LATE JAGJIT SINGH BAJWA LEAGAL HEIR HARLEEN BAJWA ,BANGALORE vs. INCOME TAX OFFICER, WARD-4(2)(3), BANGALORE

Date of Hearing : 24.06.2024 Date of Pronouncement : 27.06.2024 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

This appeal by assessee is directed against order of NFAC for the assessment year 2013-14 dated 5.2.2024 passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”).

Jagajit Singh Bajwa, Bangalore Page 3 of 13 Wherein in her order page No. 8 in computation it has been mentioned as follows: 1. Income from House Properties as declared (-) Rs. 1,59,260/- 2. Income form Business as declared Rs. 14,88,731/- 3. Income from Other sources as declared Rs. 1,27,446/- 4. Long term Capital Gain as discussed in para 4&5 Rs.1,51,74,000/- Rs. 1,69,49,437/- Less: Deduction under Chapter VIA as claimed Rs. 1,30,317/- Assessed Income Rs.1,68,19,120/- ================== 3.4 Whereas, while totalling, the loss of House property income treated as positive income accordingly it is added and instead of arriving at GTI of Rs. 166,30,917/- had arrived at Rs. 169,49,437/- which is increased by Rs. 318,520/- which is twice the figure of Loss of Rs. 159,260/- because of positive addition to the income. However, while calculating the Tax on the above income Ld. ITO took the returned Income of Rs. 13,26,600/- (in page No. 9) and arrived the correct taxation.

3.5 Factually, on the ownership of the 3 properties, as on the date of investment the assessee is not the owner of any of the properties individually, where as he is declaring the income from House property on the basis of possession in respect of : i. No.767, 6th Main, II Stage, BTM Layout – Bangalore – 560 076 wherein he is joint owner along with his mother Mrs. Bhagavanth Kaur ii. No. 1101, “Porva Fountain Square”, Marathalli, Bangalore- 560 037 owned jointly with his wife Mrs Harleen Kaur (which is registered on 2014) iii. Salarpuria Symphony at Hosur Road, wherein only possession has been handed over and not yet registered in Jagajit Singh Bajwa, Bangalore Page 4 of 13 the name of assessee. However, the rent received on letting the same is offered under the Income from house property.

3.6 The Learned AO, considered the joint ownership as “exclusive” ownership and denied the exemption U/s 54F and charged LTCG tax on the Capital Gain. Which is appealed before the CIT- NFAC, which concluded under in line with that of the ld. AO, resulted in appeal before us.

4. The ld. A.R. submitted that the Assessee is not having any exclusive ownership of more than one house property as on the date of investment in the new property and fully eligible to claim exemption U/ s 54E of the Act. He further submitted that, the assessee, has only 50% owner of property cited above along with Mrs Bhagawanth Kaur in one and with Mrs Harleen Kaur in other property and no other properties were held in his name as on that date. He placed reliance on the decisions rendered in various courts, which is summarized as follows: (i) ITO vs Rasiklal N. Satra [2006] 98 ITD 335 (Mum.- ITAT)

The word 'own' appearing in section 54F includes only such residential house which is fully and wholly owned by one person and not a residential house owned by more than one person. The assessee was already a co-owner of another flat. Being a co-owner, assessee was not the absolute owner of another residential flat, and exemption under section 54F could be denied on this ground. — (ii) Dr.(Smt) P.K.Vasanthi Rangarajan Vs The CIT Chennai. (2012) 6 TaxCorp (DT) 52084 (MADRAS)

Joint ownership of the property would not stand in the way of claiming exemption u/ s 54F. The purchase of the property was by the individual in her own name and the property held by her as on the date of transfer, stood in the joint names of the assessee and her husband. A reading of Section 54F clearly points out that the holding of the residential house as on the date of transfer has relevance to the status of the assessee as an individual or HUF. On the admitted fact that the assessee herein, as an individual, does not own any property in the status of an individual as on the date of transfer, there is no hesitation in accepting the case of Jagajit Singh Bajwa, Bangalore Page 5 of 13 the assessee, thereby allowing the appeal. As far as the issue on the purchase of our flats is concerned, the unreported decision of this Court in T.C.No. 656 of 2005 dated 4.1.2012 answers this issue. There is no inhibition in the assessee claiming the benefit on the investment made in the four fiats, thereby gaining the benefit u/ s 54F of the Income Tax Act.

4.1 He further submitted that similar view has been expressed in the case of ITO Vs. Shri Rasiklal N Satra cited (supra), wherein it has been held that: ” . ...The only question remains as to whether assessee can be said to be the owner of that residential house. The legislature has used the word "a " before the words "residential house". In our opinion, it must mean a complete residential house and would not include shared interest in a residential house. Where the property is owned by more than one person, it cannot be said that any one of them is the owner of the property. In such case, no individual person of his own can sell the entire property. No doubt, he can sell his share of interest in the property but as far as the property is considered, it would continue to be owned by co-owners. Joint ownership is different from absolute ownership. In the case of residential unit, none of the co-owners can claim that he is the owner of residential house. Ownership of a residential house, in our opinion, means ownership to the exclusion of all others. Therefore, where a house is jointly owned by two or more persons, none of them can be said to be the owner of that house. This view of ours is fortified by the judgment of the Hon'ble Supreme Court in the case of Seth Banarsi Dass Gupta v. CIT 166 ITR 783, wherein, it was held that a fractional ownership was not sufficient for claiming even fractional depreciation Under Section 32 of the Act. Because of this judgment, the legislature had to amend the provisions of Section 32 with effect from 1.4.1997 by using the expression "owned wholly or partly". So, the word "own " would not include a case where a residential house is partly owned by one person or partly owned by other person(s). After the judgment of Supreme Court in the case of Seth Banarsi Dass Gupta (supra), the legislature could also amend the provisions of Section 54-F so as to include part ownership. Since, the legislature has not amended the provisions of Section 54-F, it has to be held that the word "own" in Section 54E would include only the case where a residential house is fully and wholly owned by assessee and consequently would not include a residential house owned by more than one person. In the present case admittedly the house at Sion, Mumbai, was purchased jointly by assessee and his wife. It is nobody's case that wife is benami of assessee. Therefore, the said house was jointly owned by assessee and his spouse. In view of the discussions made above, it has to be held that assessee was not the owner of a residential house on the date of transfer of original asset. Consequently, the exemption Jagajit Singh Bajwa, Bangalore Page 6 of 13 Under Section 54-F could not be denied to assessee. The order of the Learned CIT (Appeals) is, therefore, upheld.”

4.2 He further placed reliance on the judgement rendered in following cases where joint is ownership not considered "ownership" for the purposes of 54F of the Act:- a) Seth Banarasi Dass Gupta vs. CIT (166 ITR 783) (SC) b) SB Sugar Mills Ltd. vs. CIT (166 ITR 783) (SC) - It was averred that as per the judgement of the Apex Court, a co- owner means a person entitled to a share in the property but cannot be recognised as the single owner. c) Shivnarayan Chowdary vs. CIT (108 ITR 104) (Luck.) : part share is not to be reckoned as "owned". in the said case the assessee was only a part owner of the two residential properties, they held that he could not be said as owning a 7 residential house as required for the purpose of benefit u/s. 54F of the Act d) ITO vs. Rasiklal N. Satra (100 TTJ 1039 :- holding that share in a house per se is not a single ownership. e) CIT vs Kapil Nagpal (HC Delhi), ITA 609/2014, Date of decision: 1109- 2015 benefit of section 54F cannot be denied if assessee is not exclusive owner of more than one property at the time of transfer f) Dy. CIT v. Dawood Abdulhussain Gandhi 2018 Tax Pub (DT)1319) Mum-Trib) — fractional ownership is not disqualification for claiming exemption U/s 54F g) Ashok G. Chauhan v. Asstt. CIT 2019 Tax Pub (DT) 2794 (Mum Trib) : (2019) 176 ITD 0717 : (2019) 200 TTJ 0659 - The assessee could not be treated, as 'absolute owner' of such property and therefore, the exemption under section 54F could not be denied to assessee by alleging that he was owner of two properties on date of transfer of capital assets.

Jagajit Singh Bajwa, Bangalore Page 7 of 13 4.3 Accordingly, he prayed that order of NFAC is being erroneous and bad in law should be quashed and annulled.

5.1 Thus, she relied on the judgement of Hon’ble Karnataka High Court in the case of M.J. Siwani Vs. CIT (366 ITR 356) (Karn.).

Jagajit Singh Bajwa, Bangalore Page 8 of 13 a) No.767, 6th Main, II Stage, BTM Layout – Bangalore 560076 wherein he is joint owner along with his mother Mrs. Bhagavanth Kaur. b) No.1101, “Poorva Fountain Square”, Marathahalli, Bangalore 560 037 owned jointly with his wife Mrs. Harleen Kaur (which is registered in 2014) c) Salarpuria Symphony at Hosur Road, wherein only possession has been handed over and not yet registered in the name of assessee however the rent received on letting the same is offered under the income from house property. 6.2 On the contrary, the ld. D.R. relied on the judgement of jurisdictional High Court in the case of M.J. Siwani Vs. CIT (366 ITR 356) (Karn.), wherein held that “where the assessee on the date of sale of long term capital asset owns more than one residential house even jointly with another person, benefit u/s 54F of the Act in respect of capital gain arising from sale of asset was to be rejected.”. 6.3 She also submitted that against this judgment of Hon’ble Karnataka High Court, the assessee filed a SLP which was also dismissed by Hon’ble Supreme Court reported in 232 Taxmann 335 (SC). Hence, she submitted that the jurisdictional High Court’s judgement in the case of M.J. Siwani cited (supra) to be followed. The facts in the case of M.J. Siwani cited (supra) are as follows: “4……………………………………………………………………………………………… The fact of the case as culled out from orders of lower authorities and submissions of the assessee are that the assessee’s father late Shri Iqbal Ghaswala along with other five family members had inherited land being 142/148, Ghaswala Estate Jogeshwari (west), on which land, all the six members constructed 6 flats (i.e. one flat each on their own as per their requirements which were occupied by each owner namely Shri Mohd. Ali Suleman Ghaswalla (flat no. 201), Shri Sikander Suleman Ghaswalla (flat no. 202), Shri Abdul Rahim Ghaswalla (flat no. 301), Shri Munaf& Moinuddin Anwar Ghaswalla (legal heirs of late shri Anwar Ghaswalla) (flat no. 302), Shri Ilyas &Zainul Ghaswalla (legal heirs of late Shri Iqbal Ghaswalla) (flat no. 401) and Shri Abdul Suttar Suleman Ghaswala (flat no. 402). According to assessee, all the members are owing/occupying one flat each for which they have been paying electricity bills. The assessee claimed to have filed those electricity bills before the Assessing officer coupled with confirmation letters from the owners of the other flats to the effect that none of them had any right/or interest of whatsoever Jagajit Singh Bajwa, Bangalore Page 9 of 13 nature in each other’s flats. However, the Assessing Officer disregarded the submission of the assessee and held that since the assessee owned six residential house properties though jointly, therefore the conditions mentioned in section 54F of the Act are not fulfilled in this case hence, the assessee is not eligible for exemption u/s 54F of the Act. The Ld. Assessing Officer relied on the decision of the Hon’ble Karnataka High Court in the case of M.J. Siwani (supra). The relevant facts of the case and the finding reproduced by the Assessing Officer is extracted as under:

“Further, the above issue is already a settled law in view of decision of Hon'ble Supreme Court of India in the case of M.J. Siwani vs. Commissioner of Income-tax [2015] 53 taxmann.com 318 wherein upholding the order of Hon'ble Karnataka High Court, Hon'ble Supreme Court of India held that:

Where assessee on date of sale of long-term capital asset owns more than one residential house even jointly with another person, benefit under section 54F in respect of capital gain arising from sale of asset was to be rejected.

6.4 Facts of case in the case of M.J. Siwani vs. Commissioner of Income-tax cited (supra) were as under:

6.5 On revenue's appeal to Hon'ble Karnataka High Court, it was held as under:

Section 54F provides that if the assessee has a residential house he cannot seek the benefit of long term capital gain. Under this provision, merely because, the words residential house are preceded by article 'a' would not exclude a house shared with any other person. Even if the residential house is shared by an assessee, his right and ownership in the house, to whatever extent, is exclusive and nobody can take away his right in the house without due process of law. In other words, co-owner is the owner of a house in which he has share and that his right, title and interest is exclusive to the extent of his share and that he is the owner of the entire undivided house till it is partitioned. The analogy applied by the Tribunal based on the judgment of the Supreme Court in Banarsi Dass Gupta (supra), wherein, the Supreme Court considered the provisions contained in section 32 of the Act, would not apply to the faces of the present case. The right of a person, may be one half, in the residential house cannot be taken away without due process of law or it continues till there is a partition of such residential house. Thus, the view expressed by the Tribunal on this issue cannot be accepted. Thus, the order passed by revenue authorities rejecting assessee's claim was to be restored. (Para 26] 6.6 Thus, High Court held that in terms of provisions of section 54F of the Act, where assessee on date of sale of long term capital asset owns a residential house even jointly with another person, his claim for deduction of capital gain arising from sale of asset has to be rejected.

6.7 However, in the present case, we have to see whether the assessee on the date of sale is owning more than one house or not? (i) As seen from the sale deed produced by the assessee, the property No.767, 6th Main, II Stage, BTM Layout, Bangalore-560 0076, which was owned by assessee jointly with his mother Mrs. Bhagwanth Kaur was acquired by assessee on 18.12.1989.

Jagajit Singh Bajwa, Bangalore Page 11 of 13 (ii) Next property No.1101, Poorva Fountain Square, Marathahalli Bangalore 560 037 was jointly owned by assessee with Mrs. Harleen Kaur vide sale deed dated 22.5.2014. (iii) The property at Salarpuria Symphony at Hosur Road, wherein only possession has been handed over to the assessee and there was no sale deed has been registered in favour of the assessee in the assessment year under consideration. The assessee was not able to get it registered this property in his favour and finally he deceased on 12.7.2017. 6.8 Being so, the only property stood registered in his favour was the first property No.767, 6th Main, II Stage, BTM Layout, Bangalore- 560 0076 jointly owned with his motor Mrs. Bhagwanth Kaur. The second property bearing No.1101, Poorva Fountain Square, Marathahalli Bangalore 560 037 owned by assessee along with his wife Harleen Kaur, where the sale deed was registered on 22.5.2014 and the assessee was not an absolute owner of this property even for 50% in the assessment year under consideration. 6.9. It is pertinent to mention herein that Hon’ble Supreme Court in the case of Damodhar Narayan Sawale (D) through LRs Vs. Sri Tejrao Bajirao Mhaske & Ors. (2023) SCC Online SC 566), wherein held that “As read from the provision of Transfer of Property Act along with the provisions of Registration Act and further manifested that a sale deed when registered and executed in due compliance, shall confer a valid and legitimate title to the receiver.” 6.10 Further, it was held that “The need to refer to the circumstances and the conduct giving rise to the deed must come only when the document passing title is ambiguous or indecisive.” 6.11 It further noted that “When the execution of sale deed is challenged, then even registration itself cannot be held as a proof for execution and compliance u/s 67 of the Evidence Act”. 6.12 In the present case, it was noted that the execution and registration of sale deed was not took place in the assessment year