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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
आदेश / ORDER
PER SUSHMA CHOWLA, JM:
The appeal filed by assessee is against order of CIT(A)-2, Nashik, dated 29.06.2017 relating to assessment year 2011-12 against order passed under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’).
The assessee has raised the following grounds of appeal:- On facts and in law,
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1.1. The learned CIT(A) erred in confirming the disallowance of exemption u/s 54F of Rs.18,10,498/-. 1.2. The learned CIT(A) erred in holding that the bungalow constructed belonged to the mother of the assessee and therefore, no exemption u/s 54F could be allowed to the assessee for the expenditure incurred on the construction of the bungalow. 1.3. The learned CIT(A) failed to appreciate that the assessee had constructed the bungalow out of his own funds and even under the property records, the bungalow belonged to the assessee and therefore, the exemption u/s 54F was allowable to the assessee. 1.4. The learned CIT(A) erred in rejecting the Gift Deed as per which the ownership of the plot of land was transferred to the assessee by his mother and therefore, according to him, the assessee was not entitled to claim exemption u/s 54F. 1.5. The learned CIT(A) erred in not appreciating that the Gift Deed executed was valid and therefore, there was no reason to deny the claim of exemption u/s 54F. 1.6. Without prejudice to the above grounds, the assessee submits that since the bungalow was owned by him and was also constructed out of his own funds, the exemption u/s 54F was allowable even if, the ownership of the plot was not with the assessee.
The only issue raised in the present appeal is against denial of deduction claimed under section 54F of the Act.
Briefly, in the facts of the case, the assessee during the year under consideration had declared income from long term capital gains on sale of plot, at Nil after claiming the deduction under section 54F of the Act. There is no dispute about the sale of immovable property in the hands of assessee. The long term capital gains after deducting indexed cost of acquisition worked out to ₹ 18,70,490/-. The assessee claims to have invested in the construction of bungalow at Mulshi, Pune which was purchased by his mother Mrs. Madhuri Sunpy Saraswat on 10.10.2008. The said plot of land was gifted by the mother to her two sons i.e. assessee and his brother. The Assessing Officer noted that the gift deed was executed on 25.03.2011 on ₹ 100 stamp paper, which was
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not a document as per Registration Act. The plea of assessee that the entire sale consideration of ₹ 27 lakhs was paid to the builder at Pune i.e. M/s. Nirmitee Construction for construction of the said property having ground floor and first floor was not accepted by the Assessing Officer as the property was not transferred in the name of two sons through registered document and hence, he had no legal title over the same.
The CIT(A) upheld the order of Assessing Officer, against which the assessee is in appeal.
The learned Authorized Representative for the assessee pointed out that plan for construction was approved by the Grampanchayat in the name of assessee and his brother. Further, the assessee had entered into construction agreement with M/s. Nirmitee Construction and also the payments were made to the said builder and even the completion certificate was given in the name of assessee and his brother and hence, deduction claimed under section 54F of the Act could not be denied. He further pointed out that in the facts of the case before the Hon’ble Bombay High Court in Prakash Vs. ITO (2008) 173 Taxman 311 (Bom), the denial of deduction under section 54F of the Act was on account of the fact that bungalow was constructed in the name of adopted son. The learned Authorized Representative for the assessee in this regard placed reliance on the decision of Mumbai Bench of Tribunal in Chandrakant S. Choksi HUF Vs. ACIT (2015) 53 taxmann.com 312 (Mumbai – Trib.), wherein the assessee had purchased share in property without any right in the land, on which the said property was constructed and the same was transferred to the
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assessee, then he was entitled to claim the deduction under section 54F of the Act.
The learned Departmental Representative for the Revenue on the other hand, stated that the gift deed was not a registered document. So, the land was not in the name of assessee, whereas section 17 of the Registration Act demands that an instrument of gift of immovable property needs to be registered. In this regard, he placed reliance on the ratio laid down by the Pune Bench of Tribunal in ITO Vs. Shri Kantilal C. Kankaria in ITA No.461/PN/2011, relating to assessment year 2003-04, order dated 25.07.2012.
On perusal of record and after hearing both the learned Authorized Representatives, the issue which needs to be adjudicated is the claim of deduction under section 54F of the Act. The assessee had sold an immovable property and had claimed that the sale proceeds from the said property have been invested in construction of bungalow on a plot of land which was gifted by his mother to him and his brother. Both the brothers had entered into construction agreement with a builder and had constructed the said property. The authorities below have denied the deduction under section 54F of the Act since the gift deed was not a registered document.
The question which arises is whether the assessee can claim the aforesaid deduction under section 54F of the Act against cost of construction of bungalow, where the plot of land was in the name of mother. The perusal of documents filed by the assessee reflect that the Grampanchayat had issued permission for construction of the said plot of land in the name of assessee and
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his brother vide Certificate dated 10.12.2010. The assessee has entered into construction agreement with M/s. Nirmitee Construction dated 24.12.2010 and had invested the whole consideration. The said amounts were paid to the builder and the receipts of payments are available at pages 11 to 13 of Paper Book and copy of construction agreement at pages 4 to 10 of Paper Book. The assessee has also filed approved construction plan at page 3 of Paper Book and which is in the name of assessee and his brother. Further, the completion certificate dated 11.03.2013 has also been issued by the Grampanchayat, copy of which is placed at pages 14 and 15 of Paper Book, which is also in the name of assessee and his brother, wherein it is clearly mentioned that approval for house construction was given on 10.12.2010 and the construction was completed on 03.03.2012. In such facts and circumstances, there is merit in the claim of assessee that against the capital gains arising in his hands the assessee is entitled to claim the deduction on account of his share of construction of the said property as per provisions of section 54F of the Act. In this regard, I find support from the ratio laid down by the Mumbai Bench of Tribunal in Chandrakant S. Choksi HUF Vs. ACIT (supra).
In the facts before the Pune Bench of Tribunal in ITO Vs. Shri Kantilal C. Kankaria (supra), the assessee had failed to produce any evidence to show that it had title in the said property, hence denial of deduction under section 54F of the Act. Similarly, in the facts before the Hon’ble Bombay High Court in Prakash Vs. ITO (supra), the assessee had failed to demonstrate that he had title or ownership in the property of adopted son and hence, denial. The facts of the present case are at variance and accordingly, the assessee is held to be
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entitled to claim deduction under section 54F of the Act. The grounds of appeal raised by assessee are thus, allowed.
In the result, the appeal of assessee is allowed.
Order pronounced on this 20th day of February, 2019.
Sd/- (SUSHMA CHOWLA) न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक Dated : 20th February, 2019. GCVSR आदेश की प्रयिलऱपप अग्रेपषि/Copy of the Order is forwarded to : 1. अऩीऱाथी / The Appellant; 2. प्रत्यथी / The Respondent; 3. आयकर आयुक्त(अऩीऱ) / The CIT(A)-2, Nashik; 4. The Pr.CIT-2, Nashik; ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे, एक-सदस्य 5. मामऱा / DR ‘SMC’, ITAT, Pune; गार्ड पाईऱ / Guard file. 6. आदेशािुसार/ BY ORDER, सत्यावऩत प्रतत //True Copy// वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे / ITAT, Pune