WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLE D TO DEDUCTION UNDER SECTION 54 OF THE ACT AND ACCORDINGLY WE ARE INCLIN ED TO UPHOLD THE ORDER PASSED BY THE LD. CIT(A) IN ALLOWING THE CL AIM OF THE ASSESSEE. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED. 12. IN THE RESULT THE REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.2.2010. SD/- SD/- ( R.K. PANDA ) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 17.2.2010. JV. ITA NO.3582/M/09 A.Y: 04-05 10 COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 3.2.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 4.2.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 17.2.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 18.2.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER