Income Tax Appellate Tribunal - Ahmedabad
Kalpanaben M.Bhatt, Ahmedabad vs Department Of Income Tax on 16 April, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH - AHMEDABAD
(BEFORE SHRI D. K. TYAGI, JM AND A. MOHAN ALANKAMONY,
AM)
ITA No.2192/Ahd/2010
A. Y.: 2007-08
Kalpanaben M. Bhatt, Vs The D. C. I. T., Circle - 10,
C/o. Mr. M. K. Mehta, Narayan Chambers,
9, Professors' Colony, 1st Floor, Opp. Patang Hotel,
Near Vijay Char Rasta, Near Nehru Bridge,
Ahmedabad Ashram Road,
PA No. ACHPB 7452 N Ahmedabad
(Appellant) (Respondent)
ITA No.2378/Ahd/2010
A.Y.: 2007-08
The A. C. I. T.,Circle - 10, Vs Kalpanaben M. Bhatt,
Narayan Chambers, 1st C/o. Mr. M. K. Mehta,
Floor, Opp. Patang Hotel, 9, Professors' Colony,
Near Nehru Bridge, Near Vijay Char Rasta,
Ashram Road, Ahmedabad
Ahmedabad PA No. ACHPB 7452 N
(Appellant) (Respondent)
Assessee by Shri B. R. Popat, AR
Department by Shri B. L. Yadav, Sr. DR
Date of hearing: 16-04-2012
Date of pronouncement: 08-06-2012
ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 2
Smt. Kalpanaben M. Bhatt
ORDER
PER A. MOHAN ALANKAMONY: These cross appeals are directed against the order of the learned CIT(A)- XVI, Ahmedabad dated 17th May, 2012 in appeal No. CIT(A)- XVI/DCIT.Cir-10/121/09-10 for assessment year 2007-08. Both the appeals were heard together and shall be disposed of by this common and consolidated order as under.
ITA No.2192/Ahd/2010 (Assessee's appeal)2. The assessee in its appeal has taken the following grounds:
"The learned Commissioner of Income Tax (Appeals) XVI, Ahmedabad had erred in:
1. Confirming the addition of Rs.1,00,00,000/- on account of disallowance under section 54 of the Act. Considering the facts of the case and the legal position, he ought to have deleted the addition by directing the AO to allow the claim of deduction under section 54 of the Act, as claimed.
2. Not mentioning anything about the applicability of the provisions of section 54F of the Act, when he upheld the decision of the AO only on the ground of the Long Term Capital Asset not being a residential house."ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 3
Smt. Kalpanaben M. Bhatt
3. Briefly stated, the facts of the case are that the assessee filed return of income on 13-09-2007 declaring total income of Rs.2,34,13,970/-. The same was processed u/s 143(1) of the Act accepting the returned income. The return was selected for scrutiny issuing notice u/s 143(2) of the Act and subsequently notice u/s 142(1) of the Act was issued calling the assessee for the relevant details. In response thereto the assessee filed the required details. During the year under consideration the assessee has shown long term capital gain of Rs.2,08,19,029/- and other interest income of Rs.26,79,329/- in the return of income. Capital gain income of Rs.2,08,19,029/- was earned on transfer of assessee's share @3.125% in the property situated at 5, Mansingh Road, New Delhi. The said share of 3.125% was received through Will of assessee's mother having 1/6th share in the said property on her demise in 1998. The said property was transferred by the owners for Rs.1,48,93,93,500/- and assessee's share @ 3.125% in capital gain was determined at Rs.3,58,19,029/-. The assessee claimed exemption u/s. 54EC of the Act for Rs.50,00,000/- being the amount invested in REC Bonds and Rs.1,00,00,000/- being amount deposited in Capital ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 4 Smt. Kalpanaben M. Bhatt Gain Account Scheme with State Bank of India and income under the head capital gain was offered at Rs.2,08,19,029/-.
3.1 Regarding claim of exemption u/s 54 of the Act, the AO asked the assessee to furnish copy of the sale deed and the details of expenditure incurred on transfer of the property. The assessee filed copy of the sale deed and details of expenditure on transfer of the property. The assessee has shown total expenses of Rs.8,93,93,572/- and assessee's share of expenditure @3.125% has been shown at Rs.27,93,549/-. On examination of the valuation report as on 01-04-1981 the AO noticed that the total area of plot of land is 3.85 acres which includes the property having built- up area of 1266.13 sq. yards in the plot of land admeasuring 18634 sq. yards and that the value of the property is assessed at Rs.4.89 Crores in which the value of the land is estimated at Rs.4,67,50,000/- and the value of the building is estimated at Rs.21,45,000/-. The AO further noticed that the valuation report as on the date of sale of the property has not been produced. However, the AO observed from the sale deed that the consideration of Rs.148,93,93,500/- was towards the property bearing Plot No.2, Block No.15, New Capital of Delhi which is known as 5, Mansingh Road, New ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 5 Smt. Kalpanaben M. Bhatt Delhi admeasuring 3.85 acres of land including construction thereon.
3.2 Regarding claim of reimbursement of expenses to Indian Hotels as consideration for vacating part of the property, on examination of the documents furnished by the assessee the AO found that there was tripartite agreement amongst (i) Patani Family, (ii) Indian Hotels C. Ltd. and (iii) Minerals Management Services India Ltd. - the buyer of the property in respect of joint development of the property and the assessee agreed to reimburse Rs.97,00,000/- for handover of peaceful and vacant possession of the property to the Patani Family. Accordingly, the AO felt that the conditions of section 54 of the Act for claiming exemption from capital gain tax on transfer of a residential house property have not been fulfilled by the assessee and the assessee was asked to substantiate her claim for exemption of Rs.1,00,00,000/- u/s 54 of the Act. The assessee in response submitted that the property at New Delhi was residential house which was build by P.D. Patani and the same was the source of capital gain of the assessee. It was further submitted that the properties around Mansingh Road have been declared as Lutyen's Zone and no commercial use is permitted.
ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 6Smt. Kalpanaben M. Bhatt 3.3 Regarding reimbursement of expenses to Indian Hotels Co. Ltd. the assessee submitted that though the joint development agreement/understanding was arrived at the for development of the property, but same had to be called off subsequently and since during the intervening period Indian Hotels Co. Ltd. has incurred expenses of Rs.97,00,000/- the same was reimbursed to them as per the understanding/agreement.
3.4 The AO after considering the submissions of the assessee, copy of the sale deed, valuation report and copy of letter of The Indian Hotels Co. Ltd. dated 17-11-2005 signed by the 3 parties as aforesaid was of the view that for availing exemption u/s 54 of the Act the assessee had to fulfill the following relevant conditions:
(i) The transfer shall be by Individual or a HUF
(ii) The long term capital asset shall be building or land appurtenant to building.
(iii) The building should be a residential house income of which is chargeable under the head income from house property.
3.5 With regard to point (i) above the AO observed that there was still undivided share in the property of the members as per terms of the Will of Late Smt. Savita Gauri ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 7 Smt. Kalpanaben M. Bhatt B. Pattani as mentioned in clause 2 (c) of the sale deed and that the property was never distributed. The said property remained the Estate of Late Shri Prabhashankar D. Patani as a separate entity. Therefore, the AO held that the conditions regarding transfer of capital asset by an Individual or a HUF is not fulfilled by the assessee.
3.6 With regard to point (ii) above, the AO observed from page 6 of the sale deed that Shri Prabhashankar D. Pattani was allotted a plot of land admeasuring 3.85 Acres by a Perpetual Lease Deed dated 20-08-1921 and thus the capital asset came into existence was a plot of land admeasuring 3.85 Acres. Thereafter, construction was carried out on 6.79% of the plot of land and the value of the land was estimated at Rs.4,67,50,000/- as on that date and the value of the building was estimat4ed at Rs.21,45,000/- which constitutes 4.58% of the total value of the property. The AO also observed that the present sale deed was primarily for transfer of 3.85 acres of land and not for transfer of the building constructed thereon. The AO accordingly held that the assessee is not entitled for exemption u/s 54 of the Act on capital gain realized on transfer of the property.
ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 8Smt. Kalpanaben M. Bhatt 3.7 With regard to point (iii) above, the AO observed that as per the letter written by The Indian Hotels Co. Ltd. the Pattani Family entered into an agreement with the said Hotel Group for development of the property and the property was under possession of The Indian Hotels Co. Ltd. and as per terms of the understanding on payment of Rs.97,00,000/- The Indian Hotels Co. Ltd. would hand over peaceful vacant possession of the property and would withdraw the police complaint and other suits. Accordingly, the AO held that the property did not remain as residential property. The AO further observed that the assessee has neither discharged her wealth tax liability in respect of the property acquired by her from her mother as per the Will in 1998 nor offered any rental income to tax u/s 22 of the Act knowing fully that the said property has been converted into a commercial property by way of the agreement with The Indian Hotels Co. Ltd. Accordingly, the AO treated the property as not residential house on the date of transfer and that the assessee did not fulfill the condition regarding transfer of residential building and land appurtenant thereto prescribed u/s 54 of the Act for availing exemption and disallowed assessee's claim u/s 54 of the Act for Rs.1,00,00,000/-.
ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 9Smt. Kalpanaben M. Bhatt
4. Being aggrieved, the assessee carried the matter in appeal before the learned CIT(A) and it was mainly contended before him that during assessment proceedings the AO asked the assessee to explain that the property in question was a residential property. The assessee replied the query. It was further submitted that the AO rejected the claim of the assessee u/s 54 of the Act on three grounds in the assessment order without confronting the same to the assessee. The assessee also wanted to file additional evidence by way of reply in respect of first and second ground on which the AO rejected the claim of the assessee u/s 54 of the Act and sent a copy of the paper book dated 24-2-2010 for his comment. The AO in his comment regarding claim of Rs.1,00,00,000/- being deposited in A/c No. 30420499531 if SBI, Alkapuri Branch, Baroda under Capital Gains Account Scheme stated that the same is a normal saving pass bank pass book and there is no mention that the said account is under the Capital Gains Account Scheme, hence assessee's claim is not correct. It was further stated by the AO that the property was not used as residential house by the assessee. Accordingly, the AO asked to substantiate her claim with supporting documents and evidences.
ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 10Smt. Kalpanaben M. Bhatt 4.1 In reply the assessee submitted that the property was a residential house which was constructed by Sir P D. Patani and it was the source of capital gain. It was further submitted that the property was declared as Lutyen's Zone and no commercial use of property was allowed in that area.
4.2 It was further submitted by the assessee that the AO passed order u/s 143 (3) disallowing deduction of Rs.1,00,00,000/- on the grounds that:
(i) The appellant is not the owner, the property belongs to the Estate of Late Shri Prabhashankar Patani
(ii) The property cannot be considered as residential house but commercial premises
(iii) The property is not a residential house with land appurtenant thereto.
4.3 It was further contended before the learned CIT(A) that first and third issue above, were not confronted to the assessee during assessment proceedings. The assessee also filed copy of the paper book filed before the AO as the same was not considered by him. Since the paper book contained only the reply to points No.1 & 3 above, the same was considered by the learned CIT(A) ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 11 Smt. Kalpanaben M. Bhatt 4.4 Regarding - transfer shall be by individual or a HUF - the assessee contended that the AO failed to appreciate that the assessee acquired 3.125% share in the property of Estate of Late Prabhashankar Patani who was her great grand father and that the AO's view that the property belongs to estate of deceased is based on the fact that the property was not distributed between the beneficiaries in metes & bounds amongst the members of the HUF. It was also submitted that physical distribution of the property could not be done due to the prevailing Municipal Law and that the same was accordingly owned jointly as co-owners as per section 26 of the IT Act, which the AO did not take into consideration.
4.5 Regarding - transfer not being a residential house with land appurtenant thereto - it was submitted by the assessee that the AO has not appreciated that the facts of the case, legal position and ratio of various judicial pronouncements and that income under the head "income from house property" is chargeable u/s 22 of the Act according to which the annual value of the property consisting building or land appurtenant thereto of which the assessee is owner, other than such portions as may occupy for the purpose of any business or profession carried on by him and the profits of ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 12 Smt. Kalpanaben M. Bhatt which are chargeable to income tax. It was further submitted that "land appurtenant thereto" has not been defined in the Income Tax Act and that therefore, the assessee relied upon various dictionary meanings. The assessee also further relied upon the decision of the Hon'ble Madras High Court in the case of CIT Vs Smt. M. Kalpagam, 227 ITR 733 and the decision in the case of CIT Vs Zaibunnisa Begum, 151 ITR 320 in which it was held that 'land appurtenant" is to be construed in a broad and non-technical sense and the tax authorities should determine the extent of land appurtenant by enquiring into the enjoyment of the building and land by the occupiers.
4.6 Regarding - building should be a residential house, the income of which is chargeable under the head income from house property - it was submitted by the assessee that the AO has observed that the property under transfer was not a house property as defined u/s 22 of the Act on the basis of letter received from The Indian Hotels Co. Ltd. wherein it was mentioned of revocation of all understanding, writing and agreement between the Patani Family and the Company for joint development. It was further submitted that the property was situated in Luteyan's Zone and therefore, it could be used either for residence or for setting a residential ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 13 Smt. Kalpanaben M. Bhatt hotel of star category provided a special approval in this regard. However, due to legal restriction joint development could not be realized and the co-owners of the property got buyer who was interested to buy the property as heritage home for residential purpose and for that purpose the co- owners of the property got a comfort letter from The Indian Hotels Co. Ltd. and that for getting the comfort letter the co- owners had to reimburse the expenses incurred by The Indian Hotels Co. Ltd. during the period. It was further submitted that the property was occupied by the Patani Family and was not used for any commercial purpose.
4.7 Regarding chargeability of wealth tax, it was submitted by the assessee that that since the self occupied property is exempt u/s 5 (vi) of the Act the same is not required to be taxed under Wealth Tax Act and that since the assessee was not having any residential house, notional rent is not required to be paid. It was, therefore, submitted by the assessee that the property was not handed over to The Indian Hotels Co. Ltd. and the same was used for residential purpose and that the condition that the property is residential house has been fulfilled as per section 54 of the Act.
ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 14Smt. Kalpanaben M. Bhatt
5. The learned CIT(A) considering the facts of the case, the submission of the assessee and the remand report of the AO ultimately held that the assessee is the co-owner of the property and at the same breath further held that the large extend of land is not land appurtenant to the building and the property is commercial.
6. The learned AR reiterated the submissions made before the authorities below. On the other hand, the learned DR supported the order of the learned CIT(A).
7. We have considered the rival submissions and perused the material available on record and the paper book containing 1 to 149 pages filed by the assessee. From the facts of the case it is evident that the grouse of the learned AO for denying exemption u/s 54 of the Act was due to the following three reasons: (1)The asset which is the subject matter of transfer belonged to the assets of Late Shri Prabhashankar Patni which is separate assessable entity and not the assessee. (2)The asset which is the subject matter of transfer is predominantly is a case of transfer of land and the same cannot be treated as transfer of building with land appurtenant thereto as envisaged u/s 54 of the Act.
ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 15Smt. Kalpanaben M. Bhatt (3) The subject matter of assets being transferred was converted to commercial asset and no more remained as house property as defined u/s 22 of the Act.
7.1 In respect of the first issue that the asset which is the subject matter of transfer belonged to the assets of Late Shri Prabhashankar Patni which is separate assessable entity and not the assessee; on our perusal of the records the apprehension of the learned AO does not seem to be justified. From the sale deed executed on 23-08-2006 between the members of the HUF and M/s.Minerals Management Services Pvt. Ltd., it is evident that Shri Prabhashankar D. Patni was the Great Grant Father of the assessee. The documentary evidences show that Late Shri Prabhashankar D. Patni acquired the land by virtue of perpetual lease for consideration of Rs.1,656/- and 4 Anas on 20-08-1921. The lease agreement is on record. Thereafter, Late Shri Prabhashankar D. Patni constructed a double story residential house along with servant quarters and garages protected by compound wall after obtaining sanction from the appropriate authorities at the relevant point of time. Since, the land was situated in VVIP Zone of New Delhi which was designated as Lutyen's Bungalows Zone;
ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 16Smt. Kalpanaben M. Bhatt there were stringent restrictions for construction on the large extent of 3.85 Acres of residential plot. Late Shri Prabhashankar D. Patni constructed his residential house utilizing the maximum permissible area allowed for construction on the large extent of 3.85 Acres plot which works out to 6.79% of the total area of the plot. The assessee had come out with various documents to establish these facts and the revenue has not disputed the same. Further, from the sale deed it is evident that Shri Prabhashankar D. Patni passed away and the property devolved on his two sons Shri A. P. Patni and Batukbhai P. Patni. Thereafter, the rights in the property further devolved through successive demise of the members of the family. In July, 1976 an oral partition was effected which was recorded as memorandum on 03-08-1976. This was also recognized by the revenue by order u/s 171 of the Act dated 15-05-1979 passed by the ITO-I, Bhavnagar which is placed in the paper book before us in page 26. Subsequent to the oral partition, there was further devolution in the property. As a result, the assessee had become owner of 3.125% share of the residential house which is apparent from the sale deed. Thus, it is established that all the parties mentioned in the sale deed had become joint owners of the residential ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 17 Smt. Kalpanaben M. Bhatt property. This fact is further cemented since the Revenue had recognized the oral partition in another proceeding before it as mentioned hereinabove. There is no prohibition for such oral partitions in the eye of law and they are valid. Further, it is not mandatory to partition the property in metes and bounds in order to distribute the same amongst the legal heirs. In fact, such physical division of immovable property in certain case is not possible as in the assessee's case. Since the asset has been orally partitioned amongst the members of the related Hindu Undivided Families though not by metes and bounds, the members of the HUFS were holding the property as co-owners in their individual capacity and not in the status of HUF. Therefore, the learned AO has erred to hold that the conditions regarding transfer of residential building and land appurtenant thereto prescribed in section 54 of the Act in order to avail exemption is not fulfilled. From the facts of the case, it is evident that the assessee is the joint owner of the property in her individual capacity by virtue of the oral partition and is entitled to claim deduction u/s 54 of the Act on sale of the residential building along with land appurtenant thereto, subject to the fulfillment of other conditions laid down under the Act.
7.2 The other argument of the revenue was that the subject ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 18 Smt. Kalpanaben M. Bhatt matter of transfer of assets was not related to transfer of a residential house with land appurtenant thereto but predominantly land; also does not appear to have any merit. From the facts, it is evident that the land was allotted by the Government on 20-08-1921 to the assessee's Great Grand Father which falls in VVIP Area of Lutyen's Bungalows Zone and this area is bound by various stringent rules and regulations with respect to construction of building. Though the Government had allotted 3.85 Acres of land to the assessee's Great Grand Father, the land falls in the residential zone wherein construction is possible for a restricted area of residential building. The assessee's Great Grand Father had utilized the entire permissible area available for construction, for constructing the residential house. In such circumstances, it is obvious that the nomenclature of the asset predominantly falls in the category of residential building though large extend of the premises consist of land. It is pertinent to note that the vacant land cannot be used for any other purpose other than to remain as an integral part of the residential building. Considering the facts of this case we are of the considered view that the large extent of land of 3.85 Acres is land appurtenant to the residential house and both the land and the ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 19 Smt. Kalpanaben M. Bhatt building are not divisible. The assessee has rightly relied on the decision of the Hon'ble Andhra Pradesh High Court in the case of CIT, A. P. II, Hyderabad Vs Zaibunnisa Begum, 151 ITR 320 wherein it is held that "Section 54 of the I. T. Act, 1961, grants a concession where capital gains arise from the transfer of buildings or lands appurtenant thereto used by the assessee in the two years immediately preceding the date of transfer as his own or his parent's residence, if he constructs a house property or purchases one for purposes of residence within the time specified in the provision. The expression "land appurtenant thereto" occurring in s. 54 has not been defined. It must, therefore, be understood in its popular and non-technical sense. It is not possible to accept the contention that cl. (b) of the Explanation to s. 5 (1) (ivc) of the W. T. Act, 1957, defining "land appurtenant" for the purpose of that clause should be considered equally applicable for the purpose of understanding that expression occurring in s. 54 of the I. T. Act. The Explanation in the W. T. Act is only for the purpose of s. 5 (1) (ivc) because it is specifically stated so. The meaning assigned to that expression in the Urban Ceiling and Regulation Act is also not relevant. The tax ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 20 Smt. Kalpanaben M. Bhatt authorities will have to determine the extent of land appurtenant to a building transferred, taking into consideration a variety of circumstances that may be relevant for the purpose. It is not possible to lay down in fallible tests to be applied as the tests would vary depending upon the facts and circumstances of each case. For instance: (1) If the building together with the land is treated as an indivisible unit and enjoyed as such by the persons occupying the building, it is an indication that the entire extent of land is appurtenant to the building ; (2) If the building has extensive lands appurtenant thereto and even if the building and the land have been treated as one single unit and enjoyed as such by the occupiers, an inquiry could be made to find out whether any part of the land contiguous to the building can be put to independent user without causing any detriment to the enjoyment of the building as such. Such an enquiry should be conducted not based on any artificial considerations but from the point of view of the persons occupying the building. The numbers of persons or different branches of families residing in the building, the requirements of the persons occupying the building, consistent with their social standing, etc., are ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 21 Smt. Kalpanaben M. Bhatt relevant for the purpose. If any surplus is arrived at on such enquiry, then the extent of such surplus land may not qualify to be treated as land appurtenant to the building; (3) if there is any evidence to indicate that any portion of the land contiguous to the building was applied to user other than the enjoyment of the building, then that provides a safe indication regarding the extent of land applied for such user. For instance, the land used by the occupiers for commercial or agricultural purposes although forming part of the land adjacent to the building, does not qualify to be treated as land appurtenant to the building; (4) if the owner or occupier is deriving any income from the land which is not liable to be assessed as income from house property under s. 22 of the I. T. Act, then the extent of such land does not qualify to be treated as land appurtenant to the building; and (5) any material pointing to be attempted user of the building for purposes other than the effective and proper enjoyment of the house would also afford a safe guide to determine the extent of surplus land and not qualifying to be treated as land appurtenant to the building. The above tests are illustrative and by no means exhaustive. It is for the tax authorities to apply ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 22 Smt. Kalpanaben M. Bhatt their mind properly to the facts of each case and to devise tests suitable and appropriate to each case."
With the above discussion we hold that the asset transferred by the assessee is her share in the residential building along with land appurtenant thereto as envisaged in the Act and therefore the assessee is eligible to claim deduction U/s 54 of the Act subject to the compliance of the other provisions of the Act.
7.3 On the third grouse of the learned AO that the property in question was not a residential house based on a letter from M/s. India Hotels Co. Ltd.; also does not appear to be justifiable. During the endeavor for sale of the property the owners of the property were drawn to the interest shown by the neighboring group of Five Star Hotels. The Indian Hotel Co. Ltd., being a flagship Company of "TATA" running and operating several Five Star Hotels showed interest in the property for developing it as a Five Star Hotel. The proposal of the Star Group of Hotels was for joint development. Since the group was prima facie interested in the joint development the representatives of the Company were permitted need based access to the property so that they could assess the commercial potentiality of the property and could approach ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 23 Smt. Kalpanaben M. Bhatt the Government for special approval to set up a hotel. The proposal of the group of five star hotels to the vendors was that, if such approval would have been obtained, the assessee and the co-owners of the property would further negotiate to become part the joint venture in association with Indian Hotel Co. Ltd. In such eventuality, the existing residential house would have to be demolished and a hotel building would have to be erected as per the joint development agreement. However, due to the stringent rules and regulations of the Lutyen's Bungalows Zone which came in way, permission could not be obtained for such vast construction. At this juncture, the members of the Patni Family decided to sever the ties with Indian Hotel Co. Ltd., and were on the lookout for another buyer who would be interested to purchase the property as Heritage Home for residential purpose. The property was not capable of being sub-plotted and due to stringent rules and regulations of Lutyen's Bungalows Zone it was a difficult task to find suitable buyer who might be interested to invest in very large amount for residential house property. Thus, the property remained all through as a residential property and there was no conversion of the same as a commercial property as claimed by the revenue. From the above facts it is evident ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 24 Smt. Kalpanaben M. Bhatt that even if the assessee and the co-owners had desired and attempted to convert the property as commercial property, law prohibited them to do so and the property remained as residential building with land appurtenant thereto. The earnest effort taken up by the co-owners and the probable joint developers to convert the property into a commercial property cannot be construed to hold that the property is converted as a commercial property. Therefore considering the facts of the case we do not have any hesitation to hold that the relevant property always stood as a residential building with land appurtenant thereto. Further from the facts before us it is evident that the residential building and the large extend of land of 3.85 acres are an integral unit and the same is undividable or inseparable. Thus this issue is also decided in favor of the assessee.
7.4 To sum up, from our above discussions and findings we hold that by virtue of oral partition the assessee is the individual owner of the 3.125% undivided share in the residential building with 3.85 acres of land appurtenant thereto. Further the entire asset always remained in the nomenclature of Residential building along with land appurtenant thereto as envisaged in the Act. Thus the conditions prescribed to claim the benefit under section 54 of ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 25 Smt. Kalpanaben M. Bhatt the Act with respect to ownership of the asset and the asset to be a residential building with land appurtenant thereto is fulfilled. Therefore both the grounds raised by the assessee are allowed needless to mention that the assessee will be entitled to claim the benefit u/s 54 of the Act subject to compliance of all other conditions prescribed under the Act.
ITA No.2378/Ahd/2010(revenue's appeal)8. The revenue in its appeal in has taken the following grounds:
"1. The Ld. CIT(A) erred in law and on facts in holding that the land transferred is land appurtenant to building as against the finding of A. O. that it is a distinct & independent.
2. The Ld. CIT(A) erred in law and on facts in not appreciating that it is only a land areas and not a residential property because the land comprise of 93.2% of vacant land and only 6.8% is the building area and the purchaser has purchased the property only to exploit the land for commercial use and not to use the building on the land.
3. The Ld. CIT(A) has erred in giving a finding that the property sold is a residential property with ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 26 Smt. Kalpanaben M. Bhatt appurtenant land, which is contrary to his own finding in the order, that the property is a commercial one, which is transferred by the assessee.
4. On the facts and circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer."
9. While adjudicating the appeal of the assessee all the grounds raised by the Revenue are considered and decided against the Revenue. Therefore the appeal of the Revenue is dismissed.
10. In the result, appeal of the assessee is allowed and the appeal of the Revenue is dismissed.
Order pronounced in the open Court on 08-06-2012 Sd/- Sd/-
(D. K. TYAGI) (A. MOHAN ALANKAMONY)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Lakshmikant Deka/
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
ITA No.2192 & 2378/Ahd./2010 (AY: 2007-08) 27
Smt. Kalpanaben M. Bhatt
6. Guard File
BY ORDER
Dy. Registrar, ITAT, Ahmedabad
1. Date of Dictation:
2. Date on which the typed draft is placed before the Dictating Member: other Member:
3. Date on which approved draft comes to the Sr.P.S./P.S.:
4. Date on which the fair order is placed before the Dictating Member for pronouncement:
5. Date on which the fair order comes back to the Sr. P.S./P.S.:
6. Date on which the file goes to the Bench Clerk:
7. Date on which the file goes to the Head Clerk:
8. The date on which the file goes to the Assistant Registrar for signature on the order:
9. Date of Despatch of the Order: