TMI Blog2015 (11) TMI 1452X X X X Extracts X X X X X X X X Extracts X X X X ..... n letter was issued in the name of Smt. Krishna Beniwal on 7/11/2006 and possession was to be taken by Smt. Krishna Beniwal on or before 14/12/2006, which was taken by her on 15/11/2006. Perpetual lease was executed on 23/6/2007, in which name of Smt. Krishna Beniwal and Smt. Seema Singh Beniwal had been shown. As held by the various courts that purchase of constructed house in self financing scheme from any authority would be treated construction not purchase of residential house. Thus we uphold the order of the ld CIT(A) on first exemption claim U/s 54F of the Act. Therefore, we are not giving any finding on additional expenditure incurred on finishing of the house. It is clarified by the CBDT that purchase of plot of land is a part of residential house for claiming of deduction U/s 54F of the Act. The revenue itself has admitted that it is a habitable as a servant quarter, which in other words, was habitable for human being either servant or master or any employee. There is also no restriction that what percentage of the size of flat should be used for residential purposes either under the Income Tax law but there is a restriction of maximum construction by the local author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration. The assessee had also shown interest income from banks and on loans advanced to private parties. The assessee had also declared income of ₹ 18,736/- U/s 44AF of the Act. The assessee had filed her return for A.Y. 2008-09 on 31/3/2009 declaring total income of ₹ 5,91,910/-, which was subsequently revised on 31/3/2010 declaring total income of ₹ 5,66,910/-. The case was scrutinized U/s 143(3) of the Act. The assessee did not file the return in terms of provisions of Section 139(1) and therefore revised return filed by her cannot be accepted by the Assessing Officer. Further, the ld Assessing Officer observed that in the original return the assessee had not shown the income from capital gain earned on sale of property the assessee had also not claimed the interest paid by her amounting to ₹ 42,000/- against interest income of ₹ 1,77,691/- as against shown at ₹ 1,59,291/- in the original return. The assessee had also not shown the income under the head long term capital gain in her original return of income, which had been claimed as exempt U/s 54/54EC of the Act. The assessee had also not mentioned any details in respect of sale of immovable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32726.00 233000.00 265726.00 15/10/2005 55000.00 220000.00 275000.00 14/01/2006 55000.00 220000.00 275000.00 15/04/2006 55000.00 220000.00 275000.00 Total 197726.00 893000.00 1090726.00 Another letter was issued by Rajasthan Housing Board on 07/11/2006 stating that Smt. Krishna Beniwal has deposited the full amount and also stating that she must take possession of the house till 14/12/2006. The office order of Rajasthan Housing Board dated 31/5/2007 states that after allotment of house No. 64/108 Pratap Nagar, Jaipur to Smt. Krishna Beniwal her daughter in law Smt. Seema Singh Beniwal has applied for adding her name in the allotment of the said house which has been accepted. Other payments for the allotment of said house were made even prior to the issuance of allotment letter on 15/05/2006. The ld Assessing Officer further observed that the lang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a sum of ₹ 1,10,250/- on above plot for construction of garage portion. The size of the plot is 50 x70 giving area of the total plot is 3500 sq ft or 388 sq. yards while the size of the constructed portion is 10 x20 area of constructed portion is merely 201 sq.ft. or 23.33 sq. yards as stated by the assessee. This showed that the constructed area was only 6% of the total size of the plot. As per the Assessing Officer, a residential house must consists a proper drawing room, dining room, bed rooms, living room, kitchen, bathroom, toilet etc. It should also have proper doors, windows etc. This becomes essential considering the size of the plot, post locality, financial condition of the assessee. The field inquiry was also got conducted at the site which revealed that the claimed construction work carried out by the assessee on the above plot was simply a room constructed in a corner of the plot which was locked. The area of construction was also hardly 125-150 sq.ft and was having only a section window which suggested that it was only a room without toilet, kitchen as claimed by the assessee as per the enquiry report. This room could solve the purpose of store room or hard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer rejected the deduction U/s 54F of the Act on second house and made total addition of ₹ 38,30,114/- under the head income from long term capital gain. 3. Being aggrieved by the order of the ld Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the addition by observing that the assessee can claim deduction U/s 54 of the Act only in respect of one house and that too after fulfilling the necessary conditions. Whereas the assessee has claimed deduction U/s 54 in respect of two properties. The first property was at 64/108, Pratap Nagar, Jaipur and second property was at C-114, Hanuman Nagar, Jaipur. He further relied on the decision of Special Bench of Mumbai in the case of ITO Vs. Sushila M Jhaveri 292 ITR AT 001 and held that considering this decision, the claim of the appellant is liable to be restricted to the investment in one house only. He further held that residential house at 64/108 Pratap Nagar, Jaipur was initially allotted in the name of Smt. Krishna Beniwal by the Rajasthan Housing Board. She had made payments of ₹ 10,90,726/- in four installments out of loan obtained from the Bank of Rajasthan by 15/04/2006. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leton as it was allotted by the Rajasthan Housing Board. Accordingly he held that the assessee is not entitled for deduction U/s 54 of the Act in respect of the first property. 3.1 He further observed that second exemption U/s 54 of the Act was claimed on C-114, Hanuman Nagar, Jaipur. He basically relied upon the findings of the Assessing Officer that structure on plot was very small size where watchman can stay and occupied only 6% of total area of plot. This construction is not habitable in absence of living room, bed room, kitchen, bathroom or toilet. The field enquiries conducted by the Assessing Officer showed that it was never used for residential purpose by the assessee. The ld CIT(A) also remanded this issue to the Assessing Officer but the assessee did not cooperate with the Assessing Officer, which shows that the assessee did not have any clinching evidence for construction of house on plot No. C-114, Hanuman Nagar, Jaipur. The predominant intention of the nature of construction can be the decisive factor, as to whether it is a residential building, as contradistinguished from a commercial building or any industrial building. But then every residential building would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sit of ₹ 1,10,000/- by Smt. Krishna Beniwal however, almost entire cost was paid by the assessee only. All the installments were paid from the saving bank account of the assessee as evident from different entries shown in the pass book. Hence the fact of payment out of the loan is not relevant. Thus, virtually it was the assessee who purchased the house. Smt. Krishna Beniwal was running short of funds and for that reason she tried to avail a bank loan however, she was not found eligible to get loan as desired and therefore, the name of the assessee was added as a co-borrower. A Memorandum of Understanding (MOU) was reached on dated 30.06.2005 between Smt. Krishna Beniwal and the assessee that the later shall be making payments of the installments payable to the Rajasthan Housing Board or to the bank towards the repayment of the loans but to safeguard her interest, her name shall be included as a joint owner in the records of the RHB. However, it was also agreed between the parties that in case the borrower Smt. Krishna Beniwal fails to make the repayment up to dated 31st October, 2006, the lender i.e. the assessee shall be entitled to get her name included in the record of Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Skeleton house. The photographs clearly show it is a complete residential house. Therefore, he prayed to allow the deduction U/s 54 of the Act on Pratap Nagar house. 4.1 The ld AR further argued that the assessee purchased a plot at C-114, Hanuman Nagar, Jaipur on 25/1/2010 measuring 50 X 70 = 3500 sq. ft. or 388 yards on which a construction of room measuring 10 20 = 200 sq. ft. or 23.33 yards was made thereon. The observation made by the ld Assessing Officer as well as by the ld CIT(A) that room constructed in the plot was not habitable. The findings of both the authorities are baseless and nothing more than suspicions. The ld CIT(A) was not right in holding that there is no facility in that room like bathroom, toilet etc. as the ld Assessing Officer had not made any comment in the remand report. The room was having a section window and a door. The photographs submitted during the course of appellate proceedings clearly suggest that in the front side, there is a door and window clearly visible. The window is covered by mosquito nets. The window and doors are made up of iron sections for providing sufficient safety to the inhabitant/occupant of the room. It can also be v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been held that deduction U/s 54F could not be denied on the ground that property was not suitable for residence of assessee. He has further drawn our attention on CBDT Circular No.667 dated 18.10.1993 wherein it has been clarified by the Board that cost of land is a integral part of the cost of the new house purchased/constructed. The CIT (A) has made out completely a new case by invoking the controversy of a/one u/s 54F which was not at all case made out by the AO originally. This amounts to enhancement of income without giving any notice which is not permissible hence this aspect should be ignored. In Section 54 and Section 54F, there was never intended to be interpreted as one or single residential house. He further relied on the decision in the case of CIT vs. Khoobchand Makhija (2014) 223 TAXMAN 0189 (Karnataka) wherein it was held that a residential house is used in section 54 makes it clear that it was not intention of legislature to convey the meaning that it refers to a single residential house. Letter a in context, which is used, should not be construed as meaning singular, but being a indefinite article. A residential house also permits use of plural by virtu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by the ld CIT(A) in his order before the Bench. He further argued that the first property was purchased by Smt. Krishna Beniwal mother in law of assessee. However, the assessee s name was added to get benefit of Section 54 by purchase of Rajasthan Housing Board flat was prior to 17 months from the date of sale. The house purchased from Rajasthan Housing Board got registered in the mother in law s name and the assessee was second, therefore, same was added for future litigation. Smt. Krishna Beniwal had paid all the installments from the Housing Board taken from bank of Rajasthan. It is also found that the assessee has not transferred any amount from his savings account to direction Rajasthan Housing Board or through loan account for repayment of installment. The ld counsel s argument also not correct that same bank transfer entry were for the purpose of payment of installments and whatever transfer amount is not sufficient to purchase the house as total cost charged by the Rajasthan Housing Board at ₹ 12,22,900/-. He has further drawn our attention on Board Circle No. 672 dated 16/12/1993 wherein allotment of flat under the self financing scheme of DDA treated construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith a builder was a case of construction and not purchase of residential flat. Therefore, he prayed to confirm the order of the ld CIT(A). 6. We have heard the rival contentions of both the parties and perused the material available on the record. The first property was originally booked by Smt. Krishna Beniwal under Kalptaru Yojna of Rajasthan Housing Board in the year 1992 and thereafter she made payment up to 15/4/2006 to the Board by obtaining loan from bank of Rajasthan in the joint name of Krishna Beniwal and the appellant. The possession of house was taken by Smt. Krishna Beniwal and appellant jointly in November, 2006. The assessee filed an application before Rajasthan Housing Board on 31/5/2007 to adde her name, which has been accepted by it. The registration letter for lease deed was issued in the joint name of Smt. Krishna Beniwal and the appellant. All the payments were made 17 months prior to the date of sale of first flat i.e 20/10/2007. The possession letter was issued in the name of Smt. Krishna Beniwal on 7/11/2006 and possession was to be taken by Smt. Krishna Beniwal on or before 14/12/2006, which was taken by her on 15/11/2006. Perpetual lease was executed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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