SANMEETKAUR M. KOHLI ,MUMBAI vs. INCOME TAX OFFICER (IT)-3(1)(1), MUMBAI

The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in not allowing the deduction under section 54 of the Act in respect of amount transferred by her husband to the builder’s account by holding that the same cannot be treated as her contribution. For this assessee has raised the following ground No. 1: - “1. The learned CIT(A) erred in confirming disallowance to the extent of ₹ 54,81,420/- on the ground that the appellant was required to deposit the amount received from the Sale of Property, for claiming exemptions under section 54. The amount transferred by her husband to the builder cann’t be regarded as deposit made by her as the gift claimed to be received by her was not transferred in her name, but was paid to builder by the husband of appellant directly through NEFT.”

Briefly stated facts are that the assessee is a non-resident. During the year under consideration, the assessee sold residential house property for a sum of ₹ 1,37,56,000/- on 06.03.2012 as Flat No. 65, Movie Tower, Oshiwara complex, Andheri (W), Mumbai-58. The assessee purchased this property in FY 2002-03 for a sum of ₹ 30,69,250/-. The assessee computed the long term capital gain after taking indexation under section 50C of the Act at ₹ 77,43,425/-. The assessee claimed deduction under section 54 of the Act on account of 3 investment in residential house this long term capital gain and taxable capital gain was declared at nil. The AO also noted that the investment is not made within the stipulated period and did not allow under section 54 of the Act. It was noted by the AO that the investment is not made before the due date of filing of return of income by the assessee. The AO also noted that the investment in new house is made by assessee’s husband and not assessee to the extent of ₹ 70 lacs. Hence, he stated that the assessee is not entitled for claim of deduction under section 54 of the Act. The assessee replied that she has purchased a residential property jointly within three years from the date of sale and contribution of assessee in the purchase of new residential property is Rs. 82,62,005/-. The assessee explained the investment with dates as under:

Further, the assessee stated that the sum of Rs. 12,62,005/- was invested out of own source and Rs. 70 lacs was paid by her out of gift received from her husband Shri Simarjeet Singh. The assessee filed the proof of payment made by husband and declaration of gift made by 4 husband. As regards to the source of Shri Simarjeet Singh the husband, she explained that her husband has given gift on 13.10.2014 during assessment year 2015-16 out of the sale proceed of office premises owned by him. It was claimed by assessee that payment is made by her husband directly to the builder but it was on behalf of the assessee. But the AO has not believed the explanation made by assessee and assessed the whole as long term capital gain at Rs. 77,43,425/-. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) after considering the submissions of the assessee and the above facts held that the assessee is entitled for deduction under section 54 of the Act as the investment is made within the due date of filing of return under section 139 of the Act. Accordingly, the CIT(A) allowed the claim of deduction to the extent of Rs. 12,62,000/-. But he confirmed the action of the AO and denied the deduction under section 54 of the Act on the amount of Rs. 75 lacs paid by husband of the assessee as gift. For this CIT(A) decided the issue vide Para 3.3 as under: - “3.3 Decision 1) I have gone through the submission made by the appellant before the AO and also during the course of appellant proceedings. There are two issues which have to be adjudicated before me. Whether deduction u/s. 54 of the IT Act is allowable even if the assessee has not deposited full amount in Capital Gain Account scheme till the due date of filing of return of income u/s. 139 (1) of the relevant A.Y. In the instant case part of payment for residential property was made before due date of filing return u/s. 139(1) and other payment was 5 made before due date u/s. 139(4) but after filing of return. As submitted by the appellant ruling of various counts. /tribunal which are already mentioned in above paragraphs, deposit in capital gain scheme due date includes date of tiling return u/s. 39(4) also. Now the second grounds of appeal is whether deposits can be made by family member which in this case is the husband of appellant.

The amount transferred by her husband cannot be regarded the deposit made by her as the gift claimed to be the received by her was not transfer in her name. So only amount of ₹ 12,62,005/- deposited by her can be claimed as allowable u/s 54.”

We have heard the rival contentions and gone through the facts and circumstances of the case. As regards to the dispute of entitlement of claim of deduction under section 54 of the Act whether the investment made within the stipulated period or not, the CIT(A) has allowed the claim in favour of assessee and Revenue has not challenged the same. It means, Revenue has not filed any appeal and the same is confirmed by the learned Sr. DR. The only dispute remains is whether the amount gifted by assessee’s husband of Rs. 70 lacs on 13.10.2014 by making direct payments to the builder out of NRO saving Bank Account maintained with SBI, Pune can be considered as payment made by 7 assessee. We find that the assessee has purchased flat out of own funds to the tune of Rs. 12,62,000/- on 27.07.2013 and balanced Rs. 70 lacs were paid on 13.10.2014, which was received by assessee by way of gift from her husband. The husband’s bank account copy of NRO saving bank account maintained with SBI being clearly shows that this amount was invested in purchase of this residential flat by way of transfer of amount to the builder by NEFT. For this, the learned Counsel for the assessee relied on the decision of this ITAT in the case of Deepak A Shah vs. ITO in for AY 2010-11, wherein the Tribunal following the decision of ACIT vs. Dr. P.S. Pasricha (2008) 20 SOT 468 (Mum) in ITA No. 6808/Mum/2003 for AY 2001-02 vide order dated 11.01.2008 has held that the same fund may or may not be utilized for the purchase of another residential house but the requirement of law is that the assessee should purchase a residential house within the period and the source of fund is quite irrelevant. The Tribunal has considered Hon’ble Bombay High Court vide Para 7 as under: - “7. We have heard the rival submissions and perused the relevant materials on record. We find that an identical issue arose before the ITAT ‘D’ Bench, Mumbai in Dr. P.S. Pasricha (supra). In that case, the assessee during the relevant previous year sold a property for Rs.1.40 crores. Then the assessee within the period specified u/s 54(1) purchased two adjoining residential flats in one building for a total consideration of Rs.104.78 lakhs and gave them on rent to two different tenants. The 8 assessee claimed deduction of Rs.104.78 lakhs u/s 54(1).