ORDER-RAMIT KOCHAR. AM. : -This appeal. filed by the assessee, being ITA No. 6169/Mum/2013, is directed against the order dt. 30th Aug., 2013 passed by learned CIT(A)32, Mumbai, for the asst. yr. 2007-08, the appellate proceedings before the CIT(A) arising from the assessment order dt. 23rd Dec., 2010 passed by the learned AO under s. 143(3) r/w s. 147 of the IT Act, 1961.
2. The grounds raised by the assessee in the memo of appeal filed with the Tribunal read as under:
"1. The learned CIT(A) erred in not following the judgment of the Hon'ble Bombay High Court delivered in the case of co-onwer Mrs. Chhaya Parekh after the decision of- Hon'ble Tribunal in assessee s own case, In respect of the same transaction wherein it was held that demolition of asset by assessee voluntarily would not amount La transfer under the IT Act, ] 961 and hence, denial of exemption under s. 54F is bad in law.
2. The learned CIT(A) erred in concluding that the purchase Of bungalow was symbolic and not real as the same was not occupied by assessee after purchase though the appellant had filed all the relevant documents to show that the bungalow was in a habitable condition and also filed affidavit explaining the reason for not occupying the bungalow and the reason for demolishing it for reconstruction and that for claiming exemption under s. 54F assessee can be owner of more than one residential house at the time of purchase of new residential house and denial of exemption under s. 54F is bad in law .
3. Sec. 54F'(3)-Without prejudice to the above, the learned CIT(A) failed to appreciate that the denial of exemption can be done only in the year of demolition of the asset in accordance With s. 54F(3) and not in the year under consideration."
3. The brief facts of the case are that the assessee filed return of income With Revenue on 26th Oct., 2007 declaring total income of Rs. 25,39,550, which return of income was revised on 22nd July, 2009 by the assessee by filing revised return of income whereby income returned was revised to Rs. 25.49.475.
The notice under s. 1 48 of the Act was issued to the assessee on 3rd Nov., 2009 which was duly served on, the assessee, after recording reasons for reopening of the assessment proceedings under s. 147 of the Act. The assessee filed return of income for the asst. yr. 2007-08 in pursuance of notice under s. 148 of the Act, declaring the same income of Rs. 25.49.475 as was declared earlier vide revised return filed on 22nd July, 2009.
The AO during the course of reassessment proceedings observed that during the accounting period relevant for the asst. yr. 2007-08, the Shop No.6 and garage No. 6A standing in the name of M/s Parekh Brothers in the building shown as Tirupati Shopping Complex, BhuJabhai Desai Road, Mumbai-400026 is sold vide agreement elt. 1st Sept., 2006 for a consideration of Rs. 5.40,00,000. It was ob3erved by the AO from the purchase and sale agreements that the owner of these premises was Mis Parekh Brothers, a co-ownership concern (co-owners being the assessee and Smt. Chhaya B. Parekh, the assessee's sister in-law) which purchased the said building on 28th Aug., 1981 from M/s Gowani Builders (P) Ltd. However, the assessee has claimed exemption under s. 54F of the Act from capital gains treating the half of the sale proceeds, arid his own share being Rs. 2,70,00,000 invested in Juhu Bungalow (new asset), purchased jointly with Smt. Chhaya B. Parekh, who also invested 1.5 share being Rs. 2,70,00,000 in the said Juhu Bungalow (new asset). There is no mention of M/s Parekh Brothers on the agreement drawn [or purchase of the Juhu Bungalow. The AO observed that the assessee pas intentionally treated the ownership of the shop and garage at Tirupati Shopping Complex of his own replacing the ownership of Association of Persons (AOP) Le. M/s Parekh Brothers. It has been evidently done to claim the exemption under s. 54F of the Act which are available only to HUF and individual assessees. Since no exemption under s. 54F of the Act is available to AOP. the assessee and his associate sister-in-law have made the case in individual capacity to avail the benefit not legally available to them. The AO observed that though the agreement made for new bungalow at Juhu has been purchased within one year but investments out of the sale proceeds of shop and garage is shown in individual capacity of both associates Le. assessee and Smt. Chhaya Parekh. which actually belonged to M/s Parekh Brothers, an AOP. Since exemption under s. 54F of the Act cannot be considered in the hands of M/s Parekh Brothers. the claim is made in case of individuals. The agreements and several documents mentioned earlier evidently certify that the properties (shop and garage) ownership never stood in name of individual capacity of the assessee and his sisterin-law Mrs. Chhaya B. Parekh. Hence the exemption under s. 54F of the Act was denied to the assessee; The assessee submitted that he had fulfilled all the conditions for claiming exemption under s. 54F of the Act which was furnished before the AO as reproduced hereunder:
"Note about Judgment of conditions under s. 54F:
I. Mr. Dilip M. Parekh has satisfied the following conditions for being eligible under s. 54F :
The assessee must be an individual and I am an individual assessee.
2. The asset transferred in Shop No. 06 and Garage No. 06-A of Tirupati Apartment (hereinafter referred to as the premises) and not any residential house.
3. The asset (the said premises) transferred is a long-term asset as the same was purchased on 25th' Aug., 2001 and was sold on 1st Sept., 2006 (i.e., after a period of 36 months)
4. I have purchased a residential house Le. Juhu bungalow (50 per cent share) vide agreement dt. 22nd April, 2006 within one year prior to the date of sale on 1st Sept., 2006.
5. 1 have invested Rs. 346.54.320 in the new asset (Juhu Bungalow) which is more than the gross consideration ur Rs, :2.70.00.000 received on sale of the said premises.
6. I do not own any other residential house on the date of transfer of the said premises (i.e .. 1 st Sept., 2006)
7. I have neither purchased nor constructed any other residential house after the date of transfer Le., after 1st Sept., 2006.
8. The income from the said premises was chargeable to income-tax under the head income from house property and the tax Was paid accordingly.
I have satisfied all the above conditions under s. 54F. hence I am fully entitled to the deduction and accordingly my claim has to be accepted:'
The AO, however, rejected the contentions of the assessee and held that the assessee was not the owner of the shop and garage sold in Tirupati Apartment in individual capacity but the ownership right was with Mis Parekh Brothers. The claim of the assessee in his individual capacity is erroneous. Further. during the course of assessment proceedings for the asst. yr. 2007-08 in the case of Mrs. Chhaya B. Parekh. the other coowner of M/s Parekh Brothers. the spot inquiries had also been conducted and it was ascertained and found that the Juhu Bungalow (new asset) has been demolished after purchase but within 2 years of the purchase while the· requirement of the Act is that the new residential asset should not be transferred within 3 years and also the assessee has not constructed new bungalow till date. Thus, the AO rejected the claim of the assessee under s. 54F of the Act on the grounds that while the capital gains are assessable in the hands of the assessee and Mrs. Chhaya B Parekh as the AOP stood dissolved as the properties (shop and garage) at Tirupati Apartments was divided in the individual capacity after sale of the same and AOP stood dissolved but the investment of sale consideration of the said premises of AOP does not qualify for exemption in individual hands of the assessee and Mrs. Chhaya B Parekh and' also the new asset has been demolished and no constru~tion has been done within 3 years and hence exemption claimed under s. 54F 'of the Act was denied by the AO, vide reassessment orders dt. 23rd Dec., 2010 passed by the AO under s. 143(3) r /w s. 147 of the Act.
4. Aggrieved by the reassessment order dt. 23rd Dec., 2010 passed by the AO under s. 143(3) rlw s. 147 of the Act .. the assessee preferred an appeal before the CIT(A) which was allowed by the CIT(A) in the first round of litigation vide orders dt. 4th July, 20 II by ,holding that the Tribunal. Mumbai has in assessee's own case in earlier years has held that the said property was held on co-ownership basis and not as an AOP and the AO has assessed rental income in the hands of the assessee. there is no reason to change the settled position. The capital gains are held to be chargeable to tax in the hands of the assessee by the AO and hence the assessee will be entitled for deduction under s. 54F of the Act on acquisition of new asset in the individual name of the assessee. The CIT(A) also noted that in the case of other co-owner Mrs. Cphaya B Parekh, the CIT(A) has held that the income from capital gain shall be chargeable to tax in the hands of Mrs. Chhaya B Parekh and she will be entitled for deduction under s. 54F of the Act. With respect to demolition of the new asset Juhu Bungalow within 2 years. the CIT(A) held that since in the year under consideration there was no such demolition. hence the assessee will be entitled for deduction under s. 54F of the Act and the AO shall be entitled to take up appropriate action for verifying whether there is any violation under s. 54F(3) of the Act in the year of demolition of superstructure of the Juhu Bungalow (new asset).
The matter went to the Tribunal. Mumbai in the first round of litigation whereby the Revenue filed appeal against the orders of the CIT(A) dt. 4th July, 2011 and the assessee filed cross-objections in ITA No. 6596/Mum/2011 and CO No. 37 /Mum/20 12 respectively, vide orders dt. 30th Jan., 2013 had set aside the issue's to the file of the CIT(A) for de nouo consideration of the matter both with respect to Revenue appeal and the CO filed by the assessee. During the course of appellate vroceedings before the Tribunal. the assessee relied upon the order of the Tribunal, Mumbai in the case of Smt, Chhaya B. Parekh in ITA No. 4954/Mum/2010, dt. 16th May, 2012, The Tribunal vide its order in ITA No. 6596/Mum/2011 had observed that the judgment of Hon'ble apex Court in the case of Vania Silk Mills (P) Ltd. us. CIT (1991) 98 CTR (SC) 153 : (1991) 191 ITR 647 (SC) was overruled by the Three Member Bench of Hon:ble apex Court in the case of CIT us. Mrs. Grace Collis & Ors. (200 l) 166 CTR (SC) 201 : (2001) 248 ITR 323 (SC) , whereas in the case of the co-owner Mrs. Chhaya B. Parekh , the Tribunal had followed the decision in the case of Vania Silk Mills (P) Ltd. (supra) wherein it was held that the extinguishment of right on account of destruction or loss of asset does not amount to transfer.
The Tribunal subsequently considered the decisions in the case of Neelamalai Agro Industries Ltd. us. CIT (2002) 178 CTR (Mad) 167 : (2003) 259 ITR 651 (Mad) relied upon by the assessee and in the case of CIT us. V. Pradeep Kumar (2006) 203 CTR (Mad) 579 : (2006) lS3 Ta.xman 138 (Mad) relied upon by the Revenue and observed that the issue hinges around the meaning of expression "transfer" 'provided in s. 2(47} of the Act. The Tribunal observed that expression "extinguishment of any right therein" was the subject matter of consideration by the Hon'ble Supreme Court in the case of Mrs. Grace Collis (supra) wherein their Lordships were concerned with the expression "extinguishment" in the context of amalgamating company by the order of the Court. The Tribunal further after considering decision of Hon'ble apex Court in the case of Vania Silk Mills (P) Ltd. (supra) as well as the later decision of Hon'ble Madras High Court in the case of NeelamaLai Agro Industries Ltd. (supra) arrived at that "any extinguishment on account of act of the assessee would amount to transfer" and the only exception provided theretn was the extinguishment on account of act of God such as destructiol1 of the capital asset in a fire, complete loss in the case of sinking of a vessel of the assessee etc. The Tribunal observed that in the instant case, it was not in dispute that the demolition of the building took place at the behest of the assessee and it was not an act of God in which event. it had to be said that demolition of house would fall within the definition of "transfer". The Tribunal further observed that this aspect was not prcperly analysed by the Tribunal in the case of co-owner Mrs. Chhaya B. Parekh since the subsequent decision of Hon'ble Supreme Court in the case of Mrs. Grace Collis (supra) was not brought to the notice of the Co-ordinate Bench. As the CIT(A) had also no occasio'n to consider the same, the matter was set aside to the file of the CIT(A) with the direction to consider the matter in accordance with law in the light of the Tribunal's above observation.
In de nouo proceedings before the CIT(A). the assessee submitted that the issue is squarely covered by the judgment of Hon'ble jurisdictional Bombay High Court dt. 24th Jan., 2013 in IT Appeal No. 1583 of 2012 in the case of co-owner Smt. Chhaya B. Pareked wherein the Hon'b1e Bombay High Court has held that demolition would not amount to transfer and hence the assessee was eligible to claim exemption under s. 54F of the Act (copy of the judgment placed in paper book page Nos. 177 to 180). It was submitted by the assessee that the demolition of the structure for renovation would not constitute a transfer as all rights title and interest in the property conlinue to be with the assessee relying upon decision of Hon'ble Supreme Court in the case of Vania Silk Mills (P) Ltd. (supra). It 'was submitted that extinguishment of any right in the capital asset arising out of extinguishment of asset does not amount to 'extinguishment of rights' . It was submitted that the assessee holds right to occupy, right to reconstruct. right to lease, right to renovate etc, even after demolition of Juhu bungalow (new asset). The assessee also submitted that the decision of Hon'ble apex Court in the case of CIT us. Mrs. Grace Collis (supra) was explained in the case of Neelamalai Agro Industries Ltd. us. CIT (supra). Thus, it was submitted that demolition of an asset does not amount to transfer as there is no transferee nor there is any consideration. The assessee submitted that the CIT(A) in the first round of litigation held that there was violation of s. 54F(3) of the Act on demolition of the bungalow as assessee was not the owner of the residential house for a period of three years as the residential house was demolished. The assessee contended that the interpretation adopted by the CIT(A) in first round of litigation was not correct as the assessee has purchased the bungalow with right to leasehold property and even after demolition, the said right was not transferred. The assessee submitted that the purchase of bungalow cannot be said to be symbolic as agreement clearly states that consideration was paid for purchase of bungalow and further the same was demolished in December, 2008 I.e. only four months before the completion of three years from the date of purchase. It was contended that the finding of the Tribunal that if the demolition was voluntary it will amount to transfer is contrary to the law laid down by the Hon'ble Bombay High Court in the case of the co-owner Mrs. Chhaya B Parekh, wherein it has been held that demolition will not amount to transfer. It was further submitted that the decision of the Hon'ble Bombay High Court in the case of the co-owner Mrs. Chhaya B Parekh was not available at the time of hearing before the Tribunal and the decision of the Hon'ble Bombay High Court which is a jurisdictional High Court is binding on the tax authorities and hence it may be held that demolition will not amount to transfer. Without prejudice, it was submitted that there is no requirement to reconstruct the bungalow within 3 years as (a) there is no transfer in the first place (b) the entire net consideratiori from the sale of original asset is less than the purchase cost of right in land and bungalow thereon and (c) even otherwise there is no requirement to complete the construction within three years. The assessee placed reliance on the decision of Hon'ble Madras High Court in the case of CIT us. Sardarmal Kothari & Anr. (2008) 217 CTR (Mad) 414 : (2008) 9 DTR (Mad) 257 : (2008) 302 ITR 286 (Mad). The assessee submitted that no independent due diligence was done and the assessee and his family memberf:i visited the site and were satisfied that bungalow was capable of being used and occupied. The assessee submitted that no notice/document suggesting interior repairs, demolition \vas received at the time of/subsequent to purchase. The assessee submitted the copy of the survey report conducted by the local authority before grant of permission for redevelopment. The survey report clearly indicated that the bungalow was demolished in December, 2008 and before that the same represented a house which establishes that the bungalow was demolished 2 years and 8 months after purchase by the assessee. The assessee referred to the decision of Hon'ble Madras High Court in the case of Neelamalai Agro Industries Ltd. (supra) wherein it was held that the decision in the case of Mrs. Grace Collis (supra) is not applicable to demolition of asset. hence there was no need fo;- the Hon'ble Bombay High Court in the case of co-owner Smt. Chhya Parekh to consiuer the decision of Mrs. Grace Collis (supra). The assessee further submittec1 that the Tribunal has prima jacie given a finding that voluntary demolition would amount to transfer. The assessee contended that the jurisdictional High Court decision in the case of Mrs. Chhaya B. Par2kll is the only decision on the point of voluntary demolition which being decision of jurisdictional High Court is binding on the tax authorities.
The CIT(A) after considering the submissions of the assessee rejected the claim of the assessee for deduction under s. 54F of the Act and held that the said Juhu bungalow (new asset) after being acquired by the assessee was never occupied by the assessee and it was a 'symbolic purchase of residential property' and no deduction under s. 54F of the Act can be allowed as it is not a 'real purchase of residential house property'. Further, it was held that demolition of the bungalow took place at the behest of the assessee and it is not an act of God and hence, demolition of the bungalow within three years amount to transfer in view of decision of Hon'ble Supreme Court in the case of Grace Collis (supra) and accordingly the assessee is not entitled for deduction under s. 54F of the Act. The decision in the case of co-owner Smt. Chhaya B. Parekh by the Hon'ble High Court has been done without consideration ,of the later decision of the Hon'ble apex Court in the case of Grace Collis & Or5. (supra) wherein the decision in the case of Vania Silk Mills (P) Ltd. (supra) has been overruled by the three Member Bench of Hon'ble apex Court in Grace Collis (supra). Accordingly in the humble view of the CIT(A) the decision of Hon'ble Bombay High Court in the case of co-owner' Smt. Chhaya B. Parekh would not have binding precedence in deciding the case on hand. The CIT(A) held that since there was only 'symbolic purchase of property' and not 'real purchase of property', deduction under s. 54F of the Act shall not be allowable, the question of transfer on account of demolirion would not arise and is academic especially in the year under consideration. Thus, provisions of s. 54F(3) of the Act will be applicable only in the asst. yr. 2009-10 as the bungalow was deruolished in December, 2008. The CIT(A) partly allowed the appeal of the assessee as set out above vide orders dt. 30th Aug., 2013.
5. Aggrieved by the orders dt. 30th Aug .. 2013 of the CIT-(A), the assessee is in appeal before the Tribunal.
6. The learned counsel for the assessee submitted that the assesse.e has been denied the deduction under s. 54F of the Act. The assessee has duly purchased and made investment in the residential bungalow at Juhu (new asset) along with co-owner Smt: Chhaya B. Parekh. The 8aid bungalow was demolished for the purposes. of redevelopment. The Hon'bIe Bombay High Court in the case of co-owner Smt. ClThaya B. Pw-ekh in IT Appeal No. 1583 of 2012 vide judgment dt. 24th Jan., 2013 had held that demolition of residential bungalow will not tantamount to transfer and hence, the same will not be hit by provisions of s. 54F(3) of the Act. Further, in the case of Mrs. Chhaya B Parekh who was co-owner with the assessee of the properties (shop and garage) at Tirpuati Shopping complex on the sale of which capital gain's had arisen to both the assessee and Mrs. Chhaya B Parekh, the Revenue has not challenged the entitlement of Mrs. Chhaya B Parekh to deduction under s. 54F of the Act on the purchase of Juhu bungalow property (new asset), then on the principles of parity, the assessee should also be allowed to be entitled for deduction under s. 54F of the Act as the assessee had also made investment in the same residential bungalow at Juhu along with Mrs. Chhaya B Parekh who also invested in the said Juhu Bungalow and her claim of deduction under s. 54F was allowed by the Revenue and it was not challenged before the Hon'ble Bombay High Court on the ground that investment in Juhu Bungalow tantamount to 'symbolic purchase of residential property' and not 'real purchase of the residential property'.
The decision of the Hon'ble Bombay High Coun was availab]e before the CIT(A) at the time of adjudication of the appeal in the case of the assessee. The CIT(A) refused to consider and follow the said decision of Hon'ble Bombay High Court in the case of Mrs. Chhaya B. Parekh on identical facts with respect to same transaction of sale of property (shop and garage) at Tirupati Shopping Complex, wherein the assessee was coowner with said Mrs. Chhaya B. Parekh as well with respect to purchase of Juhu bungalow (new asset) which was also jointly purchased by the assessee along with the said Mrs. Chhaya B. Parekh and thereafter the said bungalow was demolished after 2 years and 8 months after its acquisition by the assessee and said Mrs. Chhaya B. Pareki1 who is sister-in-law of the assessee.
7. The learned Departmental Representative submitted that the destruction of asset was involuntary due to fire in the case of Vania Silk Mills (P) Ltd. (supra) while in the case of the assessee it was a voluntary act of demolition of the bungalow. There was a transfer of asset hence it is an extinguishment of right of the assessee in the bungalow. The CIT(A) has given a finding that it was due to intervention of the assessee that the Juhu bungalow (new asset) was demolished prior to completion of three years from the date of acquisition which has violated provisions of s. 54F'(3) of the Ad. The learned Departmental ReIJrest'ntative also tried to distinguish the case of the assessee with that of Mrs. Chherja B. Parekh which was adjudicated by Hon'ble Bombay High Court.
8. The learned Authorised Representative submitted in rejoinder that judgment of Hon'ble Bombay High Court in, the case of Mrs. Chhaya B. Parekh has not been followed by CIT(A) despite being brought to the notice of the CIT(A). The facts in the case of Mrs. Chhaya B. Parekh and of the assessee are identical and hence the judgment of Hon'ble Bombay High Court in the case of Mrs. Chhaya B. Parekh need to be followed in the case of the assessee and relief need to be given to the assessee on the same lines.
9. We have considered the rival contentions and also perused the material including the case laws cited by both the sides. We have observed that the assessee is co-owner of the premises being shop ·No. 6 and garage No. 6A standing in the name of M/s Parekh Brothers in the building knows as Tirupati Shopping Complex, Bhulabhai Deseli Road, Mumbai-400026 which was acquired by the assessee along with hi? sister-in-law. Mrs. Chhaya B. Parekh am] was held to be owned on ('0ownership basis by the Tribunal. The same has been sold and the assessee has acquired the residential bungalow (new asset) at Juhll along with his sister-in-law Mrs. Chhaya B. Parekh. The CIT(A) denied the benefit to the assessee due to the fact that the bungalow which was purchased has been demolished within a period of three years hence the condition laid down in s. 54F'(3) of the Act have been violated. However, the Hon’ble Bombay High Court in the case of Mrs. Chhaya B. Parekh has refused to admit the question of law referred by the Revenue and dismissed the appeal of the Revenue by approving the decision of the Tribunal in the case of Mrs. Chhaya B. Parekh wherein it was held by Hon'ble Bombay High Court that demolition of bungalow, will not tantamcunt to transfer. While dismissing the said appeal of the Revenue, Hon'ble Bombay High Court has clearly noted in the judgment that Revenue is not disputing the entitlement of Mrs. Chhaya B. Parekh under s. 54F of the Act on the purchase of bungalow property (new asset). The facts in the case of the assessee are identical to the facts in the case of Mrs. Chhaya B. Parekh as the transactions with respect to the sale and purchase of the impugned properties are same where both, the assessee and Mrs. Chhaya B. Parekh are co-owners. The judgment of Hon'ble Bombay High Court in the case of Mrs. Chhaya B. Parekh (2013) 51 (l) ITCL 292 whereby the Hon'ble Bombay High Court dismissed the appeal of the Revenue and approving the orders of the Tribunal dismissing the appeal of the Revenue in the case of Mrs. Chhaya B. Parekh -is reproduced hereunder:
"In this appeal by the Revenue. the following question of law has been proposed for our consideration:
'Whether on the facts and circumstances of the case and in law. the Tribunal was correct in confirming the order of CIT(A) allowing the assessee's claim of exemption under s. 54F' of the Act even though the Juhu Bungalow which the assessee had purchased as co-owner had been demolished much before completing 3 years of purchase and no new bungalow was constructed thereby violating the'c0ndition"under s. 54F(3) of the Act that the new property should not be transferred within a period of three years and also ignoring that the facts in the Supreme Court case of Vania Silk Mills (P) Lid. us. CIT (I991) 98 CTR (SC) 153 : (J 991) 191 ITR 647 (SC) were clearly distinguishable from the facts orthis case ?'
2. The basic dispute between the parties is whether the respondent assessee is entitled to benefit of s. 54F of the IT Act, 1961 when the asset is demolished within a period of three years from its purchase.
3. The Revenue does not dispute the entitlement of\the respondent assessee under s. 54F' of the Act on the purchase of the bungalow property. However, the grievance of the Revenue is that as the respondent had demolished the bungalow within 3 years of its purchase, the same would amount to transfer and would be hit by s. 54F'(3) of the Act. Consequently, in the previous year relevant to the assessment year under consideration the capital gain tax would be payable on the amounts not charged due to the benefit availed of s. 54F' of the Act as held by the AO in his order dt 30th Oct., 2009.
4. The CIT(A) by his order dt. 18th March, 20lU followed the appeal of the respondent-assessee. The CIT(A) held that the demolition of the structure would not constitute a transfer of the assets in terms of s. 54(3) of the Act. Being aggrieved the Revenue carried the matter in appeal to the Tribunal. By order dt. 16th May, 2012, the Tribunal dismissed the 'appeal of the Revenue by placing reliance upon he decision of the apex Court in the matter of Vania Silk Mills (P) Ltd. us. CIT (1991) 98 CTR (SC) 153 : (1991) 191 ITR 647 (SC). In the above case, the apex Court has held that when an asset is destroyed, there is no question of transfer taking place under the Act. The apex Court held that in terms of the Act that the words extinguishment of any right in s. 2(47) of the Act, does not include an extinguishment of right on account of destruction. It has to be will extinguishment of right on account of transfer. Thus, a destruction of asset when not on account of any transfer would not be hit by s. 54F(3) of the Act.
5. Counsel for the Revenue seeks to distinguish the decision of the apex Court in Vania Silk Mills (P) Ltd. (supra) that the destruction in that case took place because at fire and hence it was involuntary This distinction is of no consequence. In our view of the decision of the apex Court in 'Vania Silk Mills (supra) would squarely apply to the facts of the present case.
6. In view of the above, we see no reason to entertain the proposed question of law. Accordingly, the appeal is dismissed with no order as to costs."
The facts in the case of the assessee are identical to the facts in the case of Mrs. Chhaya B. Parekh and hence the assessee cannot be denied the entitlement to deduction under s. 54F of the Act on the purchcase of same Juhu bungalow property (new asset) on pretext that the same was 'symbolic purchase of residential property' and not the 'real purchase of residential property' on the allegation that the same was never occupied after its acquisition by the assessee and the said co-owner Mrs., Chhaya B. Parekh till demolition of the said bungalow after 2 years 8 months of its acquisition. The CIT(A) is bound to follow the decision of the Hon'ble Bombay High Court in the case of the assessee's sister-in-law Mrs. Chhaya B. Parekh as the facts are identical in the case of the assessee to that of the assessee's sister-in-law Mrs. Chhaya B. Parekh case, whereby Hon'ble Bombay High Court has refusec1 to admit the question of law referred by the Revenue and instead approved the orders of the Tribunal dismissing the Revenue's appeal in the case of Mrs. Chhaya B Parekh. When the Mumbai-Tribunal set aside the issues to the file of the CIT(A) in assessee's own case in first round of litigation vide its orders dt. 30th Jan., 2013 in ITA No. 6596jMumj2011 and C.O. No. 37 jMumj2012, it did not had the benefit of judgment of Hon'ble Bombay High Court in the case of Mrs. Chhaya B. Parekh which judgment in IT appeal No. 158'3 of 2012 was pronounced on 24th Jan., 2013, while hearing by the Mumbai-
Tribunal In lhc aforcslaled appeal and CO slood concluded on 11th Jan., 2013 i.e. prior to the pronouncement of judgment of the Hon'bie Bombay High Court in the case of Mrs. Chhaya B. Parekh (supra). The CIT(A) while rendering its order on 30th Aug., 2013 clearly had the. benefit of afore stated judgment of Hon'ble Bombay High Court pronounced on 24th Jan., 2013 in the case of Mrs. Chhaya B. Parekh and the CIT(A) fell into an error by making an attempt to distinguish the judgment of Hon'ble Bombay High Court by holding that judgment of Hon'ble apex Court in the case of Grace Collis (supra) was not brought to the notice of Han'ble Bombay High Court while judgment of Vania Silk Mills Ltd. (supraj was. brought to the notice of Hon'ble Bombay High Court, which judgment of Vania Silk Mills stood overruled by Hon'ble Supreme Court by three Member Bench of Hon'ble Supreme Court in the case of Grace Collis (supra). The judgment of Hon'ble Supreme Court in Grace Collis has been considered and distinguished by Han'ble Madras High Court in the case of Neelamalai Agro Industries Ltd. (supra) whereby it was held by the Hon'ble Madras High Court that the law laid down in Vania Silk Mills (P) Ltd."s case (supra), that extinguishment of rights in a capital asset as a necessary consequence of destruction of the asset does not amount to transfer, has not been overruled by the apex Court in the case of Mrs. Grace Collis (supra), as under:
"6. That the building was completely destroyed in the fire is undisputed. The capital asset thus was not in existence when the assessee received the compensation. The asset was not available for being owned, used or enjoyed by anyone.
7. 'Capital asset' is defined in s. 2(14) of the Act. It is defined as meaning property of any kind held by an assessee whether or not connecter! \vith his business or profession. The definition of 'transfer' in s. 2(47) of the Act as it stood at the commencement of the year 1976-77 read thus:
"transfer", in relation to a capital asset, includes,-
(i) the sale, exchange or relinquishment of the asset; or
(ii) the extinguishment of any rights therein; or
(iii) the compulsory acquisition thereof under any law.
The modes of transfer mentioned in this definition are sale, exchange, compulsory acquisition, relinquishment of the asset, and extinguishment of any rights in the capital asset. The definition is an inclusive definition, and modes of transfer other than those referred to in the definition are also capable of being included in this definition. All the modes mentioned in the definition appear to h8.ve one thing in common viz., that the capital asset would continue to exist after the transfer by anyone of those modes.
8. 'Capital gains' is dealt with in Chapter IV of the Act in ss. 45 to 55A. Sec. 45 of the Act refers to profits or gains arising from the transfer of a capital asset. The section which brings the capital gains to charge of tax is s. 45. What is to be taxed is the profil or the gain arising from the 'transfer of a capital asset'. This also implies the continued availability of the asset even after the transfer. The extent of the gain is to be ascertained with reference to the cost of acquisition of the asset. The continued availability of the asset even after the transfer, though not stated in so many words, is clearly implicit in the definition of 'transfer', as also in the charging section.
9. When a thing is destroyed by fire or when a ship sinks into the sea, the capital asset is no longer available for being owned, used or enjoyed by anyone including the assessee. With the destruction of the asset. the rights of the assessee in that asset also would be destroyed. The destruction of such rights in an asset consequent upon the assets ceasing to exist is a situation which is not contemplated either in the definition of 'transfer', or in the charging section.
10. The Supreme Court in the case of Vania Silk Mills (P) Ltd. us. CIT (1991) 98 CTR (SC) 153 : (1991) 191 ITR 647 (SC) dealt with a case where the assessee's machineries had been destroyed in a fire and for which It had received the amount payable by the insurer who had insured those machineries against the risk of fire. The Court in that case held thus:
'When as asset is destroyed there is no question of transferring it to others. The destruction or loss of the asset. no doubt. brings a1Jout the destruction of the right of the owner or possessor of the asset. in it. But it is not on account of transfer. It is on account of the disappearance of the asset. The extinguishment of right in the asset on account of extinguishment of the asset itself is not a transfer of the right but. its destruction. By no stretch of imagination can the destruction of the right on account of the destruction of the asset be equated with the extinguishment of right on account of its transfer.'
Thus, the Court held that the destruction of the asset which, as a consequence brings about the extinguishment of rights in that asset. cannot be equated with the extinguishment of rights of the assesee on the transfer of the asset.
11. This Court in the case of Srnt. Agnes Corera us. CIT (2001) 249 ITR 317 (Mad) dealt with a case where the boat owned by the assessee and which had been insured against loss, sank in the sea. The Court held that the amount received by the assessee from the insurer 'who had insured the boat against such loss was not taxable by treating part of the amount received from the insurer as capital gain. While doing so, the Court rehed upon the observation of the apex Court in the case of Vania Silk Mills (P) Ltd. (supra) that. 'whatever the mode by which the transfer was brought about. the existence of the asset during the process of transfer was a precondition. Unless the asset existed in fact, there could 'not be a transfer of it.'
12. Learned counsel for the Revenue, however, contended that the law declared by the apex Court in the case of Vania Silk Mills (P) Ltd. (supra) is no longer good law, and that that decision has -both expressly and implidely been overruled by a three-Judge Bench in the case of CIT- us. Mrs. Grace Collis (2001) (2001) 166 CTR (SC) 201 : 248 ITR 303 (SC). In the case of Mrs. Grace Collis (supra). the Court was concerned with the question as to whether there is a transfer of the shares when the. amalgamation of the company whose shares are held by the assessee is ordered by the Court with another company. The Court· held that the rights of the assessee in the capital asset. viz. the bhares in the amalgamating company stood extinguished upon the amalgamation of the amalgamating company with the amalgamated company and that,
There was, therefore, a' transfer of the shares in the amalgamating company within the meaning of s. 2(47). It was, therefore, a transaction to which s. 47(vii) applied and, consequently, the cost to the assessees of the acquisition of the shares of the amalgamated company had to be determined in accordance with the provisions of s. 49(2). that is to say, the cost was deemed to be the cost of acquisition by the assessees on their shares in the amalgamating company.'
13. On the amalgamation of one company with another, the assets and liabilities of the amalgamating company are taken over by the amalgamated company. Those assets and liabilities do not cease to ~xist when amalgamation takes place. They continue to exist. The ownership of those assets stand transferred to the amalgamated company.
14. The rights of the shareholder in the shares held by him or her in the amalgamating company which had owned the assets, are replaced by the rights given to such shareholders in the shares of the amalgamated company which takes over the assets and liabilities of the a'malgamating company. Shares in the amalgamated company arc allotted to the shareholder of the amalgamating company, as tile consideration for the transfer of the assets of the amalgamating company, the ratio being determined With reference to the value of the respective shares which is dependent upon the value of the assets and prospects of the company. Despite the extinguishment of the rights in the shares of the amalgamating company on its dissolution, the assets which gave value to those shares prior to amalgamation continue to exist, now under thownership of the amalgamated company, and may provide added value to the shares of that company.
145 The extinguishment of rights in the capital asset referred to in the definition of 'transfer' in s. 2(47) of the Act, therefore, would clearly apply' to a case where the rights in the shares in the amalgamating company are extinguished on amalgamation to be replaced by shares in the amalgamated company, which after amalgamation is the Owner of the assets transferred to it as a consequence of the amalgamation, and which will thereafter have the ownership, use and benefit of those assets.
16. The case of amalgamation of companies and the extinguishment of rights of the shareholder in the amalgamating company is no way comparable to the destruction of the assets which as a consequence brings about the extinguishment of the rights of the assessee-owner in such assets.
17. In the case of Mrs. Grace Collis (supra), at page 330 of the Reports, the Court noticed the submission made by counsel for the Revenue thus:
'Learned counsel for the Revenue submitted that having held that the payment in settlement of the insurance claim was not in consideration of the transfer to the insurer of the damaged machinery and that. therefore, there was no transfer within the meaning of s. 45, it was unnecessary for this Court in Vania Silk Mills (P) Ltd.'s case (supra) to go on to consider the definition in s. 2(47) and the meaning to be attached to the expression 'extinguishment of any rights therein'. In his submission, the aecision in Vania Silk Mills (P) Ltd.·s case (supra) was to this extent orbiter dicta'.
It is only to the extent of that orbiter dicta, that the decision rendered in the case of Mrs. Grace Collis (supra) can be said to be at variance with the decision rendered in the ,case of Vania Silk Mills (P) Ltd. (8upra). In the case of Mrs. Grace Collis (supra). the Court considered the terms 'extinguishment of any rights therein' and the deftnition of 'transfer' in s. 2(47) of the Act. The Court did not approve limiting the effect of the words 'extinguishment of any rights therein' in the definition of 'transfer' in s. 2(47) of the IT Act, to extinguishment on account of transfer. The Court held,
'Aswe read it. therefore, the expression does include the extinguishment of rights in a capital asset independent of and otherwise than on account of transfer.'
18. In the case of Mrs. Grace Collis (supra). the Court did not have occasion to go into the question as to whether the destruction of a capital asset which as a consequence brings about the extinguishment of the rights of the assessee-owner in such asset. would amount to transfer. The Court did not hold that Vania Silk Mills (P) Ltd. 's case (supra) was wrongly decided, or that the definition of 'transfer' in s. 2(47). particularly, the use of the words 'extinguishment of any rights therein' would cover cases of destruction of the capital moset. Cases such as the destruction of the capital asset in a fire, or its complete loss as in the case of sinking of a vessel in the sea, cannot.. be regarded as having been brought within the fold of definition of 'transfer' in s. 2(47), by reason of what has been said and laid down in the case of Mrs. Grace Collis (supra).
19. It is well-settled that the words and expression used in a judgment are not to be read as statutory provisions. Situations which did not arise for consideration and were, in fact, not considered are not to be regarded as having been considered. It is significant that the argument advanced for the Revenue before the Court in the case of Mrs. Grace Collis (supra) was not that the case of Vania Silk Mills (P) Ltd. (supra) was wrongly decided. On the other hand, the argument before the Court was that though that decision on facts was correct. certain observations which were not necessary for the case and which the Revenue considered to be erroneous had been made, and were required to be overruled.
20. The Jaw laid down in Vania Silk Mills (P) Ltd. 's case (supra), that extinguishment of rights in a capital asset as a necessary consequence of destruction of the asset does not amount to transfer, has not been overruled by the apex Court in the case of Mrs. Grace Collis (stipra).
21. Our answer to .the question referred is, therefore, in the negative, in favour of the assessee, and against the Revenue."
Judicial discipline and rule of Jaw demand and requires that lower judicial authorities should and must follow the decisions/judgment of higher judicial authorities on identical facts. Thus. the CIT(A) was bound by law to follow the jurisdictional High Court judgment in the case of Mrs. Chhaya B. Parekh (supra) . In our considered view that this instant case is squarely covered by the decision of Hon'ble Bombay High Court in the case of Mrs. Chhaya B. Parekh (supra) and hence the assessee is entitled for his claim of deduction under s. 54F of the Act as claimed in the return of income filed with the Revenue. We order accordingly.
10. In the result, the appeal filed by the assessee in: ITA No. 6169/Mum/2013 for the asst. yr. 2007-08 is allowed.