JITENDRA B. FARIA,MUMBAI vs. ITO 18(2)(1), MUMBAI

In an appeal filed by the assessee before the CIT(A), CIT(A) directed the AO to tax the entire capital gains on sale of property in the hands of assessee as against 50% assessed by the AO. Assessee is in further appeal before us.

I have considered rival contentions and carefully gone through the orders of the authorities below. From the record, I found that assessee was the owner of a flat in Jai Mahavir Apartment, J. P. Road at Andheri (West) jointly with his wife Mrs. Manisha J. Faria. The said flat was sold for Rs. 1,02,55,000/-. The assessee computed long term capital gains at Rs. 43,01,665/- being 50% share in the property. The assessee invested Rs. 42,01,665/- in another residential property i.e., flat in "Parag" situated Shri Jitendra V Faria on J. P. Road, Andheri (West). The assessee claimed exemption u/s. 54 of Rs. 42,01,665/- and offered capital gains at Rs. 35,809/-. The name of the assessee's brother was added in the Agreement of new property so purchased for the sake of convenience. However, the entire investment for the purchase of new property i.e. Parag, along with stamp duty and registration charges were paid by the assessee. This fact has been confirmed by the AO on page 2 of the Assessment order as under:- “The entire cost of the new property is borne by the assessee through the property is in the joint name with his brother…”

Since, the new house was purchased by the assessee by incorporating name of his brother, AO restricted deduction u/s.54 to the extent of 50% value of new property, however, AO did not agree with assessee’s contention and restricted exemption u/s.54 to Rs.21,32,929/- i.e., 50% of the cost of the new flat. In an appeal before CIT(A), he has directed AO to tax the entire capital gains in assessee’s hands by disregarding the fact that 50% of the sale in old house was owned by his wife. I found that wife has already offered her share of capital gains in her return of income filed with the Department. Thus, there is no justification in the order of CIT(A) for taxing the entire capital gains in the hands of the assessee.

Now coming to the allegation of the AO that since assessee has incorporated name of his brother, he is entitled to only 50% of the investment so made in the new house. There is no justification in the AO’s action, in so far entire investment was made by the assessee and only for the safety reason he has included the name of his brother. I found that in Shri Jitendra V Faria the assessment order itself at page 2, the AO has observed that entire cot of new property was borne by the assessee though the property is in the joint name with his brother. 9. Under these facts and circumstances, there is no justification for giving 50% benefit of investment in the new house. The issue is also covered by the decision of hon’ble Delhi High Court in the case of CIT v Ravinder Kumar Arora (2012) 342 ITR 38 (Del) wherein High Court held that the assessee was entitled to full exemption u/s. 54F when the full amount was invested by the assessee even though the property was purchased in the joint names of the assessee and his wife. It may be appreciated that even in the case before the hon'ble Delhi High Court, the AO had allowed exemption only to the extent of 50%. The question raised by the Revenue before the hon'ble High Court reads as under:

"Whether the Income-tax Appellate Tribunal was correct in law in granting the exemption under section 54F. of the Income-tax Act, 1961, to the assessee for the whole consideration of Rs. 3,28,15,000 for the purpose of the new asset (the residential property) in the joint names of the assessee and his wife, and not to the extent of 5 0 per cent. share of the assessee in the new asset?" The hon'ble High Court has at pages 42 and 43 held as under: "9. At the outset, the 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 Shri Jitendra V Faria 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 names 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.1fthe view of the Assessing Officer (AO) or the contention of the Revenue is accepted, it would be a derogatory step.

In the result, appeal of the assessee is allowed.