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Sanjeev Puri Versus Deputy Commissioner of Income-tax, Circle-37 (1) , New Delhi

Eligible to claim deduction under sec. 54F - nature of property - residential or commercial - Held that:- There is no dispute on fact that the property owned by the assessee was being used as his office during the relevant period but only dispute between the assessee and Revenue remained about the entitlement of deduction of sec. 54F of the Act on the basis of actual user of the property i.e. office use and not merely on the basis of the municipal showing the property meant for residential use o .....

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eligibility of deduction under sec. 54F of the Act claimed by the assessee. In the present case, for denial of the claimed deduction under sec. 54F of the Act, the Assessing Officer should not have considered the property as residential on the basis of municipal record ignoring the actual user thereof. The authorities below were thus not justified in denying and upholding the denial of the claimed benefit to the assessee by way of deduction under sec. 54F of the Act on the basis that the assess .....

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r. Adv. Gaurav Jain and Shambav Jain, CA For The Respondent : Smt. Anima Barnwal, Sr. DR ORDER I.C. Sudhir, Judicial Member - ITA No.5474/Del/2014: The assessee has questioned first appellate order on the following grounds: . 1. That Learned CIT(Appeals) has erred in deciding that the appellant is not entitled to deduction under section 54F of the Income-tax Act, 1961 based on the following presumptions: (a) That the appellant in the assessment year 2008-09 had produced the sale deed for ground .....

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an office of the appellant was treated by the appellant at all times as his permanent address. (b) That the confirmation from his son who is a practicing lawyer for taking on rent appellant's claim that he has been using front half portion of E 575E Ground Floor, G.K.U till 31st March, 2009 as his office is self serving and not of much value. However, the Learned CIT(Appeals) failed to appreciate that the above fact does not concern the relevant assessment year. (c) That the sale deed in re .....

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the electricity bill is on domestic rates does not establish that the appellant was not using it as his office. As a matter of fact it an admitted case that the appellant at the relevant time was staying at E 549 G. KII which is another premises. (e) That E-575 A G.K. II is not the property on which depreciation has been claimed by the appellant and allowed by the department as the figures don't tally with the cost of the building. The Learned CIT(Appeals) did not appreciate the fact that t .....

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ould have been avoided. As a matter of fact the Learned CIT(Appeals) has factually come to an incorrect conclusion as regards the finding that the depreciation claimed is for some other property. The fact is that in page 14 of the impugned order the Learned CIT(Appeals) she herself has mentioned the properties which the appellant possessed during the relevant assessment year. (f) That the correspondence address in form 3CB and-3CD is treated as proof of appellant residing at E-575A G.K. II. Howe .....

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he has simply stated all the grounds of appeal raised by the appellant in her order without commenting on the same or dealing with the same in any manner. 3. The appellant has cited several judgments in support of his case. However, the Learned CIT(Appeals) has failed to deal with any of the cases cited by the appellant. 4. The Learned CIT(Appeals) has also completely ignored the proof that were filed before her by way of several documents including official documents establishing that the dispu .....

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ce to justify that E-575A, G.K. II is a commercial building. In fact the appellant has never claimed E-575A, G.K.II as commercial building but has stated that this property was being used by him as his office, the income of which cannot be considered under the head income from house property. 6. The Learned CIT(Appeals) has gone wrong in concluding that the appellant is not entitled to deduction u/s. 54F as he has not conformed to the conditions laid down u/s. 54.She has erred in not considering .....

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1,48,23,645 & adding the same to the income of the appellant from long term capital gain. 9. It is most relevant to mention that despite noticing it in her order the Learned CIT(Appeals) has not even dealt with the issue with regard to deduction which in any event is available to the appellant u/s. 54E of the Income-tax Act, 1961". 2. During the course of hearing, the Learned AR at the outset submitted that the appellant does not wish to press ground Nos. 1(a) to 1(e) and 2 to 8 of the .....

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ithin the specified time and claimed deduction under sec. 54F. The assessee also invested ₹ 50 lacs in REC Bonds for deduction under sec. 54EC. The Assessing Officer disallowed the claimed deduction under sec. 54F of the Act resulting into the addition of Rs.l,48,23,645 on the basis that a residential property cannot be used as an office, only sale deed of the property can determine the use of the property. He held that property at E-575A, Ground Floor, Gr. Kailash-II, New Delhi is a resid .....

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le deed of the property can determined the use of the property and that there is no distinction between the expression "Type" and "actual use" of the property. He submitted that the finding of the Assessing Officer that only sale deed would determine the use of the property is contrary to the master plan for Delhi 2021 (MPD - 2021). In terms of Rule 15.8 of MPD-2021 professional activities such as those involving services based on professional skills namely that of Doctor, La .....

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pe of the properties and not the use of property as contended by the Assessing Officer. 5.1 The Learned AR submitted that the assessee is a senior advocate deriving income from profession, house property, capital gains and other sources. During the assessment year 2002-03, he had purchased residential house which E-549, GK.IT, New Delhi for the purpose of his residential where he started residing with his family. Prior thereto, the assessee appellant was residing rear portion of E-575A, G.K. II, .....

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nt half portion was jointly held by the assessee and his daughter. In that year, the assessee established his own office for carrying on legal professional in E-575A (comprising of rear portion and first front half portion) and capitalized the purchase price of aforesaid two portions, amounting to ₹ 51,36,000 under the head "office building" ₹ 24,07,500 and under the head office land ₹ 27,28,500) in the books of account ( On 28.8.2007) and claimed depreciation thereon .....

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000 (under the head office building ₹ 12,15,000 and under the head "office land" ₹ 13,77,000 ) was capitalized in books of account and depreciation was claimed thereon in the return of income, which has been allowed by the Assessing Officer. 5.5 Under the aforesaid background, the Learned AR submitted that as at the beginning of the relevant assessment year, the assessee had, inter alia, following properties, which were put to different use: 1. E-549A - Residential purposes .....

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50 lacs under sec. 54EC of the Act. 5.7 The Learned AR contended that as per the terms of section 54F of the Act, the assessee is entitled to deduct proportionate capital gains arising from sale of long term capital assets, not being a residential house, which are invested in purchased/construction f new residential house, if on the date of transfer, the flsSessee doBsr^^dw^p^re than one residential house. He submitted that in the present case, the assessee did not own more than one residential .....

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disregarding the actual use thereof for professional purposes. In support, he placed reliance on the following decisions and referred Rules 15A of Master Plan for Delhi 2021: (i) CITv.GeetaDugal-357ITR153(Del.); (ii) ITO v. Rasiklal & Satra - 98ITD 335 (Mumbai); (iii) CIT v. Geeta Dugal - 228 Taxman 62 (SC); (iv) ITO v. Smt Rohini Reddy - 122 TTJ (Hyd) 423; (v) CIT v. Ouseph Chacko - 271 ITR 29 (Ker.); (vi) Dr. Smt. P.K. Vasanthi Rangrajan v. CIT - 23 Taxman.com 229 (Madras); 5.8 The Learned .....

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Gr. Kailash-Il, New Delhi (Page Nos. 168 to 169 of P.B); (ii) The Delhi High Court Bar Association List - the official address of the assessee as E-575A and residential address as E-549-GK-1I, New Delhi (page No. 169 of P.B.); (iii) The professional invoices raised by the assessee also contain the said address; (iv) Claim and allowance of depreciation by Assessing Officer on the capitalized amount of respective portion (front and rear) of E- 575A, as and when put to professional use by the asses .....

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cceptance of the said property being used for the purpose of profession; (v) No wealth tax levied on value of property at E-575A, implying acceptance of the said property being used for the purpose of profession; and (vi) Claim and allowance of office expenses by the Assessing Officer in the completed assessments, including the Assessment order for the year under consideration (page No. 32 of the P.B); 6. The Learned Senior DR on the other hand placed reliance on the orders of the authorities be .....

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mercial/official. The Learned Senior DR submitted that the decision relied upon by the Learned AR having distinguishable facts are not helpful to the assessee. She submitted that the premises capable of use as residential house is enough and it is not necessary to live there. She submitted that user of the property is immaterial if property is shown as residential on the record of the corporation. She submitted that undisputedly GK-II, New Delhi area is marked for residential use. She contended .....

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y servant but not by the assessee as residence and so far as the decision in the case of Mahavir Prasad Gupta v. JCIT (Supra) by Delhi Bench, the decision of Hon'ble jurisdictional High Court of Delhi will prevail. The Learned AR may be clear that there are two properties in E-575A, GK-II, one is held by the assessee jointly with his daughter and the other one in his individual capacity. He submitted that it is an established position of law that for claiming benefit of deduction under sec. .....

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the residential house to be constructed in 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 requireme .....

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y 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 apart 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 phys .....

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ed by the Revenue against the aforesaid ruling of the Hon'ble High Court, reported in 228 Taxman 62 (SC). 8.2 The Mumbai Bench of the ITAT in the case of ITO v. Rasiklal & Satra (supra) has defined the word "residence" as under; "6. ** ** ** The word "residence", as per Stroud's Judicial Dictionary, means a place where an individual or his family eat, drink and sleep. So a residential house would mean a building or part of the building where one can eat, drin .....

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or the purpose of business or profession and not for residential house, the same could not be considered as "residential house" for the purpose of sec. 54/54F of the Act, notwithstanding that the building was in the nature of residential building. In the case of Dr. Smt P.K. Vasanti Rangrajan v. CIT (supra), before the Hon'ble Madras High Court, the assessee was an individual practicing as a doctor by profession. She owned a property along with her husband in equal proportion. The .....

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to be conveyed in favour of the developer. The consideration for parting with 50% of the undivided share consisted of four flats as well as a sum of ₹ 10 lacs payable by the developers. On long term capital gain arising from the aforesaid transfer of 50% undivided share in the property, the assessee in her return of income claimed benefit of exemption under sec. 54F of the Act on account of investment in another residential property. The said claim was rejected by the Assessing Officer on .....

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to whether joint ownership of a property could be held to stand in her way of claiming exemption under sec. 54F. It was held in negative. The further question raised was as to whether since assessee did not own any property in status of an individual as on date of transfer, her claim was to be allowed. It was held in affirmative i.e. in favour of the assessee. 8.4 In view of the above ratios when we examine facts of the present case, we find that at the beginning of the relevant assessment year, .....

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54F of the Act. He also made investment in REC Bond and claimed deduction of ₹ 50 lacs under sec. 54EC of the Act. The Assessing Officer disallowed the claimed deduction under sec. 54F of the Act on the basis that property at E-575A GK-II, New Delhi being a residential property as per municipal laws and as per sale deed registered at the time of purchase thereof was to be regarded as "residential house". The Assessing Officer held that since on the date of transfer of Gurgaon Fla .....

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aised before us is as to whether the property E-575A, GK-II, New Delhi shown as residential on the municipal record and in the sale deed as residential type can be treated as official premises as per the actual user as such by the assessee? 8.7 There is no dispute on fact that the property E-575A, GK-II, New Delhi owned by the assessee was being used as his office during the relevant period but only dispute between the assessee and Revenue remained about the entitlement of deduction of sec. 54F .....

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relevant period. In other words, it does not make difference whether the property has been shown as residential house on the record of the government authority but actual user thereof by the assessee will be considered while adjudicating upon the eligibility of deduction under sec. 54F of the Act claimed by the assessee. In the present case, for denial of the claimed deduction under sec. 54F of the Act, the Assessing Officer should not have considered the property E-575A, G.K.II, New Delhi as r .....

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