Ita/815/2006 Of Sri Abdul Gaffar v. The Income-Tax Officer

IN THB HIGH COURT OF KARNATAKA AT BANGALORE DATEKED THIS THE 17 DAY OF JULY 2012 PRESENT THR HON BLE MR.JUSTICE K.SREEDHAR RAO AN THR HON'BLB MR. JUSTICK B. MANOHAR ITA NO.815/2006(T-IT) BBRITWRE pRIABDUL GAFFAR,]AGED ABOUT 57 YEARS,SON OF SRI.ABDUL RAHIM,BEEDI MERCHANT & REAL ESTATE AGENT,NO.383, BANNIMANTAP ‘C’ LAYOUT,MYSORKE— APPBELLANT (BY SRI.S.PARTHASARATHI, ADVOCATE) AN): THE INCOME-TAX OFFICER,WARD —- 2 (1), MYSORENO.99/1, SHILPASHREE BUILDINGS,VISWEOWARANAGAR,STERLING TALKIES ROAD,MYSORE — 570 OO8. .. RESPONDE (BY SRI.E.R.INDRAKUMAR SENIOR COUNSEL A/WoRLE.SANMATHI, ADVS) ITA FILED U/S.260-A OF I.T.ACT, 1961 ARISINGOUT OF ORDER DATED: 29-03-2005 PASSED INITA.NO.844/BANG/2004 FOR THE ASSEMENT YEAR20Q00-QO1PRAYINGTO.RORMULATETHESUBSTANTIAL QUESTIONS OF LAW STATED THEREINAND ALLOW THR APPRAL AND SBT ASIDR THRORDERORTHEITAT,BANGALOREBENCH,BANGALOREBBRARINGITA.NO.844/ BANG/200DATED: 29/03/2005, IN THE INTEREST OF JUSTICEAND EQUITY, THIS APPEAL COMING ON FOR HEARING THISDAY,SREEHDHARRAO|J*)fDELIVEREDTHEFOLLOWING: JUDGMENT The appellant-assessee sold a site bearing No.389situatedaT|Alanahalli,MysoreforaaSUTM:BRs.4,08,000/-. The assessee purchased the said site inthe year 1996. The long term capital gain from the salewas in a sum of Rs.3,600,000/-. The assessee owned aresidential house at the time of sale of the said site. The assessee invested the sale value in improving andremodeling his residential house. The assessee claimedexemption of the said amount towards reconstructionand remodeling of the existing residential house. TheAssessing Officer allowed the exemption u/s o4F of theIncome Tax Act (hereinafter referred to as ‘the Act’). TheCIT, Mysore in exercise of revisional powers u/s 263 ofthe Act held that the assessee is not entitled toexemption because at that point of time, the investmentshould be made tor purchase of a residential house, if itis not already owned by the assessee and that isexempted. The amount spent towards remodeling orrepairs of existing residential house was not within thepurview of exemption u/s 54F of the Act. Thus, theorder of Assessing Officer was set aside. The assesseefiled an appeal before the Appellate Tribunal. TheTribunalcontirmedtheOrderpassedby823Commissioner for Income Tax in revision. Hence, thisappeal. ?)The following are the substantial questions of law formulated in this memorandum of appeal: (1)In.law,andOnthe|factsandcircumstances of the case, whether theTribunal was justified in confirming theorder of Commissioner of Income Taxu/s.263 in denying the benefit of abenevolent provisions u/s.54-F to theappellant? (it)In.law,andOnthe|factsandcircumstances of the case, whether theTribunal was Justified in concluding thatthe expansion/remodeling of existinghouse would not amount to constructionof a house within the meaning ofSection 54-F? !<<<#In.law,andOrlthefactsandcircumstances of the case, whether theexisting portion of the house which wasinsufficient for occupation could beconsidered to be aq residential housowned by the appellant at the time of sale to deny the benefit u/s.54-F of theAct? 3.This court admitted the appeal and accepted thequestions of law framed in the memorandum of appealfor consideration. 4Aiter hearing both the sides, precisely thefollowing questions of law would arise for consideration: “Whether the investment of net saleconsideration towards expansion/ remodelinof an existing residential house would enablethe assessee to seek exemption under SectionO4-F of the Act?” 5.The provision of Section o4F of the Act for theassessment year 2O0OO reads as under 54>A7Subject to the provisions of sub-section(4), where, in the case of an assessee beingan individual or a Hindu undivided family,the capital gain arises from the transfer ofany long-term capital asset, not being a sale to deny the benefit u/s.54-F of theAct? 3.This court admitted the appeal and accepted thequestions of law framed in the memorandum of appealfor consideration. 4Aiter hearing both the sides, precisely thefollowing questions of law would arise for consideration: “Whether the investment of net saleconsideration towards expansion/ remodelinof an existing residential house would enablethe assessee to seek exemption under SectionO4-F of the Act?” 5.The provision of Section o4F of the Act for theassessment year 2O0OO reads as under 54>A7Subject to the provisions of sub-section(4), where, in the case of an assessee beingan individual or a Hindu undivided family,the capital gain arises from the transfer ofany long-term capital asset, not being a residential house(hereafter in this sectionreferred to as the original asset), and theassessee has, within a period of one yearbefore or (two years) after the date on whichthe transfer took place purchased, or haswithin a period of three years after that dateconstructed, a residential house (hereafter inthis section referred to as the new asset), thecapital gain shall be dealt with in accordancewith the following provisions of this section,that is to say- (a) uf the cost of the new asset is notless than the net consideration inrespect of the original asset, the wholeof such capital gain shall not bechanged under Section 45; (b) the cost of the new asset is lessthan the net consideration in respect ofthe original asset, so much of thecapital gain as bears to the whole ofthe capital gain the same proportionas the cost of the new asset bears tothe net consideration, shall not becharged under section 45. Providedthat nothing contained in this sub-section shall apply where the assessee ownson the date of the transfer of the original asset, or purchases within the period of oneyear after such date, or constructs, within theperiod of three years after such date, anyresidential house, the income from which 1schargeable under the head “Income fromhouse property’, other than the new asset, 6.The provision of Section 54F of the Act makes itexplicit that the exemption is available only if the saleconsideration is invested for construction or purchase ofa residential house and the exemption was applicableonly if the assessee does not own a residential house.In the instant case, the assessee owned a residentialhouse at the time of receipt of sale consideration andthe amount is not invested for the purchase orconstruction of a residential house. The amount isinvested for remodeling/expansion of the existingresidential house and such investment is not exemptedu/s O4F of the Act. ���7�8248�F<3E�:B�823�C4883>&�823�:>;3>�:B�823�55366483��><=@746�<9�9:@7;�47;�5>:53>����DD:>;<7?6A&823�455346�<9�;<9C<993;� �����������;�"������������� ����;�"�������������� C5I�"J