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Income Tax Appellate Tribunal, DELHI BENCH “D” NEW DELHI
Before: SHRI G.D. AGRAWAL & SHRI AMIT SHUKLA
The aforesaid appeal has been filed by the assessee against the impugned order dated 04.02.2016, passed by ld. CIT(A)-Meerut for the Assessment Year 2012-13. In the grounds of appeal
, following grounds have been raised by the assessee.
1. That the Ld. CIT(A), erred in law and on facts in upholding the action of the A.O. in initiating proceedings u/s 147 of the Income Tax Act on the alleged ground that the A.O. had received information for not disclosing the source of investment in the purchase of property to the tune of Rs.61,10,000/-.
2. That without prejudice to the ground no.1, the Ld CIT (A) also erred in confirming the action of the A.O. for considering the issue of capital gain if any arising on sale of flat no-53-, Sector-56, Noida in the hands of the appellant since the aforesaid flat did not belong to the appellant but belonged to her husband Shri Arun Kumar Nandwani. That the Ld. CIT(A), erred in not accepting the claim of the 3. appellant that her husband Shri Arun Kumar Nandwani had already disclosed the capital gain on sale of flat no-53-B, Sector-56, Noida in his Income tax return and accepted as such by the department. 4 That the appellant’s husband Shri Arun Kumar Nandwani sold flat no- 53-B, Sector-56, Noida and its sale proceeds were invested by him in the purchase of new no- 2-A, Extn-4,Floor-13(ex), Tower- 2, Indirapuram, Ghaziabad fulfilling the requirement of law for getting exemption u/s 54 of the I.T.Act. That in the sale deed of the aforesaid new flat, the names of spouse (appellant) and their son Shri Rishu Nandwani was also added.
5. That without prejudice to ground no- 1,2,3 and 4, the Ld. A.O. had erred in restricting the claim of exemption u/s 54 of the I.T. Act to one-third of the alleged capital gain on the ground that three names including the name of the appellant and their son Shri Rishu Nandwani were mentioned in the sale deed of flat no- 2-A, Extn-4, Floor-13(ex), Tower-2, Indirapuram, Ghaziabad . That the Ld. CIT(A) also erred in not allowing full exemption u/s 54 of the I.T. Act but restricting the claim of exemption to two-third on the ground that the name of spouse was included since it had been made mandatory by the Ghaziabad Development Authority but the name of their son was also added. That without prejudice to ground no-1,2,3,4 and 5 the Ld.
6. CIT(A) erred in not accepting the claim of full exemption u/s 54 of the I.T.Act supported by the fact that the sale proceeds of flat no-
53-B Sector-56, Noida had been invested by the appellant’s husband Shri Arun Kumar Nandwani for purchasing flat no-2-A, Extn-4,Floor-13(ex), Tower-2, Indirapuram, Ghaziabad.”
The facts in brief are that the assessee had purchased a flat bearing no.53-B, Sector 56, Noida in the financial year 1993-94. During the year under consideration, as per the registered sale deed, the said flat was sold on 23.11.2011 for a consideration of Rs.1 crore. The sale proceed of the said flat was invested in purchasing of a flat bearing no.2A, Ex-4, 13(Ex), Tower-2, Plot No.2C, Vaibhav Khand, Indirapuram, Ghaziabad on 25.11.2011 in the names of Smt. Nandwani, her husband Shri Arun Kumar Nandwani and son Rishu Nandwani. As per the registered sale deed, the entire investment of purchase of flat was stated to be made by assessee only.
Before the Assessing Officer, it was submitted that she has not invested any amount for the purchase of the aforesaid house as the entire investment was made by her husband, Shri Arun Kumar Nandwani in support of which affidavit was also filed before the Assessing Officer. It was further brought to the notice of the Assessing Officer that Shri Arun Kumar Nandwani has duly disclosed the capital gain of flat in Noida in his return of income and he alone was a real investor at the time of purchase of flat bearing no.35-B at Noida. In the return of income, he has claimed exemption u/s.54 which has been stated to be accepted by the Department. The Assessing Officer did not accept the assessee’s contention and in the assessment order passed u/s.143(3)/148 he added the amount of capital gain of Rs.58,83,005/- and restricted the claim of exemption u/s.54F to 1/3 of the capital gain, i.e., denying the exemption on the other two co-owners, namely, her husband and her son.
Ld. CIT (A) upheld the action of the Assessing Officer on the ground that the sale deed revealed that the flat of NOIDA which was sold in the name of the assessee and she has not shown the transaction in her relevant return of income, and therefore, the capital gain is to be assessed in the hands of the assessee only. On this ground alone, he has upheld the initiation of proceedings u/s.147/148 also. However with regard to the claim of exemption u/s.54, he held that a benefit of exemption should be allowed only to the extent of investment done in the name of assessee and her husband and restricted the tax on capital gain to 1/3rd and benefit of 2/3rd, i.e., Rs.43,73,333/- out of 65,60,000/- has been granted.
Before us, the learned counsel submitted that even if it is held that the capital gain is to be assessed in the hands of the assessee, despite the fact that assessee has vehemently challenged that no capital gain should be taxed in her hand, because same has been offered by her husband in his return of income as he alone had made investment in the purchase of the earlier property, the exemption u/s.54 has to be allowed in full as the entire sale proceeds have been invested in the purchase of new houses. Ld. CIT (A) has allowed the exemption of Section 54 in respect of assessee and her husband, i.e., 2/3rd and the 1/3rd for the son has been denied. He submitted that now there is a decision of Hon'ble Delhi High Court in the case of CIT vs. Ravindra Kumar Arora, reported in 342 ITR 38 (Del) wherein the Hon'ble High has held that even if the property has been purchased jointly with the wife then also exemption cannot be denied on the ground that purchase has been made in the name of one assessee and it is not necessary that house should be purchased only in the name of assessee and benefit should be denied if it is purchased jointly with his wife or legal heir. On this point alone, the capital gain which has been sought to be taxed by the Assessing Officer in the hands of the assessee should be given full exemption u/s.54. This argument is without prejudice to the main contention of the assessee that no Long Term Capital Gain should be assessed in the hands of the assessee as the same has already been offered in the case of her husband wherein the entire exemption u/s.54 has been claimed and the same has not been disturbed by the Department.
On the other hand, learned DR strongly relied upon the order of the ld. CIT(A).
After considering the rival submission and on perusal of the relevant finding given in the impugned order, we find that it is not in dispute that Long Term Capital Gain had arisen in the impugned assessment order on account of sale of residential flat as per registered sale dated 23.11.2011. The assessee had not disclosed the said Long Term Capital Gain in the return of income and that is the reason why assessee’s case was reopened u/s.148 vide notice dated 20.01.2014, which was on the basis of AIR information that the assessee has not disclosed the source of investment in purchase of immovable property. The contention of the assessee before the authorities below has been that since originally the residential flat which was though standing in the name of the assessee was purchased from the funds of the husband who was the main investor, therefore, any capital gain arising out of sale of such flat is to be assessed in his hands and that is the reason why her husband, Shri A.K. Nandwani has offered the sale proceeds from the flat as Long Term Capital Gain in his return of income. Since the entire sale proceeds was invested in purchase of other residential flat the claim of exemption u/s.54 was claimed by him in his return of income. The Department’s stand is that, since the flat sold was standing in the name of the assessee, therefore, the Long Term Capital Gain would be taxed in the hands of the assessee. The Assessing Officer has restricted the claim of benefit of deduction u/s.54 only to 1/3rd on the ground that property sold which has been invested in the new flat was in the name of the assessee only. Ld. CIT (A) though upheld the taxability of the Long Term Capital Gain in the hands of the assessee, but held that exemption of Section 54 should be given on 2/3rd considering that Ghaziabad Development has made it mandatory that spouse name is to be included in the registry of the new property. It is not disputed that the property which has been purchased stood in the name of assessee, i.e., Smt. Uma Nandwani, her husband Shri A.K. Nandwani and their son Shri Rishu Nandwani. Even if we do not go by the other contention of the assessee that under whose hand the taxability of Long Term Capital Gain has to be seen, we find merits in the contention of the learned counsel that the exemption u/s.54 cannot be denied on the share of the son of the assessee who is also a legal heir. The Hon'ble Delhi High Court in the case of CIT vs. Ravindra Kumar Arora (supra) in the context of similar claim of exemption u/s.54F which was denied to the assessee on the ground that the property has been purchased in the name of the assessee and his wife, and therefore, benefit of exemption should be restricted only in the case of assessee. Hon'ble High Court noted that even though the entire payment for the purpose of new house was made by the assessee but since it was purchased jointly in the name of the assessee and his wife, therefore, benefit of exemption u/s.54F cannot be restricted and has to be allowed in full. While interpreting the word ‘assessee’ Hon'ble High Court held that same has to be given wide and liberal interpretation so as to include legal heirs also. The relevant observation and the ratio laid down by the Hon'ble High Court reads as under:-
“7. Plain reading of the aforesaid provision 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.
8. 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.
On the aforesaid facts, we are of the view that 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 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.
Even when we look into the matter from another angle, facts remain that the assessee is the actual and constructive owner of the house. In CIT Vs. Poddar Cements (P) Ltd. & Ors., (1997) 226 ITR 625 (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 of the Act is the beneficial provision which should be interpreted liberally in favour of the exemption/deduction to the taxpayer and deduction should not be denied on hyper technical ground. Andhra Pradesh High Court in the case of Late Mir Gulam Ali Khan Vs. CIT, (1987) 165 ITR 228 (AP) has held that the object of granting exemption under Section 54 of the Act is that an assessee who sells a residential house for purchasing another house must be given exemption so far as capital gains are concerned. 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.
We also find judgments of other High Courts giving benefit of Section 54F(1) of the Act when the house of the assessee is purchased jointly with his wife. In the case of CIT Vs. Natrajan, (2007) 287 ITR 271 (Mad), though this case was decided in relation to Section 54 of the Act, the said Section is pari materia of Section 54F(1) of the Act. Likewise, the Punjab & Haryana High Court in the case of CIT Vs. Gurnam Singh, (2010) 327 ITR 278 took the same view while discussing the provisions of Section 54 of the Act which is again pari materia of Section 54F(1) of the Act.”
Thus, the Hon'ble High Court has held that even if the property has been purchased by the assessee by his own fund and simply because he has included the name of his wife and the property has been purchased in the joint name, it would not make any difference and upheld the theory of constructive ownership and explained the overall objective of Section 54/54F. The meaning of the assessee has been given wide and liberal interpretation by the Hon'ble Court so as to include a legal heir also. Thus, following the said ratio of the Hon'ble High Court, we hold that the son of assessee who is a legal heir of the assessee and is jointly holding the property even though he may not have contributed in the purchase of the said property, exemption u/s.54F cannot be denied. Thus, we hold that assessee is fully entitled for exemption u/s.54 because the entire sale proceeds have been invested in the purchase of new residential flat. Accordingly, in view of the aforesaid reasoning, the ground raised by the assessee is allowed and other grounds raised have been rendered purely academic.