Case Law Details
Brief:
The assessee has been denied the deduction u/s 54F of the Act. the assessee has duly purchased and made investment in the residential bungalow at Juhu(new asset) along with co-owner Smt. Chhaya B. Parekh. The said bungalow was demolished for the purposes of redevelopment. The Hon’ble Bombay High Court in the case of co-owner Smt. Chhaya B Parekh in Income Tax Appeal No. 1583 of 2012 vide judgment dated 24th January, 2013 had held that demolition of residential bungalow will not tantamount to transfer and hence the same will not be hit by provisions of section 54F(3) of the Act.
Fact of the case:
The brief facts of the case are that the assessee filed return of income with Revenue on 26-10-2007 declaring total income of Rs.25,39,550/-, which return of income was revised on 22-07-2009 by the assessee by filing revised return of income whereby income returned was revised to Rs.25,49,475/-. The notice u/s 148 of the Act was issued to the assessee on 03-11-2009 which was duly served on the assessee, after recording reasons for re-opening of the assessment proceedings u/s 147 of the Act. The assessee filed return of income for the assessment year 2007-08 in pursuance of notice u/s 148 of the Act, declaring the same income of Rs.25,49,475/- as was declared earlier vide revised return filed on 22-07-2009. The A.O. during the course of re-assessment proceedings observed that during the accounting period relevant for the assessment year 2007-08, the Shop No. 6 and garage No. 6A standing in the name of M/s. Parekh Brothers in the building shown as Tirupati Shopping Complex, Bhulabhai Desai Road,
Mumbai -400026 is sold vide agreement dated 01-09-2006 for a consideration of Rs. 5,40,00,000/-. It was observed by the AO from the purchase and sale agreements that the owner of these premises was M/s. Parekh Brothers, a coownership concern (co-owners being the assessee and Smt. Chhaya B. Parekh, the assessee’s sister in-law) which purchased the said building on 28-08-1981 from M/s. Gowani Builders Pvt. Ltd. . However, the assessee has claimed exemption u/s. 54F of the Act from capital gains treating the half of the sale proceeds, and his own share being Rs. 2,70,00,000/- invested in Juhu Bungalow (new asset), purchased jointly with Smt. Chhaya B. Parekh, who also invested ½ share being Rs. 2,70,00,000/- in the said Juhu Bungalow (new asset). There is no 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 evidently certify that the properties (shop and garage) ownership never stood in name of individual capacity of the assessee and his sister-in-law Mrs, Chhaya B. Parekh. Hence the exemption u/s. 54F of the Act was denied to the assessee.
Judgement of Reputed ITAT:
We have considered the rival contention and also perused the material including the case laws cited by both the sides. We have observed that the assessee is co-owner of the premises being shop No.6 and garage no. 6A standing in the name of M/s Parekh Brothers in the building knows as Tirupati Shopping Complex, Bhulabhai Desai Road, Mumbai-400026 which was acquired by the assessee along with his sister-in-law, Mrs Chhaya B. Parekh and was held to be owned on co-ownership basis by the Tribunal.
The same has been sold and the assessee has acquired the residential Bungalow(new asset) at Juhu along with his sister-in-law Mrs. Chhaya B. Parekh. The CIT(A) denied the benefit to the assessee due to the fact that the bungalow which was purchased has been demolished within a period of three years hence the condition laid down in section 54F(3) of the Act have been violated. However, the Hon’ble Bombay High Court in the case of Mrs.Chhaya B. Parekh has refused to admit the question of law referred by
the Revenue and dismissed the appeal of the Revenue by approving the decision of the Tribunal in the case of Mrs Chhaya B Parekh where-in it was held by Hon’ble Bombay High Court that demolition of bungalow will not tantamount to transfer. While dismissing the said appeal of the Revenue, Hon’ble Bombay High Court has clearly noted in the judgment that Revenue is not disputing the entitlement of Mrs Chhaya B Parekh u/s.54F of the Act on the purchase of Bungalow property(new asset). The facts in the case of the
assessee 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) 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
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 approved the orders of the Tribunal dismissing the Revenue appeal in the case of Mrs. Chhaya B Parekh. When the Mumbai-Tribunal set aside the issues to the file of the CIT(A) in assessee’s own case in first round of litigation vide its orders
dated 30-01-2013 in ITA No. 6596/Mum/2011 and CO no. 37/Mum/2012 , it did not had the benefit of judgment of Hon’ble Bombay High Court in the case of Mrs Chhaya B Parekh which judgment in ITA(L) No.1583 of 2012 was pronounced on 24-01-2013 , while hearing by the Mumbai-Tribunal in the afore-stated appeal and CO stood concluded on 11-01-2013 i.e. prior to the pronouncement of judgment of the Hon’ble Bombay High Court in the case of Mrs Chhaya B. Parekh(supra). The CIT(A) while rendering its order on 30-08- 2013 clearly had the benefit of afore-stated judgment of Hon’ble Bombay High Court pronounced on 24-01-2013 in the case of Mrs Chhaya B. Parekh and the CIT(A) fell into an error by making an attempt to distinguish the judgment
of Hon’ble Bombay High Court by holding that judgment of Hon’ble Apex Court in the case of Grace Collins(supra) was not brought to the notice of Hon’ble Bombay High Court while judgment of Vania Silk Mills Limited(supra) was brought to the notice of Hon’ble Bombay High Court, which judgment of Vania Silk Mills stood overruled by Hon’ble Supreme Court by three member bench of Hon’ble Supreme Court in the case of Grace Collis(supra). Judicial discipline and rule of law demand and requires that lower judicial authorities should and must follow the decisions/judgment of higher judicial
authorities on identical facts. Thus, the CIT(A) was bound by law to follow the jurisdictional High Court judgment in the case of Mrs Chhaya B. Parekh(supra) . In our considered view that this instant case is squarely covered by the decision of Hon’ble Bombay High Court in the case of Mrs Chhaya B. Parekh(supra) and hence the assessee is entitled for his claim of deduction u/s 54 F of the Act as claimed in the return of income filed with the Revenue. We order accordingly. 10. In the result, the appeal filed by the assessee in ITA N0. 6169/Mum/2013 for the assessment year 2007-08 is allowed.
