BINA B. RAMCHANDANI,MUMBAI vs. ADDL CIT 21(3), MUMBAI

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ITA 7208/MUM/2011Status: DisposedITAT Mumbai13 January 2017AY 2008-0913 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that for the purpose of Section 54 deduction, ownership cannot be divorced from investment. Since the flats were purchased jointly, the assessee's ownership was restricted to 50%, thus rightly limiting the deduction to 50% of the investment.

What were the facts?

The assessee claimed deduction under Section 54 for the purchase of two residential flats, partly funded by the sale of another property. The AO restricted the deduction as the flats were purchased jointly with the daughter and were considered independent dwelling units. The CIT(A) allowed the flats to be treated as a single unit but restricted the deduction to 50% of the investment due to joint ownership.

What were the issues?

Whether joint purchase of residential flats with a daughter disentitles the assessee to full deduction under Section 54, and if the flats used as a single residence can be considered for the deduction.

Which sections of the Income-tax Act were involved?

Section 54

AI-generated summary — verify with the full judgment below

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES 'B"_ MUMBAI BEFORE SHRI D KARUNAKARA RAO (ACCOUNTANT MEMBER) AND SHRI RAVISH SOOD (JUDICIAL MEMBER) ITA No. 7208/MUM/2011 Assessment Year: 2008-09 Mrs. Niharika M. Jhangiani (Legal heir of late Mrs. Bina B. Ramchandani), Mumbai. Vs. Addl: CIT 21(3), Mumbai. PAN No. AFCPRO858J (Appellant) (Respondent) Appellant by Sh. Subhash Shetty Respondent by Sh. TA Khan Date of Hearing 06.12.2016 Date of pronouncement 13.01.2017 2 ORDER PER RAVISH SOOD, JUDICIAL MEMBER The present appeal has been filed by the assessee against the order of the CIT(A)-32, Mumbai; dt:22/07/2011, which in itself has arisen from the assessment order passed by the A.O under section of the Income Tax Act, 1961(in short 'Act ), dated 143(3) 29/12/2010. 2. The brief facts of the case are that the assessee filed her return of income for A.Y. 2008-09 on 01.10.2008, declaring total income of Rs. 1,19,71,950/-. The case of the assessee was taken up for scrutiny proceedings u/s 143(2) of the 'Act' That during the course of scrutiny proceedings it was observed by the AO that the assessee who had sold a Flat No. 62/B in Grand Paradi Co.op. Hsg: Society Ltd:_ situated at 572, Dabyseth Hill, August Kranti Marg, Mumbai 400 036, vide a transfer deed dated:24/08/2007 , for a consideration of Rs. 4,25,00,000/-, had thereafter invested part of sale proceeds for purchase of the following residential flat- properties at Powai, Mumbai Sr. Description of Names of the Purchase No_ the flat purchasers consideration purchased Date of purchase deed 1 Flat No. 1508, 1.Mrs Beena Maple Leaf;, Bhagwan Rs.83,08,250 / 08.02.2008 3 Tungwa village, Ramchandani Kurla Taluka & (BSD), Andheri (E), Mumbai 2.Mrs Niharika M. Jhangiani 2 Flat No_ 1509, 1.Mrs Niharika Rs. 83,08,250/- 08.02.2008 Maple Leaf, M. Jhangiani Tungwa village, Kurla Taluka (BSD), Andheri 2.Mrs Beena (E), Mumbai Bhagwan Ramchandani The assessee after claiming deduction u/s 54 of the 'Act' as regards the investment made by her towards purchase of the aforesaid two flats, had therein reflected the Net capital gains of Rs_ 1,14,87,472/- in her return of income. The A.O being of the view that (i) the assessee had claimed deduction u/s 54 as regards investments made towards purchase of two flat properties, ie. Flat No. 1508 and 1509, i.e_ more than one property, and (ii) the respective investments were not made in the name of the assessee, but jointly alongwith her daughter, wherein in the purchase deed of Flat No. 1508 the assessee was the first name holder, while for in the purchase deed of Flat No. 1509 the daughter of the assessee Smt: Niharika M. Jhangiani was the first name holder, thus being of the view that the claim of the assessee was not as per the parameters contemplated u/s 54, therein called upon the assessee to substantiate the aforesaid claim of deduction as was so raised by The assessee in compliance to the her in the return of income. query so raised by the A.0 therein submitted her reply, however the with the explanation of the assessee and A.O not finding favor view that Flats No. 1508 and No. 1509 were two being of the independent dwelling units, and as such the assessee had invested one property, therefore her claim for deduction u/s in more than the investment made by her W.r.t both the new 54 as regards residential flats, therein militated against the provisions of Sec 54, as such could not be accepted. The A.0 further observed that and purchased a property in the joint name of as the assessee had therefore her investment/right in the herself and her daughter, property, in the absence of there being any mention of the share of right in terms of money in the sale deed, thus had to be presumed to be only 50%. Thus the A.O in light of his aforesaid observations, therein restricted the entitlement of the assessee to 50% of the investment in one property, ie. Flat No. 1508, wherein the assessee was the first name holder, and as such allowed deduction u/s 54 of amount of Rs. 41,54,125/- (i.e. 50% of Rs. the 'Act' at an The A.O therein proceeded with and assessed the 83,08,250/-). income of the assessee at Rs. 2,47,35,010/- ~. 3 The assessee assailed the assessment order before the CIT(A) The CIT(A) during the course of the appellate proceedings considering the facts of the case which therein revealed that the Flats No. 1508 and 1509 were adjacent and were being used by the assessee as a single residence, therein relying on the order of the 5 Bench' of the Tribunal so passed in the case of ITO Vs. Special Jhaveri [292 (AT) 1-Mum(SB)]; therein vacated the Sushila N. restriction by the A.O of the entitlement of the assessee as regards u/s 54 only as regards the Flat No. 1508 her claim of deduction however observed by the CIT(A) that though the (supra): It was eligible for claim of deduction u/s 54 as regards her assesssee was investment made in both the flats, for the reason that the said two were being used as a single residential unit; flats being adjacent but being of the view that for the purpose of claim of deduction u/s 54 of the 'Act , as the ownership of the new residential house could from the investment made by the assessee as not be divorced regards the same, therefore in the backdrop of the fact that as the ownership rights of the assessee in both of the aforesaid Flats No. 1508 and 1509 was only to the extent of 50% of her investment; therefore the deduction u/s 54 was liable to be restricted to the extent of 50% of the total investment of Rs. 1,66,16,500/- made by Thus the CIT(A) on the basis of his aforesaid observations, her. on the judgment of the Hon'ble Bombay High therein relying Court in the case of Prakash Vs: ITO (2009) 312 ITR 40 (Bom), restricted the claim of deduction of the assessee u/s 54 of the 'Act' to the extent of Rs. 83,08,250/ - (i.e: 50% of Rs 1,66,16,500/-), as so allowed by the AO, and as such partly against Rs. 41,54,125/- allowed the appeal. 4_ The assessee being aggrieved with the order of the CIT(A) had the matter in appeal before us_ That during the therein carried course of the hearing of the aforesaid appeal it was submitted by 6 the Ld. Authorized Representative (for short 'A.R) for the assessee that as the investment of Rs. 1,66,16,500/- towards purchase of the new residential Flats No. 1508 and 1509 at Maple leaf; Tungwa village, Kurla Taluka (BSD), Andheri (E), Mumbai, was solely made by the assessee, and she had added the name of her daughter Smt; Niharika M: Jhangiani only for the sake of convenience, keeping in mind her advanced age, while for no investment was made by the daughter towards the purchase of the aforesaid flats, therefore the erred in restricting the entitlement of the assessee to CIT(A) had only one half of the total amount invested by the assessee towards purchase of the aforesaid flats The Ld: A.R further averred that the CIT(A) failing to appreciate that the facts involved in the case before Hon'ble Bombay High Court in Prakash Vs ITO (2009) 312 ITR 40 were distinguishable on facts, had thus erroneously (Bom) the said judgment to the case of the present assessee: The applied AR referring to the facts involved in the case of Prakash Ld: (supra), therein submitted that in the case before the Hon?ble High Court the investment in the new flat was made exclusively in the name of the adopted son of the assessee, whereas in the case of the the flats were exclusively purchased by the present assessee assessee, who had included the name of her daughter only for the sake of convenience, keeping in view her advanced age. The Ld: AR further in support of his aforesaid contention that the inclusion of of the daughter in the purchase deed would not the name materially affect the entitlement of the assessee towards claim of deduction u/s 54, in light of the fact that the investment made towards the purchase of the aforesaid new residential Flats no_ 1508 and 1509 (supra) was made to the last of the paisa by the assessee, and no investment was made by the daughter, therein relied on the following judicial pronouncements/orders Sr . No. Particulars 1 CIT Vs. Kamal Wahal 351 ITR 4 (Delhi) 2 Director of Income Tax Vs. Mrs Jennifer Bhide 349 ITR 80(Kar) 3 CIT Vs: Ravinder Kumar Arora 342 ITR 38 (Delhi) 4 CIT Vs. Natarajan 287 TTR 271 (Mad) 5_ N. Ram Kumar Vs. Asstt. CIT 138 ITD 317 (Hyd) 6_ ITO Vs: Dr. Vandana Bhulchandani ITA No. 978/Mum/2013 dt-10.08.2016 A.R further in support of his aforesaid contention That the Ld. placed heavy reliance on the judgment of the Hon'ble Karnataka High Court so passed in the case of DIT Vs: Mrs: Jennifer Bhide (2012) 349 ITR 80 (Karn), wherein the Honble High Court after considering the various provisions of the Transfer of property act; 1882, and referring to certain other judicial pronouncements had that if an assessee had invested the sale therein concluded consideration in the purchase of a residential flat; but included the name of some other person without any investment having been 8 then it is the assessee alone who would be made by the latter, entitled towards claim of deduction u/s 54 of the 'Act' The Ld A.R the judgment of the Hon'ble Karnataka High further relied on Court in the case of: CIT Vs: D. Ananda Basappa (2009) 309 ITR 329 (Karn) and therein submitted that the Special Leave Petition (for short 'SLPI filed by the revenue against the aforesaid order of Court of Karnataka had been dismissed by the the Hon ble High Court in CIT Vs. D Ananda Basappa (2010) Hon'ble Supreme 320 ITR (St)

19.

The Ld. AR further in his attempt to support his aforesaid contention, therein relied on an analogy drawn from the order of a coordinate bench of the ITAT; 'F' Bench, Mumbai in the Dr . Vandana Bhul Chandani (ITO No_ case of: ITO Vs. 978/Mum/2013; dt:l0.08.2016). It was submitted by the Ld: A.R that in the aforesaid case before the Tribunal, it was held that as had been carried out by the the investment in the property husband of the assessee, then irrespective of the fact that the name stood reflected as a joint owner in the aforesaid of the assessee gain arising from the sale of the property was property, the capital liable to be assessed in the hands of the husband of the assessee was not to be saddled as regards the same The and the assessee Ld: Departmental Representative (for short DR) on the other hand of the CIT(A) and submitted that the heavily relied on the order on the judgment of the Honble first appellate authority relying Jurisdictional High Court in the case of Prakash (supra) had rightly held that as the assessee was owner of only 50% of the aforesaid Flats No_ 1508 and 1509 (supra), therefore her entitlement towards claim of deduction u/s 54 was liable to be restricted to only 50% of 9 the total investment of Rs 1,66,16,500/-, and as such had rightly of deduction u/s 54 in the hands of the restricted the claim assessee to the extent of Rs. 83,08,250/- It was thus submitted by D.R that the order of the CIT(A) may therein be upheld and the Ld. the appeal filed by assessee be dismissed We have heard the Ld. Representatives for both the parties 5 of the lower authorities, as well as the and perused the orders us_ We are of the considered view material placed on record before that a bare perusal of the statutory provisions contemplated u/s 54 to make an investment towards though requires the assessee of a residential house, the income of purchase or construction which is chargeable under the head Income from House Property' period provided in the said statutory within the stipulated provision, but it does not specifically prescribe as to in whose name be made. We are however not persuaded to the investment is to subscribe to the contention of the Ld. A.R that investment made by the assessee in the name of any other person would be sufficient to of Sec. 54, as the same to our meet the requirements be gathered as such from a literal understanding cannot of the aforesaid statutory provision: We are of the interpretation the long term capital gain (for short considered view that once LTCG) is earned by an assessee, then to dispel the tax liability o such LTCG , the scope of the aforesaid statutory provision cannot contemplate an investment in the name of a third be stretched to party, because if that would have been the intention, then the same out by the legislature in all its would have been clearly spelt 10 the said statutory provision. The Section 54 does not wisdom in making of an investment in a contemplate the deduction on property, which is being gifted or transferred simultaneously with the investment by the assessee. We are the very making of of a literal interpretation of persuaded to observe on a perusal contemplates the making of an Section 54 that the same investment by an assessee in a house property owned by him; and residential property cannot be divorced the ownership of such a the assessee. We are of the from the investment made by of the purpose which had considered view that irrespective the assessee in the present case to include the name of prompted the purchase deed, the same therein vested the her daughter in daughter with the enforceable right as that of a joint owner of the as such the assessee did not remain the aforesaid property, and We are thus of the considered view absolute owner of the same_ entire investment towards the purchase of Flats that though the was made by the assessee, but by Nos. 1508 and 1509 (supra) virtue of the daughter being made & joint owner in both of the flats, of 50% of the same, and as such the the latter became owner ownership of the assessee stood restricted to the remaining 50% only. That our aforesaid view that where & property is purchased by an assessee in the name of a relative, who may not had made any investment towards the purchase of the new residential property, would however in the absence of the ownership of the property by the assessee, therein disentitle him as regards raising of a claim of or Sec. 54F of the 'Act' only on the basis of the deduction u/s 54 is fortified by the judgment of the investment SO made by him, 11 in the case of Prakash Vs. ITO Honble Bombay High Court the Honble High Court had (20091 312 ITR 40 (Bom), wherein upheld the observations of the Tribunal, as under: - 48. A plain reading of section 54F would show that it is the who has to invest the capital gain in the new assessee residential house in his name. The construction of a that the assessee had purchased Or expression a new asset in sub-section (1) would only constructed that the new asset has to be in the name %f the mean assessee. The proviso of sub section (l) makes the position clear inasmuch as it says that the assessee shall not very residential house on the date of transfer or own any purchase a residential house within 1 year of the transfer construct residential within a period of 3 years, other Or Thus, reading of sub-section (1) than the new asset together with the proviso would show that the investment by the assessee has to be in his Own in the new asset name and not in the name of any other person The legal of purchase of the new asset by the consequences assessee in the name of his son is to constitute his son as the beneficial owner of the new asset The assessee has, therefore, not made the investment in his name. Therefore, capital gains he had rendered himself liable to pay tax on arising out of the transfer of a capital asset' placed by the Ld: A.R on the 6. We now advert to the reliance of the Hon'ble High Court of Karnataka in the case of judgment 12 B. Ananda Basappa (supra), and the order of the Hon'ble Supreme D. Ananda Basappa (2010) 320 ITR (St:) 19, Court in CIT Vs. the 'SLP' of the revenue against the aforesaid therein dismissing Honble High Court: We have duly perused the judgment of the order of the Honble High Court of Karnataka, as well as the order of the Hon ble Apex Court dismissing the 'SLP' of the revenue: We that the Hon ble High Court in the case of Ananda Basappa find (supra) after referring to the facts of the case, had concluded that where the assessee had purchased two residential flats adjacent to which thereafter were used as a single residential each other, apartment; then no adverse inference as regards the entitlement of of deduction u/s 54 could be drawn. the assessee towards claim We further find that the Revenue had assailed the aforesaid finding of the Hon*ble High Court by way of a 'SLP' before the Hon"ble Apex however dismissed: We thus in light of the Court; which was facts involved in the case of Ananda Basaapa distinguishable (supra) are thus unable to subscribe to the heavy reliance placed We are thus of the considered view that by the Ld. AR o the same. in light of the aforesaid facts, the reliance placed by the Ld. A.R on the dismissal of the 'SLP' of the revenue by the Hon ble Supreme of D Ananda Basappa (supra), is absolutely Court in the case would not be of any assistance to the misconceived, and thus the present case. We are thus of the considered view assessee in binding force of the judgment of the that in light of the Prakash Vs. ITO (2009) Jurisdictional High Court in the case of 312 ITR 40 (Bom), the entitlement of the assessee towards claim 54, in light of the fact that the aforesaid new of deduction u/s 13 residential Flats No_ 1508 and 1509 (supra) had been purchased jointly in the name of the assessee and that of her daughter, had thus rightly been restricted by the CIT(A) to the extent of 50% of the total investment at Rs. 83,08,250 /- (i.e. 50% of Rs. 1,66,16,500 /-). Thus finding no reason to take a different view, we herein uphold the order of the CIT(A) and dismiss the appeal of the assessee. 6 That the appeal of the assessee is dismissed Order pronounced in the open court on 3/01/2017. (D.KARUNAKARA RAO) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER yaf Mumbai; fd5 Dated 13.01.2017 311ar1 3} waifrify a1afea/Copy of the Order forwarded to 1_ adiareff The Appellant 2. 4ayeff The Respondent 3 314c5r ay(dd) The CITIA) 4. 31or 31437 CIT_ concerned 5 fapf4wAfu; 314ar &daif4 3feraorul, -arf DR, ITAT, Mumbai 6. 11E +1a Guard File HQFTR / BY ORDER, 3une1d qufa R (Dy-/Asstt Registrar) 31144< 3diaily &fearul;, -ae ITAT, Mumbai

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