ALLAN EMANUEL FERNANDES,PUNE vs. INCOME-TAX OFFICER,

आदेश / ORDER

PER VIKAS AWASTHY, JM

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-9, Pune dated 27.07.2016 for the assessment year 2010-11.

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(hereinafter referred to as ‘the Act’) and thereby making addition of

Rs.33,15,420/- under the head ‘ Capital Gains’.

assessee in the period relevant to assessment year 2010-11 sold immovable

property for Rs.71 Lakhs and invested capital gains arising therefrom for

purchase of a new capital asset in the name of his wife and daughter. The

Assessing Officer disallowed assessee’s claim of exemption u/s. 54F of the

Act.

filed appeal before the Commissioner of Income Tax (Appeals). The

Commissioner of Income Tax (Appeals) rejected assessee’s contentions and

confirmed the findings of Assessing Officer. Against the order of First

Appellate Authority, now the assessee is in second appeal before the

Tribunal.

that the assessee owned immovable property jointly with his wife, Mrs.

Fiona Allan Fernandes. Both of them were having 50% each share in the

immovable property. The said property was sold and the entire capital gain

arising from sale of property was invested for purchase of a residential

house jointly in the names of assessee’s wife and unmarried daughter. The

ld. AR submitted that originally property was owned by his father in law and

after his death in 2006, the property was inherited by Mrs. Fiona Allan

Fernandas. The name of the assessee was also added as joint holder of the

property at the time of transfer. The ld. AR submitted that the assessee is

suffering from Alziemer and as a result, his memory is impaired. In order to

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protect financial interest of his unmarried daughter, new asset was

purchased jointly in the name of his wife and unmarried daughter. The ld.

AR furnished Neuropsychological assessment reports of the assessee to

substantiate that the assessee is not in a fit state of mental health. The ld.

AR further submitted that the Hon'ble Delhi High Court in the case of CIT

Vs. Kamal Wahal reported as 351 ITR 04 held that the language of section

54F does not mandate that the house property should be purchased in the

name of the assessee alone and the word “assessee”. The provisions of

section 54F being beneficial provision enacted for encouraging investment in

residential houses and should be liberally interpreted. The ld. AR to further

support his contentions placed reliance on the following decisions:-

i) CIT Vs. V. Natarajan, reported as 287 ITR 271 (Madras)

ii) CIT Vs. Ravinder Kumar Arora, reported as 342 ITR 38 (Delhi)

iii) DIT Vs. Jennifer Bhide reported as 349 ITR 80 (Kar.)

iv) Mir Gulam Ali Khan Vs. CIT reported as 165 ITR 288 (AP)

vehemently defended the impugned orders. The ld. DR submitted that the

provisions of section 54F mandates that the capital gains arising from sale

should be invested by assessee in his own name for claiming benefit of

exemption u/s.54F of the Act. The ld. DR in support of his contentions

placed reliance on the decision of Hon'ble Bombay High Court in the case of

Prakash Vs. ITO reported as 173 taxmann.com 311.

sides and have perused the orders of Authorities below. We have also

considered decisions on which rival sides have placed reliance to support

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their respective contentions. It is an undisputed fact that capital asset sold

by the assessee was jointly owned by the assessee with his wife in equal

share. The capital gains arising from sale of original asset was invested for

purchasing residential house jointly in the names of assessee’s wife and

unmarried daughter. The reason for investment in the name of wife and

unmarried daughter is stated to be financial security of the ladies and

fragile mental health of the assessee. The assessee has filed medical records

indicating that the assessee is suffering from Neuropsychological disorder

and his verbal and visual learning and memory has been impaired.

Courts wherein exemption u/s. 54F/54 of the Act have been allowed where

the new asset has been purchased in the name of wife. In the case of CIT

Vs. Ravindra Kumar Arora (supra.) the Hon'ble Delhi High Court held that if

the property is purchased jointly in the name of wife, the conditions

stipulated in section 54F stands fulfilled. The Hon'ble High Court further

observed that if the property is purchased in the name of women, it would

encourage empowerment of women. The relevant extract of the decision of

Hon'ble High Court reads as under:

“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.

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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.

[Emphasized by us ]

Similar view has been taken by the Hon'ble Delhi High Court in the 9.

case of CIT Vs. Kamal Wahal (supra.). The Hon'ble High Court emphasized

on the rule of purposive construction of provision of section 54F of the Act.

The relevant extract of the observation of Hon'ble High Court reads as

under:

“9. It thus appears to us that the predominant judicial view, including that of this Court, is that for the purposes of Section 54F, 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.

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purchased new asset jointly with her husband and had claimed benefit of

exemption u/s.54F, the Hon'ble High Court held:

“7. On careful reading of s. 54 as well as s. 54EC on which reliance is placed makes it clear that when capital gains arise from the transfer of long term capital asset to an assessee and the assessee has within the period of one year before or two years after the date on which the transfer took place purchase or has within the period of three years after the date of construction of residential house then instead of capital gain being charged to income‐tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the provision made under the section which grants exemption from payment of capital gains as set out there under. Therefore, in the entire s. 54, the purchase to be made or the construction to be put up by the assessee, should be there in the name of the assessee, in not expressly stated. Similarly even in respect of s. 54EC, the assessee has at any time within a period of six months after the date of such transfer invested the whole or any part of the capital gains in the long‐term specified asset then she would be entitled to the benefit mentioned in the said section. There also it is not expressly stated that the investment should be in the name of the assessee. Therefore, to attract s. 54 and s. 54EC of the Act, what is material is the investment of the sale consideration in acquiring the residential premises or constructing a residential premises or investing the amounts in bonds set out in s. 54EC. Once the sale consideration is invested in any of these manners the assessee would be entitled to the benefit conferred under this provision. In the absence of an express provision contained in these sections that the investment should be in the name of the assessee only any such interpretation were to be placed, it amounts to Court introducing the said word in the provision which is not there. It amounts Court legislating when the Parliament has deliberately not used those words in the said section. That is the view taken by the Hon’ble Madras High Court and Hon’ble Punjab & Haryana High Court and we respectfully agree with the view expressed in the aforesaid judgment.

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(supra.) allowed the benefit of exemption u/s. 54 where the capital gains

arising from sale of original asset was utilized for purchase of new asset in

the name of wife. Thus, there is no bar in purchasing the new asset in the

name of spouse for being eligible to claim exemption u/s. 54F of the Act.

The Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Gurnam

Singh, reported as 327 ITR 278 allowed exemption u/s.54B of the Act where

the assessee had purchased agricultural land jointly in the name of his son

after investing capital gains.

Thus, a plain reading of provisions of section 54F and perusal of

decisions discussed above, we find that the assessee is eligible for claiming

benefit of section 54F after having invested capital gain towards purchase of

new asset jointly in the names of his wife and unmarried daughter.

Jurisdictional High Court in the case of Prakash Vs. ITO (supra.) for

rejecting the assessee’s claim of exemption u/s.54F of the Act. We find that

the facts in the aforesaid case are distinguishable. In the said case, assessee

had claimed exemption u/s.54F for making investment of sale proceeds of

agricultural land in the name of adopted son. Whereas, in the present case,

original asset sold was jointly in the name of assessee and his wife and sale

proceeds from original asset were invested by the assessee jointly in the

names of wife and unmarried daughter on account of his unstable mental

condition.

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Order pronounced on Friday, the 31st day of August, 2018

Sd/- Sd/- (डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 31st August, 2018 SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals)-9, Pune. 4. The Pr. CIT-5, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, 5. पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.