TMI Blog2009 (5) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... s. (2006 -TMI - 13259 - MADRAS High Court) has held that a mere extension of the existing building will not give benefit to the assessee under s. 54F of the Act. The case of the assessee clearly comes within the ken of the ratio of the aforesaid decision. - Decided in favor of Revenue. - I. T. A. No. 231/Mds/2008 (assessment year 2000-01). - - - Dated:- 25-5-2009 - Member(s) : M. K. CHATURVEDI., U. B. S. BEDI., SHAMIM YAHYA. ORDER-SHAMIM YAHYA, A.M.: This appeal by the Revenue and cross-objection by the assessee emanate out of order of CIT(A)-VI, Chennai, dt. 26th Oct., 2007 and pertains to asst. yr. 2000-01. 2. Revenue's appeal: ITA No.231/Mad/2008: Asst. yr. 2000-01 2.1 The issue raised is that the CIT(A) erred in directing to allow exemption under s. 54F in respect of investment in additional construction in the existing property. 2.2 In this case, for the asst. yr. 2000-01 the assessee had filed his return of income on 3rd July, 2000 declaring a total income of Rs. 17,76,370 and claimed a sum of Rs. 10,22,862 as exemption under s. 54F. This was processed under s. 143(1) accepting the total income declared by the assessee. Subsequently, the AO passed an order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne house property as envisaged in s. 54F. Further, construction of additional floor can very well be taken as necessary investment as per s. 54F enabling the assessee to claim the exemption. The learned counsel of the assessee in this regard reiterated that investment in construction of first floor by the assessee at the said house which was bequeathed to the assessee by his father as co-owner along with his brother and mother will entitle him claiming exemption under s. 54F. 2.6 The learned counsel of the assessee placed reliance upon following case law: (1) Smt. Kalwanti D. Alreja vs. ITO (1996) 54 TTJ (Bom) 593; (2) Sonia Gulati vs. ITO (ITA No. 1300/Mum/1998); (3) CIT vs. P.V. Narasimhan (1990) 81 CTR (Mad) 141 : (1990) 181 ITR 101 (Mad); (4) Addl. CIT vs. Vidya Prakash Talwar (1981) 25 CTR (Del) 220 : (1981) 132 ITR 661 (Del); (5) CIT vs. Chandanben Maganlal (2000) 162 CTR (Guj) 542 : (2000) 245 ITR 182 (Guj); (6) Balvantram U. Chima vs. ITO (ITA No. 1147/Ahd/1995); (1) Smt. Kalwanti D. Alreja vs. ITO "Capital gains-Exemption under s. 54F-Assessee using capital gains for purchasing 1/5th share in the house in which she already had 2/5th undivided share-Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The assessee invested the consideration arising out of the shares sold earlier in this year, i.e., asst. yr. 1993-94 in the purchase of the house in question as well as invested Rs. 1,22,525 on the renovation of the house to make it habitable in this year. The assessee has also claimed Rs. 5,000 being the architect's fee as exempt under s. 54F of the Act as it was part of the cost of the flat. Now, the question, arises whether the assessee is entitled to s. 54F deduction if she spends the amount realised from the sale of subsequent shares on the same house for making it habitable? This question arose before the, Orissa High Court in CWT vs. K.B. Pradhan, wherein it was held that if the investment has been made to make the house habitable it cannot be presumed that the house was not in a habitable condition on the day when it was purchased and the amount invested should be considered for the purchase of a house or construction, the concept of habitability being inherent in the word 'house'. Respectfully following the ratio laid down by the Hon'ble Orissa High Court in the decision cited above, I am of the opinion that the assessee is entitled to get exemption under s. 54F for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in all these cases claimed deduction under s. 54F, inter alia, on the ground that sale proceeds of the long-term capital assets sold by them have partly been utilized for investment in residential house. The AO denied grant of said deduction under s. 54F on the ground that all these assessees were owners of 1/8th share of property No. 8/2286, Parsiwad, Gopipura, Surat, which they were using for their self-residence. Such a view was taken by the AO in view of the plain language of the proviso to sub-s. (1) of s. 54F. The proviso to s. 54F(1) provides that where the assessee owns on the date of the transfer of the original asset any residential house, the income from which is chargeable under the head 'Income from house-property' other than the new asset acquired from such long-term capital gains will not be entitled to grant of deduction under s. 54F. The assessees contended that the sale proceeds of the long-term capital assets transferred by them have been utilized for purchasing 5/18th right from other co-owners in the same residential house property. The investment so made in the residential house property therefore, qualifies for grant of deduction under s. 54F. The AO did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s entitled to raise objection in this regard. Upon careful consideration, we find that there was no reasonable cause for the delay in filing the cross-objection. However, on the other premise taken by the learned counsel of the assessee to agitate this issue, we deal with the same as under. 3.3 Regarding the plea that reopening was not permissible, the learned counsel of the assessee inter alia placed reliance upon the case law of CIT vs. E.I.D. Parry Ltd. (1995) 216 ITR 489 (Mad). In our opinion, this case law from Hon'ble jurisdictional High Court is not applicable as in that case the AO having taken recourse to s. 147 has considered invoking s. 154 and in that context, the Hon'ble Court made the decision. Hence, this decision is out of context. 3.4 It will be worthwhile to refer to the Hon'ble apex Court decision in the case of CIT vs. Sun Engineering Works (P) Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC) as under: "It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the Court. The judgment must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred an appeal against this revision and the CIT(A) allowed the appeal in favour of the assessee for the reason that the point is debatable and action under s. 154 is beyond the scope. The AO thereafter issued noticed under s. 148 and completed the assessment under s. 143(3) r/w s. 147 by order dt. 18th Jan., 2006. In doing so, the AO disallowed the claim of Rs. 10,22,862 as exemption under s. 54F for the reason that the assessee extended the co-owned, bequeathed property and no new asset had come out of the investment as per the assessee's claim. 5.1.1 Aggrieved on this, assessee preferred an appeal before the learned CIT(A) and reiterated his submissions as made before the AO. After considering the submissions of the assessee, the entire issue and giving elaborate reasons, the learned CIT(A) has concluded by directing the AO to allow exemption under s. 54F in respect of investment in additional construction in the existing property. 5.1.2 Against such findings of the learned CIT(A), the Department has filed appeal by taking following grounds: "1. The order of the CIT(A) is opposed to the facts and circumstances of the case. 2. The learned CIT(A) erred in directing to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... floor in the existing joint residential house, which further disqualifies the assessee from exemption under s. 54F. Relying upon the Chennai "A" Bench of the Tribunal in the case of Dr. (Smt.) P.K. Vasanthi Rangarajan vs. Dy. CIT in ITA No. 1753/Mad/2004, order dt. 25th July, 2005 and Hon'ble jurisdictional High Court decision in the case of CIT vs. V. Pradeep Kumar (2006) 203 CTR (Mad) 579 : (2006) 153 Taxman 138 (Mad), it was pleaded for reversal of the order of the learned CIT(A) and restoring that of the AO as issue is squarely covered in favour of the Revenue by these decisions. 5.1.4 The learned counsel for the assessee while relying upon the order of the learned CIT(A) has pleaded for confirmation of the impugned order and support has been taken from the following decisions: (1) Smt. Kalwanti D. Alreja vs. ITO (1996) 54 TTJ (Bom) 593; (2) Sonia Gulati vs. ITO (ITA No. 1300/Mum/1998); (3) CIT vs. P.V. Narasimhan (1990) 81 CTR (Mad) 141 : (1990) 181 ITR 101 (Mad); (4) Addl. CIT vs. Vidya Prakash Talwar (1981) 25 CTR (Del) 220 : (1981) 132 ITR 661 (Del); (5) CIT vs. Chandanben Maganlal (2000) 162 CTR (Guj) 542 : (2000) 245 ITR 182 (Guj); (6) Balvantram U. Chima vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 9,53,000 Dr. B. Rangarajan 50% Rs. 4,76,500 Dr. Vasanthy Rangarajan 50% Rs. 4,76,500 50% used for residence and 50% used for clinic 14. It would be seen that the above details contradict with the arguments of the learned counsel for tile assessee. Further, the sale deed dt. 25th Jan., 1974 by which the assessee has purchased the above along with her husband reveals that there is no determination of separate share for husband and wife. Thus, it is implied that the assessee has undivided interest of 50 per cent on the whole property including commercial and residential property which goes to prove that the assessee is owning residential property on the date of transfer i.e., September, 1999. By even owning part of residential property, though not fully, it amounts to owning of any residential property as envisaged in s. 54F, before amendment, which is applicable for the assessment year before us. By this, the assessee becomes disqualified for relief under s. 54F. Therefore, we uphold the action of the authorities below and reject the plea of the assessee. The assessee fails before us on all the grounds taken by her." 5.2.1 As would be seen, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of clear and consistent enunciation of legal principles in the decision of the Supreme Court in Union of India Anr. vs. Raghubir Singh (1990) 87 CTR (SC) 186 : (1989) 178 ITR 548 (SC). The Art. 141 of the Constitution of India embodies the doctrine of precedents as law and provides that the law declared by the Supreme Court should be binding on all Courts and Tribunals in India-CWT vs. Aluminium Corporation Of India Ltd. (1972) 85 ITR 167 (SC). Similarly, the doctrine of precedent is applicable to the decisions delivered by the High Court. The law declared by the High Court is binding on all the Courts subordinate to it within its territorial jurisdiction. By judicial precedent the law declared by the High Court is to be followed by the Courts and Tribunal subordinate to it and under its supervisory jurisdiction. The law declared by the High Court in the State is binding on the authorities or Tribunals under its superintendence and they cannot ignore it either in initiating a proceeding or deciding on the rights involved in such proceedings. The launching of proceeding contrary to the law laid down by the High Court would be invalid and proceedings themselves would be without j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her part of the order on merits is concerned, I do not agree with the same. Since the cross-objection of the assessee has not been admitted/entertained, so, it was absolutely unnecessary to deal with the grounds raised in the cross-objection. As such, without commenting on the discussion or conclusion in regard to merits of the grounds raised in the cross-objection, I decline to agree with such action of the learned AM being unnecessary and uncalled for. REFERENCE UNDER S. 255(4) OF THE IT ACT, 1961 1st Jan., 2009 Since there is difference of opinion between the Members constituting 1st Jan., 2009 the Bench, the following question is formulated and referred for nominating Third Member: "(i) Whether, in view of facts and circumstances, exemption under s. 54F of IT Act, 1961 could be allowed to assessee or not?" M.K. CHATURVEDI, VICE PRESIDENT (AS THIRD MEMBER): 25th May, 2009 This appeal came before me as a Third Member to express my opinion on the following question: "Whether, in view of facts and circumstances, exemption under s. 54F of IT Act, 1961 could be allowed to assessee or not?" 2. I have heard t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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