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Income Tax Appellate Tribunal, “SMC” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
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.
The solitary issue raised in the appeal is against disallowance of exemption claimed by assessee u/s.54F of the Income Tax Act, 1961
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(hereinafter referred to as ‘the Act’) and thereby making addition of
Rs.33,15,420/- under the head ‘ Capital Gains’.
The brief facts of the case as emanating from records are: The
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.
Aggrieved by the assessment order dated 19.12.2012, the assessee
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.
Shri R.M. Rajapurkar appearing on behalf of the assessee submitted
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
3 ITA No.2493/PUN/2016 A.Y.2010-11
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)
On the other hand, Rajesh Gawli representing the Department
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.
We have heard the submissions made by representatives of rival
sides and have perused the orders of Authorities below. We have also
considered decisions on which rival sides have placed reliance to support
4 ITA No.2493/PUN/2016 A.Y.2010-11
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.
The ld. AR placed reliance on the decisions of various Hon'ble High
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.
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
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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.
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. Podar 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.”
[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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Having regard to the rule of purposive construction and the object which Section 54F seeks to achieve and respectfully agreeing with the judgment of this Court, we answer the substantial question of law framed by us in the affirmative, in favour of the assessee and against the revenue.”
In the case of DIT Vs. Jennifer Bhide (supra.) wherein wife had
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.
In the instant case the assessee has purchased the property jointly with her husband. She has invested the money in rural bonds jointly with her husband. It is nobody’s case that her husband contributed any portion of the consideration for acquisition of the property as well as bonds. The source for acquisition of the property and the bonds is the sale consideration. It is not in dispute. Once the sale consideration is utilized for the purpose mentioned under ss. 54 and 54EC, the assessee is entitled to the benefit of those provisions. As the entire consideration has flown from the assessee and no consideration has flown from her husband, merely because either in the sale deed or in the bond her husband’s name is also mentioned, in law he would not have any right.”
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The Hon'ble Madras High Court in the case of CIT Vs. Natarajan
(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.
The Revenue has placed reliance on the decision of Hon'ble
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.
8 ITA No.2493/PUN/2016 A.Y.2010-11
Thus, in view of the facts as discussed above and various judicial precedents, we find merit in the submissions of the assessee. Accordingly, the impugned order is set aside and appeal of the assessee is allowed.
In the result, appeal of the assessee is allowed.
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.