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.
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