ANITHA BOBBA,HYDERABAD vs. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-6(1), HYDERABAD

(i) CIT vs. Gurnam Singh [2008] 170 Taxman 160 (Punjab & Haryana). (ii) CIT vs. V. Natarajan [2006] 154 Taxman 399 (Mad.) (iii) CIT vs. Kamal Wahal [2013] 30 Taxmann.com 34 (Delhi) and (iv) CIT vs. Ravinder Kumar Arora [2011] 15 Taxmann.com 307 (Delhi).

(1) CIT vs. V. Natarajan [2006] 154 Taxman 399 (Mad.) / [2006] 287 ITR 271 (Mad.):

For the assessment year 1990-91 the Assessing Officer disallowed exemption U/s. 54 of the Income Tax Act, 1961. The Tribunal held that the assessee was entitled to the exemption of capital gains and deleted the addition. On appeal; Held, (i) that the assessee had purchased a house in the name of his wife after selling the property at Bangalore. But the same was assessed in the hands of the assessee. Hence, as correctly held by the Commissioner (Appeals) as well as by the Tribunal the assessee was entitled to exemption U/s. 54.

(2) CIT vs. Gurnam Singh [2008] 170 Taxman 160 (Punjab & Haryana) [2010] 327 ITR 278.

The Assessing Officer initiated proceedings against the assessee under section 158BD of the Income Tax Act, 1961, on the basis of an agreement seized during a search conducted in the business premises of SP which revealed that the assessee had sold agricultural land to one S and obtained earnest money. In the assessment of income the assessee claimed deduction under section 54B of the Act in respect of the agricultural land purchased by him along with his son out of the sale proceeds of the agricultural land. The Assessing Officer disallowed the deduction on the ground that the land was registered in the name of the assessee’s son. However, the Commissioner (Appeals) allowed the deduction and the Tribunal confirmed the order of the Commissioner (Appeals) on the premise that the sale proceeds of the agricultural land were used to purchase another piece of agricultural land. On appeal, Held, dismissing the appeal, that the Tribunal had recorded a pure finding of fact that the land in question was purchased out of the sale proceeds of the agricultural land which was used only for agricultural purposes and merely because the assessee’s son was shown in the sale deed as co- owner, it did not make any difference. It was not the case of the Revenue that the land in question was exclusively used by his son. Therefore, the assessee was entitled to deduction U/s. 54B. CIT vs. Kamal Wahal [2013] 30 Taxmann.com 34 (Delhi) Facts • The assessee sold his joint property which gave rise to proportionate capital gains. He claimed deduction under section 54F by investing sale proceeds in acquisition of vacant plot and purchase of a residential house in the name of his wife. • Taking a view that under section 54F, investment in residential house should be in the assessee's name, the Assessing Officer denied deduction in respect of investment in residential house purchased by assessee in his wife's name. • The Commissioner (Appeals) allowed the assessee's claim. • The Tribunal confirmed the order of the Commissioner (Appeals), holding that section 54F, being a beneficial provision enacted for encouraging investment in residential houses, should be liberally interpreted. Issue involved • Whether for claiming deduction of capital gains under section 54F, the new residential house needs to be purchased by the assessee in his own name? HELD

• In CIT v. Ravinder Kumar Arora [2012] 342 ITR 38/[2011] 203 Taxman 289/15 taxmann.com 307 (Delhi), it was held that where the entire purchase consideration was paid only by the assessee and not a single penny was contributed by any other person, preferring a purposive construction against a literal construction, more so when even applying the literal construction, there is nothing in section 54F to show that the house should be purchased in the name of the assessee only. Section 54F in terms does not require that the new residential property shall be purchased in the name of the assessee; it merely says that the assessee should have purchased/constructed 'a residential house'.[Para 7] • Therefore, the predominant judicial view for the purposes of section 54F is that the new residential house need not be purchased by the assessee in his own name nor is it necessary that it should be purchased exclusively in his name. It is moreover to be noted that the assessee in the present case has not purchased the new house in the name of a stranger or somebody who is unconnected with him. He has purchased it only in the name of his wife. There is also no dispute that the entire investment has come out of the sale proceeds and that there was no contribution from the assessee's wife. [Para 9] • The substantial question of law is answered in favour of the assessee and against the revenue. [Para 10]

(3) CIT vs. Ravinder Kumar Arora [2011] 15 Taxmann.com 307 (Delhi)

FACTS

During the relevant assessment year, the assessee had shown certain long-term capital gain on sale of a plot of land and claimed exemption under section 54F on account of purchase of new house property. The Assessing Officer noted that though all the payments were made by the assessee, the residential house was purchased jointly in the names of the assessee and his wife. The Assessing Officer, then referred to section 54F only to the extent of his right in the new residential house purchased jointly with his wife and allowed only 50 per cent of the exemption claimed under section 54F as against total claim made by the assessee. The Commissioner (Appeals) dismissed the assessee's appeal. On second appeal, the Tribunal held that the assessee was entitled to benefit of section 54F with reference to the total investment. On the revenue's appeal to the High Court: HELD Plain reading of section 54F indicates that in order to get benefit of this section, the assessee should, inter alia, 'purchase' a house. As per the revenue, this house has to be purchased in the name of the assessee only and benefit is not given if it is purchased by the assessee jointly with his wife.[Para 7] At the outset, important factual findings recorded by the Tribunal in this case are that it was the assessee who independently invested in the purchase of new residential house though in his own name but along with the name of his wife also and that it was the assessee who paid stamp duty and corporation tax at the time of the registration of the sale deed of the house so purchased and has also paid commission and legal expenses in connection with the purchase of the house. The Tribunal further records that whole of the purchase consideration has been paid by the assessee and not even a single penny has been contributed by the wife in the purchase of the house. The Tribunal also noted the argument that the property was purchased by the assessee in the joint name with his wife for 'shagun' purpose and because of the fact that the assessee was physically handicapped. The Tribunal further concludes that as a matter of fact, the assessee was the real owner of the residential house in question. [Para 8] On the aforesaid facts, the conditions stipulated in section 54F stand fulfilled. It would be treated as the property purchased by the assessee in his name and merely because he has included the name of his wife and the property was purchased in the joint names would not make any difference. Such a conduct has to be, rather, encouraged which gives empowerment to women. There are various schemes floated by the Government itself permitting joint ownership with wife. If the view of the Assessing Officer (AO) or the contention of the revenue is accepted, it would be a derogatory step.[Para 9] Even when one look into the matter from another angle, facts remain that the assessee is the actual and constructive owner of the house. In CIT v. Podar Cement (P) Ltd. [1997] 226 ITR 625/92 Taxman 541 (SC), the Supreme Court has also accepted the theory of constructive ownership. Moreover, section 54F mandates that the house should be purchased by the assessee and it does not stipulate that the house should be purchased in the name of the assessee only. Here is a case where the house was purchased by the assessee and that too in his name and wife's name was also included additionally. Such inclusion of the name of the wife for the above-stated peculiar factual reason should not stand in the way of the deduction legitimately accruing to the assessee. Objective of section 54F and the like provision such as section 54 is to provide impetus to the house construction and so long as the purpose of house construction is achieved, such hyper-technicality should not impede the way of deduction which the Legislature has allowed. Purposive construction is to be preferred as against the literal construction, more so when even literal construction also does not say that the house should be purchased in the name of the assessee only. Section 54F is the beneficial provision which should be interpreted liberally in favour of the exemption/deduction to the tax-payer and deduction should not be denied on hyper-technical ground. The word 'assessee' must be given wide and liberal interpretation so as to include his legal heirs also. There is no warrant for giving too strict an interpretation to the word 'assessee' as that would frustrate the object of granting exemption. [Para 10] In view of aforesaid discussion the exemption under section 54F is extendable to the assessee for the total consideration paid by him, for the purchase of the new asset (the residential property) in the joint name [Para 12]”

Pronounced in the open Court on the fourth of February, 2021.