Case Law Details
DCIT Vs. Vikas Oberoi (ITAT Mumbai), I.T.A. No. 4362/M/2011 (AY: 2002- 03), Date of decision- 20.3.2013
Briefly stated relevant facts of this issue are that the AO restricted the claim of an exemption u/s 54F of the Act to Rs. 1,10,59,626/- only as against the assessee’s claim of Rs. 1,23,50,854/-. It was invested by the assessee on two residential flats located adjacent to each other. In this regard, AO made dis allowance of Rs. 12,91,228/- by giving the reasoning that the assessee has invested the capital gain in two separate flats, hence, as per the provisions of 54F, exemption has to be granted only in respect of investment in a residential house. On appeal, CIT (A) allowed the assessee and directed the AO to recompute the exemption u/s 54F by treating the both units as comprising of a residential house and the relevant para is reproduced here under:
“6.9.5. Having analyzed the judgments which end up defining “a residential house”for the purpose of exemption from capital gains tax, it is relevant to notice in this case that the same appellant has purchased two contiguous flats with a common wall. In view ofthe fact that the Courts have been of the opinion that flats on different floors being utilized for different purposes also qualify to be considered as “a residential house”, there is no reason to treat two contiguous houses as separate for this purpose. Accordingly, it is held that the Ld AO is not justified in not allowing exemption in respect of investment in one of the units. The AO is directed to recompute the exemption u/s 54F by treating both the units as comprising of “a residential house”for this purpose. This ground of appeal is accordingly allowed.”
During the proceedings before us Ld Counsel brought our notice that an identical issue was adjudicated by the Hon’ble Delhi High Court in the case of CIT vs. Gita Duggal vide ITA 1237/2011 dated 21.03.2013 and para 8 from the said order is relevant in this regard which is reproduced here under:
“There could also be another angle. Section 54/54F uses the expression “a residential house”. The expression used is not “a residential unit”. This is a new concept introduced by the assessing officer into the section. Section 54/54F requires the assessee to acquire a “residential house” and so long as the assessee acquires a building, which may be constructed, for the sake of convenience, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the section should be taken to have been satisfied. There is nothing in these sections which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use. If there is nothing in the section which requires that the residential house should be built in a particular manner, it seems to us that the income tax authorities cannot insist upon that requirement. A person may construct a house according to his plans and requirements. Most of the houses are constructed according to the needs and requirements and even compulsions. For instance, a person may construct a residential house in such a manner that he may use the ground floor for his own residence and let out the first floor having an independent entry so that his income is augmented. It is quite common to find such arrangements, particularly post-retirement. One may build a house consisting of four bedrooms (all in the same or different floors) in such a manner that an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may even arrange for his children and family to stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. There may be several such considerations for a person while constructing a residential house. We are therefore, unable to see how or why the physical structuring of the new residential house, whether, it is lateral or vertical, should come in the way of considering the building as a residential house. We do not thing that the fact that the residential house consists of several independent units can be permitted to act as an impediment to the allowance of the deduction under section 54/54F. It is neither expressly nor by necessary implication prohibited.
For all the above reasons, we are of the view that the Tribunal took the correct view. No substantial question of law arises for our consideration. The appeal is accordingly dismissed.’
We have applied the above ratio to the facts of the instant case and find the two flats in question are not adjacent and they are not functionally one residential house with two adjacent units. Revenue has not brought any contrary decision to our notice. Considering the settled nature of the issue, we are of the opinion, the order the CIT(A) does not call for any interference on this issue.
Section 2(22)(e) Deemed Dividend: Share application money is not “loan or advance”
share application money or share application advance is distinct from the ‘loan or advance’. Although the share application money is one kind of advance given with the intention to obtain the allotment of shares/equity/preference shares etc, such advances are innately different form the normal loan or advances specified both in section 269SS or 2(22)(e) of the Act. Unless the mala fide is demonstrated by the AO with evidence, the book entries or resolution of the Board of the assessee become relevant and credible, which should not be dismissed without bringing any adverse material to demonstrate the contrary. From the above extracts, it is also evident that the share application money when partly returned without any allotment of shares, such refunds should not be classified as ‘loan or advance’ merely because, share application advance is returned without allotment of share. In the instant case, the refund of the amount was done for commercial reasons and also in the best interest of the prospective Share applicant. Further, it is self explanatory that the assessee being a ‘beneficial share holder’, derives no benefit whatsoever, when the impugned ‘share application money/advance’ is finally returned without any allotment of shares for commercial reasons. In this kind of situations, the books entries become really relevant as they show the initial intentions of the parties into the transactions. It is undisputed that the books entries suggest clearly the ‘share application’ nature of the advance and not the ‘loan or advance’. As such the revenue has merely suspected the transactions without containing any material to support the suspicion. Therefore, the share application money may be an advance but they are not advances which are referred to in section 2(22)(e) of the Act. Such advances, when returned without any allotment or part allotment of shares to the applicant/ subscriber, will not take a nature of the loan merely because the same is repaid or returned or refunded in the same year or later years after keeping the money for some time with the company. So long as the original intention of payment of share application money is towards the allotment of shares of any kind, the same cannot be deemed as ‘loan or advance’ unless the mala fide intentions are exposed by the AO with evidence. Therefore, relying on the cited judgments of Madras High court and the Delhi High court, supra and further relying on the number of coordinate bench decisions of Mumbai Tribunal and others, we are of the opinion, the decisions given by the CIT(A) vide para 9.2.1 of the impugned order does not call for any interference. Accordingly, the grounds raised by the revenue are dismissed.
