KALPANA SUNDAR,CHENNAI vs. ITO, NON CORPORATE WARD-8(1), CHENNAI

आयकर अपील�य अ�धकरण, ‘‘ए’’ �यायपीठ, चे�नई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI �ी धु�वु� आर.एल रे�डी, �या�यक सद�य एवं �ी एस जयरामन, लेखा सद�य के सम� Before Shri Duvvuru RL Reddy, Judicial Member & Shri S. Jayaraman, Accountant Member आयकर अपील सं./I.T.A.No.2153/Mds/2017 �नधा�रण वष�/Assessment Year:2013-14 Smt. Kalpana Sundar, The Income Tax Officer, No. 4/3, Sri Janakas, 2nd Cross Vs. Non-Corporate Ward 8(1), Street, East Kamakodi Nagar, Chennai. Valasaravakkam, Chennai 600 087. [PAN:CNVPS4092J] (अपीलाथ� /Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से / Appellant by : Shri S. Sridhar, Advocate ��यथ� क� ओर से/Respondent by : Shri AR. V. Sreenivasan, JCIT सुनवाई क� तार�ख/ Date of hearing : 22.01.2018 घोषणा क� तार�ख /Date of Pronouncement : 31.01.2018 आदेश /O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 9, Chennai dated 28.07.2017 relevant to the assessment year 2013-14. The only effective ground raised in the appeal of the assessee is that the ld. CIT(A) erred in confirming the disallowance of the claim of tax exemption under section 54 of the Income Tax Act, 1961 [“Act” in short].

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2.1 The assessee sold her property at Plot No. 13 of Ramakrishna Nagar of 2048 sq.ft. at Kolapakkam Village, Sriperumpudur Taluk, Kancheepuram District for ₹.60 lakhs on 13.02.2013 and the assessee acquired undivided share of land by entering a sale agreement with M/s. Excellent Housing Constructions (P) Ltd. represented by M/s. Golden Homes (P) Ltd. on 18.02.2013 and builders agreement with M/s. Golden Homes (P) Ltd. to construct a flat of a super plinth area of 2067 sq.ft. with two cars parking at Poonamallee Village, Ponnamallee Taluk at the cost of ₹.70,53,798/- by 31.03.2016 and claimed capital gain under section 54F of the Act upto ₹.57,52,800/-. The assessee has invested and started paying the amount from 14.02.2013 and paid upto the date of filing of the return i.e., 31.07.2013 ₹.44,88,986/- and the balance of ₹.12,61,604/- was paid after the due date of filing of return. The AR of the assessee has submitted before the Assessing Officer that the investment/payments even after due date of filing

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the return can be made/allowed as the period of investment extended upto the period allowed under section 139(4) of the Act. However, the Assessing Officer has not accepted the above submission and held that investment of capital gain after due date of filing of return prescribed under section 139(1) of the Act is not admissible.

2.2 Further, on verification of agreement, the Assessing Officer found that Ms. Vaishnavi Sundar, daughter of S. Sundar had entered into construction agreement with M/s. Golden Homes (P) Ltd. The assessee, being an individual, herself should have entered into agreement as the purchaser of the property with the builder and the said purchase of conveyance should be in the assessee’s name. Even the clubbing provisions as envisaged under section 64 and 64(1A) of the Act do not include income of the major children, the Assessing Officer denied the entire exemption claimed of ₹.57,52,800/- under section 54F of the Act, since, the investment in new house property was in the name of the adult daughter.

On being aggrieved the assessee is in appeal before the Tribunal. 4. The ld. Counsel for the assessee has submitted the assessee made full

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investment of capital gains towards acquisition of residential flat within the time stipulated under section 139(4) of the Act and thus, eligible for claiming exemption under section 54 of the Act. Moreover, the investment was made in the name of assessee’s own daughter, closely blood- related, is also eligible to claim exemption under section 54 of the Act and strongly replied upon the decision in the case of Smt. Hemalatha Chandran v. ITO in I.T.A. No. 603/Mds/2016 dated 01.04.2016 for the assessment year 2011-12 and prayed that the entire claim of exemption under section 54 of the Act should be allowed.

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of the property since the construction agreement was entered into with assessee’s adult daughter.

6.1 It is an admitted fact that the assessee made entire investment within the period stipulated under section 139(4) of the Act. Since the assessee has paid ₹.44,88,986/- upto the date of filing of the return under section 139(1) of the Act i.e., 31.07.2013, the Assessing Officer held that the balance amount of ₹.12,61,600/-, which was invested after due date of filing is not admissible. The ld. CIT(A) confirmed the above findings of the Assessing Officer by relying upon the decision of the Hon’ble Bombay High Court in the case of Humayun Suleman Merchant v. CCIT 387 ITR 421, wherein, when the decision of the Hon’ble Gauhati High Court in the case of CIT v. Rajesh Kumar Jalan 286 ITR 274 was relied on, the Hon’ble Bombay High Court held that the decision of one High Court is not a binding precedent upon another High Court and at best can only have persuasive value. It is pertinent to note that while deciding the appeal against the assessee in the case of Humayun Suleman Merchant v. CCIT (supra), the Hon’ble Bombay High Court has not distinguished the observations of the Hon’ble Gauhati High Court in the case of CIT v. Rajesh Kumar Jalan (supra), wherein, the Hon’ble Gauhati High Court has held that the assessee can fulfill the requirement of section 54 of the

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Act of depositing the unutilized portion of the capital gain on sale of residential property in notified scheme upto the expiry of time limit for filing return under section 139(4) of the Act. Further, the Hon’ble Karnataka High Court in the case of Fathima Bai v. ITO (2009) 32 DTR (Kar) 243 has considered similar issue and held that the assessee, having utilized the entire capital gains by purchasing house property before extended due date of filing of return of income under section 139(4) of the Act, she is eligible for exemption under section 54 of the Act. Thus, two decisions of different High Courts in the case of CIT v. Rajesh Kumar Jalan (supra) and in the case of Fathima Bai v. ITO (supra) are in favour of the assessee, whereas, the decision in the case of Humayun Suleman Merchant v. CCIT (supra) is against the assessee. Further, in the case of Jagtar Singh Chawla of Punjab and Haryana High Court in ITA No.71 of 2012, dated 20.03.2013 decided the issue in favour of the assessee. Under these facts and circumstances, when there exists two contradictory decisions of different High Courts and moreover no decision of the Jurisdictional High Court was placed on record, we are of the considered opinion that the decisions favourable to the assessee have to be acted upon as held by the Hon’ble Supreme Court in the case of CIT v. Vegetable Products Ltd. 88 ITR 192. Moreover, by respectfully following the above judgments of Hon’ble Karnataka High Court as well as Hon’ble Gauhati High Court, the Coordinate Benches of the Tribunal decided the above issue in favour of the assessee in the case of

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Mrs. Vasanthi Ravi v. DCIT in I.T.A. No. 3095/Mds/2014 dated 13.02.2015, in the case of ACIT v. Smt. Umayal Annamalai in I.T.A. No. 415/Mds/2015 dated 22.04.2015, in the case of Shri S.R. Jeyashankar v. ITO in I.T.A. No. 2930/Mds/2013 dated 03.04.2017, Smt. Dhriti Grover v. ITO in I.T.A. No. 529/Mds/2016 dated 26.05.2017, etc.

6.2 The provisions of section 54 of the Act are beneficial and are to be considered liberally for reasonable bonafide cause but investment in residential property is mandatory which the assessee has proved with substantial evidence before the lower authorities. Prime facie, the assessee paid substantial amount to the builder for acquisition of new Flat, which is not in dispute and only ₹.12,61,604/- was paid after filing of return, but paid before the extended period provided under section 139(4) of the Act. Under the above facts and circumstances and in view of the overwhelming decisions of various High Courts as well as decision of the Coordinate Benches of the Tribunal, we set aside the order of the authorities below and direct the Assessing Officer to allow exemption under section 54 of the Act as claimed by the assessee.

6.3 With regard to second aspect on which the disallowance made relates to purchase of property not exclusively in the name assessee. In this case, payment made by the assessee to the builder for the purchase of new property was not at all disputed by the Assessing Officer.

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However, the objection of the Assessing Officer is that the assessee has purchase the new property in her daughter’s name and not in the name of the assessee. On appeal, the ld. CIT(A) has observed that the assessee is entitled for exemption in respect of the investment made by her in acquiring the new house property in her own name and equally is not entitled for exemption in respect of the property acquired in the name of the adult daughter. The relative ownership of the share of each person is not available in the sale deed. Therefore, the ld. CIT(A) restricted the exemption to the tune of 50% being ownership right of the assessee over the said new property and accordingly allowed relief to the tune of ₹.22,44,493/- only out of the eligible investment of ₹.44,88,986/-. Before us, the ld. Counsel for the assessee has submitted the issue is squarely cover in favour of the assessee by the decision of the Tribunal in the case of Smt. Hemalatha Chandran v. ITO (supra). We have also perused the decision, wherein the Tribunal observed as under: “7. The next objection of the Assessing Officer is that the assessee has purchased the new house in the joint name of the assessee and her daughter. The Assessing Officer distinguished the judgment of Delhi High Court in CIT v. Kamal Wahal (2013) 351 ITR 4 on the ground that the assessee before the Delhi High Court was living with his wife together. The fact is that the assessee before the Delhi High Court purchased the house jointly with that of his wife. Therefore, this Tribunal is of the considered opinion that when the assessee purchased a house in the joint name along with her daughter, the assessee is eligible for exemption under Section 54F of the Act. The distinction made by the Assessing Officer on the ground that the assessee before Delhi High Court and his wife are living together may not be relevant

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consideration at all. What is to be considered is when the assessee purchased a house along with her legal heir for investment of capital gain, whether such investment is eligible for exemption under Section 54F of the Act? This was considered by the Delhi High Court in Kamal Wahal (supra). The Delhi High Court held that the assessee is eligible for exemption under Section 54F of the Act under such circumstances. Therefore, the Assessing Officer is not justified in disallowing the claim of the assessee.” 6.3.1 Further, on similar facts and circumstances in an identical issue, by following the judgment of the Hon’ble High Court of Madras in the case of CIT v. V. Natarajan [2006] 287 ITR 271 and also the judgment of the Hon’ble Punjab and Haryana High Courts in the case of CIT v. Gurnam Singh [2010] 327 ITR 278, in the case of DIT v. Mrs. Jennifer Bhide, the Hon’ble Karnataka High Court has observed and held as under: “2. The assessee is a non-resident individual. She filed her return of income on 31.07.2007 for the year 2007-08 declaring taxable income of Rs. 62,41,068. During the assessment proceedings u/s 143(3) of the Income-tax Act, 1961 (for short hereinafter referred to as “the Act”), the assessing authority noticed that the assessee has derived income from house property, income from long term capital gains on sale of property at Bangalore and income from other sources such as interest and dividend income. The assessee sold her residential property for Rs.2,21,00,000 and had invested an amount of Rs. 49,09,804 on purchase of residential property and claimed exemption u/s 54 of the Act. On verification of the purchase deed of the said property dated 25.12.2006 registered in the officer of the sub-registrar, Haveli, Pune, he found that the above property was not in the name of the assessee alone but was also in the name of her husband. He therefore, held that if the ownership of the property is shared with someone else, then the property cannot be said to be purchased by the assessee alone and therefore only 50% of the investment is to be allowed as exempt in the hands of the assessee. He further observed that similar investment was made for Rs. 50 lakhs in Rural Electrification Corporation Ltd., Bonds in the names of Mrs. Jennifer Bhide and Mr. Vikram Anil Vasant Bhide and exemption for the entire amount of Rs. 50 lakhs u/s 54EC was claimed. Therefore, he disallowed 50% of the investment in the Bonds

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also which was made in the name of her husband. Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), who confirmed the order of the assessing authority. Aggrieved by the same, the assessee preferred an appeal to the Tribunal. 3. The Tribunal after taking note of section 45 of the Transfer of Property Act and the judgment of the Hon’ble High Court of Madras in the case of CIT v. V. Natarajan [2006] 287 ITR 271 and also the judgment of the Hon’ble Punjab and Haryana High Courts in the case of CIT v. Gurnam Singh [2010] 327 ITR 278 came to the conclusion that neither section 54 nor section 54EC of the Act mandates that the purchase of the property or investment in bonds should be exclusively in the name of the assessee. Though the name of the assessee’s husband in shown in the sale deed as well as in the bonds, as the entire consideration for acquisition of the same is flown from the assessee, in law the assessee’s husband has no right. In that view of the matter, the Tribunal held that both the assessing authority and the Appellate Commissioner were in error in denying the benefit of deduction and allowed the deduction. Aggrieved by the same, the revenue is before this Court. 4. Learned counsel appearing for the revenue assailing the impugned order contended that the original asset sold is in the name of the assessee. Unless the assessee invests the sale consideration in acquisition of an immovable property or the bonds in her name exclusively, she is not entitled to the benefit of deduction as in the sale deed she has included the name of her husband and in the bonds also her husband’s name is included jointly. The assessee would be entitled to only 50% of such investment and therefore should be entitled to the benefit of deduction only to the extent of 50%. Therefore, he submits that the Tribunal committed a serious error in interfering with the orders passed by the assessing authority as well as the Appellate Commissioner. 5. In the light of the said submission the question that arise for consideration is whether the husband of the assessee, by inclusion of his name as joint owner in the property, would become 50% owner of the said property and whether the assessee would not be eligible for exemption of the entire investment made by her. 6. Section 45 of the Transfer of Property Act throws some light in this regard which reads under:

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“45. Where immovable property is transferred for consideration to two or more persons, and such consideration is paid out of a fund belonging to them in common, they are, in the absence of a contract to the contrary, respectively entitled to interests in such property identical, as nearly as may be, with the interests to which they were respectively entitled in the fund; and, where such consideration is paid out of separate funds belonging to them respectively, they are, in the absence of a contract to the contrary, respectively entitled to interests in such property in proportion to the shares of the consideration which they respectively advanced. In the absence of evidence as to the interests in the fund to which they were respectively entitled, or as to the shares which they respectively advanced, such persons shall be presumed to be equally interested in the property.” 7. On careful reading of section 54 as well as section 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 thereunder. Therefore, in the entire section 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 section 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 section 54 and section 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 section 54EC. Once the sale consideration is invested in any of these manner the assessee would be entitled to the benefit conferred under this provisions. In the absence of an express provision contained in these sections that the investment

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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 and Haryana High Courts and we respectfully agree with the view expressed in the aforesaid judgment. 8. 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 sections 54 and 54EC, the assessee is entitled to the benefit of those provision. 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. 9. In that view of the matter, the assessee cannot be denied the benefit of deduction of the aforesaid amount. The Tribunal on proper appreciation of the material on record has rightly allowed the appeal and set aside the order passed by the assessing authority as well as the Appellate Commissioner. We do not see any infirmity in the order which calls for interference. Accordingly, the appeal is dismissed.” 6.3.2 Respectfully following the decision of the Coordinate Benches of the Tribunal in the case of Smt. Hemalatha Chandran v. ITO as well as the decision of the Hon’ble Karnataka High Court in the case of DIT v. Mrs. Jennifer Bhide (supra), wherein the decision of Hon’ble Jurisdictional High Court in the case of CIT v. Natarajan (supra) has been followed, we hold that the assessee is eligible to claim entire exemption under section 54 of the Act. Under the above facts and circumstances, we set aside the

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orders of authorities below and direct the Assessing Officer to allow entire claim of exemption under section 54 of the Act. Thus, the grounds raised by the assessee are allowed.

Sd/- Sd/- (S. JAYARAMAN) (DUVVURU RL REDDY) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, the 31.01.2018 Vm/- आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant, 2.��यथ�/ Respondent, 3. आयकर आयु�त (अपील)/CIT(A), 4. आयकर आयु�त/CIT, 5. �वभागीय ��त�न�ध/DR & 6. गाड� फाईल/GF.