SRI ANAND KUMAR DHANUKA ,RANCHI vs. ITO WARD-1(1), RANCHI

आदेश / O R D E R Per Bench (Oral):

This assessee’s appeal for assessment year 2011-12 is directed against the CIT(A)-Jharkhand’s order dated 06/12/2018 in appeal no. CIT(A), Ranchi/10433/2016-17 involving proceedings u/s 263 r.w.s. 143(3) of the Income Tax Act, 1961 ( in short the ‘Act’). Heard both the parties. Case file perused.

I.T.A No.163/Ran/2018 Anand Kumar Dhanuka A.Y. 2011-12 has upheld the Assessing Officer’s action disallowing the impugned deduction claim for the sole reason that the assessee had not reinvested the impugned long term capital gains in his own name but in the name of his wife. The lower appellate discussion to this effect reads as under: [5.9] Section 54 refers to the assessee being an individual or a Hindu undivided family. Importantly, both are different legal entities. As per the scheme of these sections of the Income-tax Act, the assessee, who is the owner of the original asset, need to, within a period of one year before or two years after the date on which the transfer took place, purchased or within a period of three years after that date construct a residential house (new asset). The capital gain shall be dealt with in accordance with the other parts of the section. [5.10] The concepts of the "assessee", "own", "owned", "owner", "ownership", "co-owner", "owner of house property" or "ownership of property" as elaborated in sections 22 to 27 and 32 of the Income-tax Act, are very much interlinked and connected for granting the benefit under the Income-tax Act. The word and phrase "owner" in the context of section 22 of the Income-tax Act has been elaborated in CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625(SC) and Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775(SC). An assessee must have valid title legally conveyed to him after complying with the requirement of law or at least entitled to receive income from the property in his own right and have control and domain over the said property for all the legal purposes, which basically excluding a third person of any right over the said property. Therefore, all these concepts are inter-linked. The scheme and purpose of section 54F, which was inserted by the Finance Act, 1982 with effect from 01.04.1983, i.e., from the Assessment Year- 1983-84 is with a view to encourage house construction. The object, therefore, is to give all benefits under this section to the assessee on conditions as elaborated in the section. No such benefit is available to a person other than the assessee. It also means the assessee must comply with the conditions strictly as per this provision in all respects. As noted, this exemption will not be available in case where the assessee owns, on the date of transfer of the original asset, any residential house or purchased within the period of one year, after such date or constructs within a period of three years after such date any other residential house. Where an assessee purchases or constructs any other residential house within the period of the aforesaid exemption under the proposed provision, if allowed, shall stand forfeited. The amount of capital gain arising from the transfer of the original asset which was not charged to taxes shall be allowed to be income chargeable under the head "Capital gain" relating to long-term capital assets of the previous year in which such residential house is so purchased or constructed. Furthermore, if an assessee transfers newly acquired residential house within three years of its purchase or construction, then the amount of capital gain arising from the transfer of original asset, which was not charged to tax, shall be deemed to be the income of the year in which the new asset is transferred and the said income shall be charged to tax under the head of capital Page | Page | 2 Page | Page |

I.T.A No.163/Ran/2018 Anand Kumar Dhanuka A.Y. 2011-12 gains relating to the long-term capital assets. [(1982) 138 ITR Section 10] (Departmental Circular No.346, dated 30.06.1982) [5.11] It is, therefore, clear that the purpose is to give this benefit on the ownership of one residential house only by the assessee and to encourage to have one residential house of the assessee. Therefore, right from the sale of original asset till the purchase and/or construction of the residential house, i.e., the "new asset", the ownership and domain over the new asset is a must. The new property must be owned by the assessee and/or having legal title over the same. The others may use and occupy the same along with the assessee but the ownership should be of the assessee of the residential house so purchased from the net consideration/sale proceeds of the sale of original asset by the assessee.

[5.12] Having observed above and in view of the undisputed position on the record that the appellant, admittedly, though sold the property part owned by him yet did not purchase any property in his name benefit u/s.54F was not allowable. In the case of Prakash v ITO [2008] 312 ITR 40 (Bom) one of the questions w« exactly the same being : - “ Whether for qualifying exemption under section 54 of the Income-tax ACT is it necessary and obligatory to have investment made in residential house in the name of assessee only or investment in residential house is enough to qualify and claim the said exemption? ....YES” [5.13] After examining the law in this regard the Hon’ble Bombay HC held that: - “15. The deceased assessee admittedly sold and purchased the property from the realisation but in the name of the adopted son, who in the scheme of the Act and section 54F is not an assessee, who after selling the old asset purchased and constructed the new property. He was not the owner of the new purchased property. In Ponds India Ltd. (Merged with H.L. Ltd.) v. Commissioner of Trade Tax, JT 2008 (9) SC 94, the Apex Court's following declaration supports the view we have taken based upon the principle of interpretation of revenue/taxation status : - "39. When a case of obvious intent on the part of the Legislature is made out, a meaning which subserves the legislative intent must be given effect to. It is however also well known that when a word is defined by the Legislature itself, the same meaning may be attributed even in the changed situation." [5.14] In the case of Ganta Vijaya Laxmi v ITO Vijaywada [2013] 37 taxmann.com 263 (Visakhapatnam ITAT) the facts were that the assessee sold agricultural land for a consideration of Rs 1.41 crores and had invested money in purchase of an Agricultural land and a residential flat in the name of her two married daughters who were also majors. The assessee claimed exemption under section 54B in respect of agricultural land and also claimed exemption under section 54F in respect of the flat while computing long-term capital gain on sale of agricultural land. Page | Page | 3 Page | Page |

I.T.A No.163/Ran/2018 Anand Kumar Dhanuka A.Y. 2011-12 Negating the claim of the appellant it was held that the term 'assessee' used in section 54B/54F cannot be extended to mean the major married daughters. 3. Drawing strength from the CIT(A)’s detailed discussion in view of the hon’ble Bombay high Court’s decision (supra), Mr. Singh vehemently argues that the assessee’s deduction claim has been rightly disallowed. Mr. Poddar quotes CIT vs. Kamal Wahal (2013) 258 CTR 251 (Del) deciding the issue in assessee’s favour in ITA No. 4/ 2013 dated 11.01.2013. Faced with this situation of non-jurisdictional high courts having different opinions on the issue and no guidance coming from hon’ble jurisdictional high court, we invoke hon’ble apex court judgment in CIT vs. Vegetable products Ltd (1973) 88 ITR 192 (SC) that the view in assessee’s favour has to be adopted. We order accordingly. The Assessing Officer is directed to delete the impugned disallowance.

Order pronounced in the Court on 31.07.2020

Sd/- Sd/- (A.L.SAINI) (S.S.GODARA) लेखासद�य / ACCOUNTANT MEMBER �या�यकसद�य / JUDICIAL MEMBER कोलकाता /Kolkata; �दनांक/ Date: 31/07/2020 SB, Sr.PS Copy of the order forwarded to: 1. Anand Kumar Dhanuka 2. ITO, Ward-1(1), Ranchi 3. C.I.T(A)- 4. C.I.T.- Ranchi 5. CIT(DR), Ranchi Bench, Ranchi . 6. Guard File.