DCIT, DEHRADUN vs. SMT. NILIMA DUTT, DEHRADUN

Date of Hearing : 10.01.2017 Date of Order : 16.01.2017 O R D E R

PER KULDIP SINGH, JUDICIAL MEMBER :

“1. The Ld. CIT (A) has erred in law and on facts in allowing renovation charges in new house even if the bills/vouchers could not be produced by the assessee.

2. The Ld. CIT (A) has erred in law and on facts in allowing deduction u/s 54 despite the fact that the new residential house was purchased in joint names and the bank account form which payments were made was also a joint account.

3. The Ld. CIT (A) has erred in law and on facts in allowing deduction u/s 54EC despite the fact the bonds was purchased in joint names and the bank account from which payments were made was also a joint account.

Sl.No. Particulars As per As per assessee Department 1. Sale consideration of both the Rs.8,50,00,000 Rs.8,71,88,000 properties 2/3rd Share of the assessee 2. Rs.5,66,61,000 Rs.5,81,25,333 3. Indexed cost of acquisition Rs.48,56,403 Rs.48,56,403 4. Long term capital gain Rs.5,18,04,597 Rs.5,32,68,930

Cost of purchase Rs.3,25,00,000 Registration charges Rs.4,61,526 Stamp duty Rs.29,35,417 Legal expenses Rs.2,70,000 Amount spent on renovation Rs.14,88,820 Total investment in new house Rs.3,76,55,763

4. AO noticed that the flats sold by the assessee were purchased in the name of two persons, namely, the assessee and her daughter-in-law, Smt. Purabi Dutt. Assessee was called upon to furnish copy of bank account and bills & vouchers of expenses of renovation charges amounting to Rs.14,88,820/- but assessee filed the bills & vouchers of expenses to the extent of Rs.13,00,000/- only and as such, the AO disallowed the difference of Rs.1,88,820/- as expenses made on renovation charges. AO computed the net income from long term capital gain of the assessee as under :-

Capital Gain Rs.5,32,68,930 Less deduction u/s 54 Rs.1,87,33,472 Less deduction u/s 54EC Rs.16,66,666 Net Long Term Capital Gain Rs.3,28,68,792

GROUND NO.1 8. CIT (A) deleted the addition of Rs.1,88,820/- out of the investment of Rs.14,88,820/- claimed by the assessee on the renovation of the house property. The ld. AR for the assessee contended that such bills and vouchers were not available because the work was procured from the daily wagers completed within three months. However, the ld. DR relied upon the order of the AO in this regard. We are of the considered view that when the AO got satisfied regarding renovation of the house carried out by the assessee during the year under assessment to the tune of Rs.13,00,000/- on the basis of bills and vouchers produced by the assessee, contention of the assessee that the amount of Rs.1,88,820/- was spent by way of labour charges given to the daily wagers who have worked for a period of three months is sustainable. One cannot be expected to procure the vouchers for making payments to the daily wagers who even keeps on changing as per availability in the labour market. So, we find no illegality or perversity in the findings returned by the CIT (A). This ground is determined against the revenue.

GROUND NO.2

“13. I have duly considered the facts and circumstances of the case. It has been judicially held in a number of cases, details of which have been cited by the counsel for the assessee in the submission made before the undersigned, that it does not matter if the property is purchased in a joint name or for that matter even in the name of a close relative. To avail the benefit under section 54, it is the source of funds that is relevant. Thus if an assessee has invested the entire funds in a purchase of a residential property, even if that property is purchased in a joint name or even in the name of a close relative, that assessee would be entitled to claim the benefit of deduction under section 54, to the extent that the investment bears relation to the capital gain obtained by the sale of another residential property. I think the Assessing Officer has misdirected himself in stating that the said case laws do not apply to the assessee's case because they pertain to investment made in the name of the wife while the assessee had made the investment in her own name and that of her daughter in law. The exemption cannot be denied to a 95 year old widowed lady, simply because she does not have a living spouse. She has made the investment in her own name and one of her closest relatives, her daughter in law, to whom she ultimately bequeathed the property. The Assessing Officer has not brought on record any material to suggest that the investment made in the property was made by any person other than the assessee. Simply because the bank account is a joint account does not mean that the funds emanating from such account towards the purchase have been contributed by all the holders of that account. For determination of the facts, the credit entries have to be examined. The assessee has brought on record the fact that all the credit entries in the said account at SBI, pertain to the assessee, who was the first holder of the said bank account. Perusal of the same shows that there are no other major credit entries in the said account other than those contributed by the assessee out of her share of the sale of the house property at 22 Kalidas Road Dehradun. All the cheques pertaining to the purchase of property at Kolkata are seen to emanate from this account and out of the funds so contributed by the assessee. Thus there is no reason to assume that Smt Purabi Dutt had contributed any amount towards the purchase of the property at Kolkata. That being the case there is no reason to deny the assessee the benefit of deduction under section 54, to the extent of Rs 1,87,33,472/- only on account of the fact that the assessee purchased the property in a joint name. The addition made in this regard is therefore deleted and the assessee is to be allowed the entire amount invested by her as deduction u/s 54.”

Purabi Devi has not invested anything, the exemption u/s 54 of the Act cannot be denied. However, on the other hand, ld. DR relied upon the order passed by the AO.

The ratio of both the judgments is that, “when new residential property has been purchased by the assessee in joint names of assessee and his close relative by investing the entire amount of long term capital gain, the assessee is entitled for full exemption u/s 54F of the Act.” The ration of the judgment in the cases of CIT vs. Ravinder Kumar Arora and CIT vs. Kamal Wahal (supra) is applicable to the facts and circumstances of the case. So, finding no illegality or perversity in the findings returned by the ld. CIT (A), the Ground No.2 is determined against the revenue.

GROUND NO.3 13. CIT (A) also deleted the addition of Rs.50,00,000/- claimed u/s 54-EC on purchase of National Highway Authority of India (NHAI) Bonds which were in the names of Mrs. Nilima Dutt, assessee, Shri Pranab Dutt and Smt. Purabi Dutt. Ld. AR for the assessee to support the order passed by ld. CIT (A) contended that since the investment has been made by the assessee in purchasing the NHAI bonds out of her own funds from the sale of house property, she is entitled to exemption u/s 54EC.

However, bare perusal of section 54-EC goes to prove that there is no mention that the long term investment in specified assets should be in the name of assessee only rather the core issue to be seen is as to what was the source of fund. No doubt, the bonds were purchased by way of cheques issued form joint account of the account holders but further perusal of the bank account goes to prove that the assessee has received Rs.75,00,000/- as the sale consideration out of which the amount of purchase of long term specific assets were invested. So, following the ratio of the judgments in the cases of CIT vs. Ravinder Kumar Arora and CIT vs. Kamal Wahal (supra), we are of the considered view that the assessee has rightly claimed deduction of the entire amount of Rs.50,00,000/- invested by her. So, finding no illegality or perversity in the findings returned by the CIT (A), this ground is determined against the revenue.