JEETENDRA CHANDRAKANT NAYAK,NAGPUR vs. ASSISTANT COMMISSIONER OF INCOM TAX(OSD), NAGPUR
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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR
BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI K.M. ROY, ACCOUNTANT, MEMBER
ITA No. 368/Nag./2023 (Assessment Year : 2015-16) Shri Jeetendra Chandrakant Nayak, 254, Bajaj Nagar, Nagpur. ……………. Appellant PAN – AAQPN4090H v/s Asstt. Commissioner of Income Tax, ……………. Respondent (OSD), Nagpur Assessee by : Shri M.G.Moryani, Advocate Revenue by : Shri Rajat Singhai, Sr. DR
Date of Hearing – 27/06/2024 Date of Order – 27/06/2024
O R D E R PER K.M.ROY, A.M.
The present appeal has been preferred by the assessee challenging the impugned order dated 18/10/2023, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT (NAFC)”], for the assessment year 2015-16.
Shri Jeetendra Chandrakant Nayak vs. ACIT (OSD) ITA no. 368/Nag./2023
The assessee has raised following grounds of appeal:– “1] Order passed by Commissioner of Income Tax Appeal, National Faceless Appeal Centre u/s 143(3) by the ACIT (OSD) Nagpur is illegal, invalid and bad in law. 2] On the facts and circumstances the Commissioner of Income Tax Appeal, National Faceless Appeal Centre ought to have considered that the assessing officer was not correct in holding that the assess would not been entitled for deduction under section 54F as the assessee owned more than once residential house at the time of transfer, therefore order passed is unjustified, unwarranted and excessive. 3] On the facts and circumstances the Commissioner of Income Tax Appeal, National Faceless Appeal Centre erred in not considering as per law and on the facts of the case in confirming that the properties jointly owned by the assessee were not ready in all respect only because sale deeds were executed disregarding the confirmation given by the builder to the effect that the construction was completed in the month of August, 2015, therefore addition confirmed are unjustified, unwarranted and excessive. 4] On the facts and circumstances the Commissioner of Income Tax Appeal, National Faceless Appeal Centre ought to have considered that the assessing officer was not correct in holding that 2 flats were purchased at Andheri, Mumbai and accordingly assessee would be entitled for deduction only in respect of one flat, therefore, order passed is unjustified, unwarranted and excessive. 5] On the facts and circumstances the Commissioner of Income Tax Appeal, National Faceless Appeal Centre ought to have accepted that the assessee would be entitled for deduction in respect of conveyance allowance only to the extents of Rs.9,600/-, therefore, addition confirmed is illegal, invalid and bad in law. 6] The assessee denies the liability of interest charged U/s. 234A, 234B and 234C of the Income Tax Act. Without prejudice, levy of interest u/s 234A, 234B and 234C of the Income Tax Act is unjustified, unwarranted and excessive.
Shri Jeetendra Chandrakant Nayak vs. ACIT (OSD) ITA no. 368/Nag./2023
7] The assessee craves leave to amend, add or take a new ground or grounds at the time of hearing.” 3. The facts of the case of the assessee as culled out from the Assessment Order are as under: “4. During the year under consideration, the assessee has sold an industrial plot in Butibori Industrial are for a total consideration of Rs.1,14,55,200/- which was purchased during the financial year 2010-11 for Rs.21,31,200/-. Applying indexation, the indexed cost of acquisition works out to Rs.30,69,408/- [2131200 X 1023/711]. Accordingly, the long term capital gain works out to Rs.83.89.792/- [11455200 – 3069408]. 7. On perusal of the return of income of the assessee, it is seen that the assessee has shown income from house properties as under; Sr. Address of Property Whether Let out/SOP Income from No. co-owned property 1 E-1, Plot No. 62, Neel No. Let Out Rs.82,125/- Kamal, Bajaj Nagar, Nagpur 2 11 & 12, Shree Yes Self Occupied (-) Rs.67,271/- Venkatesh Krupa Enclave, Panjri, Nagpur 3 11 & 12, Shree Yes Let Out (-) Rs.50,471/- Venkatesh Krupa Enclave, Panjri, Nagpur It can be seen from the above table that the assessee is already owner of three residential houses, other than the aforesaid new assets on the date of transfer of the original asset. The issue of fractional ownership in respect to the residential houses at Sr.No. 2 and 3 of the above table has been set to rest by the judgment of the Hon’ble Supreme Court in the case of M.J.Siwani v. CIT reported in [2015] 53 Taxmann.com 318 (SC) wherein it has been 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. 8. The authorized representative of the assessee however submitted that both the residential houses at Sr. Nos. 2 and 3 (supra) were incomplete on the date of transfer of the original asset and therefore
Shri Jeetendra Chandrakant Nayak vs. ACIT (OSD) ITA no. 368/Nag./2023
the assessee is not the owner of these two residential houses on the date of transfer of the original asset. The assessee has shown the residential house at Sr.No.2 of the above table as “self occupied” and the residential house at Sr.No. 3 as “Let out” which itself proved that both the aforesaid residential houses were complete and inhabitable. On perusal of the sale deeds of the aforesaid residential houses, it is seen that the sale deeds of both the residential houses were executed on 05.07.2013 by virtue of which the assessee and his wife become joint owners of the aforesaid properties on 05-07-2013 much earlier to 04-07-2014, the date of transfer of the original asset and the assessee has declared income under the head “income from house property”. Therefore, as on the date of transfer of the original asset, the assessee was actually owner of three residential houses without any scope for any ambiguity. Thus, the assessee was owner of more than one residential house, other than the new asset on the date of transfer of the original asset and therefore, as per proviso (a)(i) and (b) to section 54F of the Income Tax Act, 1961, the assessee does not qualify for claiming deduction under Section 54F of the Income Tax Act, 1961. Accordingly the claim of deduction of the assessee under section 54F of the Income Tax Act, 1961, is disallowed and the entire long term capital gain of Rs.83,85,792/- has to be charged to tax which is added to the returned income of the assessee. Penalty proceedings under section 27(1)(c) of the Income Tax Act, 1961 for concealment of income by furnishing inaccurate particulars of income are hereby initiated.” 4. The appellant filed an appeal before the CIT (A), who has held as follows: “The AO in the assessment order held that on perusal of the return of income, it is seen that the assessee has shown income from house property as under: Sr. Address of Property Whether Let out/SOP Income from No. co-owned property 1 E-1, Plot No. 62, Neel No. Let Out Rs.82,125/- Kamal, Bajaj Nagar, Nagpur 2 11 & 12, Shree Yes Self Occupied (-) Rs.67,271/- Venkatesh Krupa Enclave, Panjri, Nagpur
Shri Jeetendra Chandrakant Nayak vs. ACIT (OSD) ITA no. 368/Nag./2023
3 11 & 12, Shree Yes Let Out (-) Rs.50,471/- Venkatesh Krupa Enclave, Panjri, Nagpur From the above table, it is seen that the assessee has already owner of three residential houses, other than the aforesaid new assets on the date transfer of the original asset. Accordingly, the claim of deduction of the assessee under sec. 54F of the I.T Act, 1961 is disallowed and the entire long term capital gain of Rs.83,85,792/- has to be charged to Tax. 5.2 During the course of appellate proceedings, the appellant vide letter dated 03.11.2022 has submitted as under; Ground no 2 & 3: The assess, se owned a residential flat at 62, Neelkamal, Bajaj Nagar, Nagpur in addition to 2 units at 11 & 12, Shri Venkatesh Krupa Enclave, Panjari, Nagpur owned jointly along with his wife Mrs Renuka Nayak. The said units at 11 & 12, Shree Venkatesh Krupa Enclave, Panjari, Nagpur were not ready for residential purpose at the time of transfer of land on 04th July 2014 against which deduction under section 54F was claimed or even after one year from the date of transfer. The said units were let out to a company "Minar Hydrosystems Pvt Ltd, Nagpur in which appellant was a Director to use the same as a godown. The fact that the said units were not complete in all respect so as to term it as a habitable units was brought to the notice of Assessing Officer vide letter dated 23 October 2017 (copy enclosed) along with a copy of letter of Developer as detailed below assuring appellant that the remaining work would be completed shortly which was finally completed on 01/09/2015. 1. Assessee's letter to Developer regarding incomplete work dated 01/09/2014 2. Assurance letter from Developer dated 15/10/2014 3. Assessee's 2nd letter to Developer regarding remaining incomplete work dated 01/07/2015 4. Assurance letter from Developer dated 20/08/2015 5. Completion letter dated 01/09/2015 Assessing Officer without appreciating the fact that the said units were not ready for the purpose of residence as no following amenities were provided by the Developer at the time of sale deed, disallowed the claim of the appellant under section 54F holding that the appellant owned more than one residential house, other than the new asset, on the date of transfer of the original asset.
Shri Jeetendra Chandrakant Nayak vs. ACIT (OSD) ITA no. 368/Nag./2023
a. Kitchen Ota & Plumbing b. Floor Tiles fitting & washing basin in master bedroom toilet c. Approach road inside the scheme d. Water supply to the scheme e. Street Light It is respectfully submitted that the appellant cannot be said to be owner of residential property in respect of 11 & 12, Shree Venkatesh Krupa Enclave, Panjari, Nagpur unless it is fully ready and worth habitable. The fact that the sale Deeds were executed in favour of appellant would not change the character of the asset in question. The subject property would still be termed as" Under construction" and as such appellant cannot be denied the benefit of beneficial section 54F of the Income tax Act, 1961. Reliance is placed on the judgment of Hon'ble jurisdictional High Court in the case of CIT VS Kalpana Hansraj reported in the 307 CTR 797 wherein it was held that the property under construction though of residential nature could not be categorized as " Residential House" and accordingly deduction under section 54F was allowed. Operating portion of the said judgment in para 5 is reproduced herewith. "5. We have considered the rival contentions of the Ld. Representatives of both the parties and have also gone through the records. The Ld. CIT(A) has categorically discussed the factual position of the case that the assessee had booked a residential flat on 15.01.1981. The builder failed to complete the construction and the dispute travelled to the Hon'ble Bombay High Court. The Hon'ble Bombay High Court had appointed a committee/receiver with a direction to complete the construction. The construction of the building was not complete upto Feb 2011 as has been gathered by the Ld. CIT(A) from the letter dated 17.02.2011 issued by the said committee of court receiver. The assessee, however, in the year 2005 had sold the unconstructed / under construction unit resulting in taxable long term capital gains. The learned CIT (A) has categorically held, after appreciation of the factual matrix of the case, that the property transferred by the assessee could not be termed to be a residential house. The findings of the Ld. CIT(A) have been reproduced above. The provisions of section 54F are beneficial provisions enacted for the purpose of promoting the construction/purchase of residential houses. The property in question sold by the assessee could not be constructed by the builder for a sufficient long time and the same could not be categorized as residential house and therefore the claim of the assessee has rightly been allowed by the Ld. CIT(A) under section 54F of the Act. We do not find any infirmity on the
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order of the Ld. CIT(A) in this respect. There is no merit in the appeal of the Revenue and the same is accordingly dismissed." In view of above, it is respectfully submitted that the appellant is entitled for deduction under section 54F of the I.T. Act, 1961 and therefore Assessing Officer may kindly be directed to allow the same”. 5.3.1 I have gone through the facts of this case and the grounds of appeal. After amendment to the provision of section 54 of the Act w.e.f. 01.04.2014 from the A.Y. 2015-16, the word “a residential house” has been substituted to “one residential house”. The relevant provisions of the Act are reproduced as under: Section 54 Profit on sale of properly used for residence: i) Subject to the provisions of sub-section (2), where in the case of an assessee being an individual or a Hindu Undivided Family, the Capital gain arises from transfer of long-term asset being buildings land appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date [constructed, one residential house in India), then, instead of the 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 following provisions of this section, that is to say, (ii) if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; Or
Shri Jeetendra Chandrakant Nayak vs. ACIT (OSD) ITA no. 368/Nag./2023
(ⅲ) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain. [ As per the above said amendment, in sub-section (1) to section 54 of the Act, for the words “constructed, a residential house”, the words “constructed, one residential house” have been substituted w.e.f. 01.04.2015. 5.3.2 In the present case, the assessee purchased more than one residential flat vide two different sale deeds, i.e. two flats and claimed deduction. The same shall not be allowable as per the amended provisions of section 54 of the Act. , 5. The assessee is now in appeal before us. The sole solitary ground of dispute is the denial of benefit u/s 54F of the Act on the ground that the assessee was owning more than one residential property as on the date of transfer. The authorized representative vehemently submitted that only one house was under the exclusive ownership of the appellant. The rests two houses were under the joint ownership. He pleaded that the “joint ownership” cannot be equated to “exclusive ownership” and as such the assessee was owner of only one residential house as on the date of transfer. The assessee has relied upon the following judgments: (1) (2012) 252 CTR 0336 (Mad.HC) Dr. Smt. P.K.Vasanthi Rangarajan vs. Commissioner of Income Tax (2) (2023) 201 ITD 0829 (Mum. Trib.) Zainul Abedin Ghaswala vr. Commissioner of Income Tax (3) (2016) 159 ITD 0402 (Chen. Trib.) V.R.Usha vs. Income Tax Officer. (4) 2018 TaxPub (DT) 1319 (Mum. Trib.)
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Deputy Commissioner of Income Tax vs. Dawood Abdulhussain Gandhi (5) Judgment of Hon’ble Income Tax Appellate Tribunal, “G” Bench, Mumbai, dated 21/03/2024 vide ITA No. 3528/Mum/2023 in case of Shweta Singh vrs. Income Tax Officer. (6) (2019) 176 ITD 0717 (Mum. Trib.) Ashok G. Chauhan vs. Assistant Commissioner of Income Tax. (7) (2006) 98 ITD 0335 (Mum. Trib.) Income Tax Officer vs. Rasiklal N. Satra (8) (2015) 228 Taxman 0062 (SC) Commissioner of Income Tax-IV vs. Gita Duggal (9) (2013) 84 CCH 0386 (Del HC) Commissioner of Income Tax-IV vs. Gita Duggal (10) (2012) Tax Pub (DT) 2279 (Bom. HC) Commissioner of Income Tax vs. Joe B. Fernandes (11) (2004) 091 ITD 0053 (Bang. Trib) Anand Basappa vs. Income Tax Officer. (12) (2019) 179 ITD 0265 (Pune Trib) Kamal Murlidhar Mokashi vs. Income Tax Officer. (13) Judgment of Income Tax Appellate Tribunal, Nagpur Bench (At e-Court Pune) dated 10/01/2022 vide ITA No. 115/ NAG/2017 in case of Shri Rajendra Madhukar Mahajan vs. Income Tax Officer (14) (2016) 381 ITR 0351 (Del.HC) Commissioner of Income Tax vs. Kapil Nagpal. 6. We have perused the above judgments thoroughly. The Ld. DR on the other hand pointed out that there is a clear violation of Section 54F of the Act and as such he pleaded that no interference is required in the order of CIT(A). We find that the matter was before the Hon’ble Mumbai Bench in the case of Zainul Abedin Ghaswala v. CIT (A), ITA No. 545/Mum/2023,
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Dated 22 May, 2023. The brief facts and the ratio of the judgment is reproduced below : “2. Briefly stated, facts of the case are that the assessee is an individual and filed return of income for the year under consideration on 23-3-2017 declaring total income of Rs. 11,84,37,909. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income Tax Act, 1961 (in short the Act) were issued and complied with. In the assessment completed under section 143(3) of the Act on 31-12-2018, the learned assessing officer disallowed the claim of the assessee for deduction under section 54F of the Act against the capital gain on transfer of long term capital asset, on the ground that the assessee owned interest in more than one residential properties and therefore, he was not entitled for deduction under section 54F of the Act. The learned assessing officer relied on the decision of the Hon’ble Karnataka High Court in the case of M.J. Siwani v. CIT (2014) 53 taxmann.com 318 (SC): 2015 TaxPub(DT) 2834 (SC). On further appeal, the learned Commissioner (Appeals) upheld the finding of the assessing officer. 3. Aggrieved, the assessee is in appeal before the Tribunal by way of raising grounds as facts reproduced above. 4. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The issue in dispute before us is whether the co-ownership of the assessee in more than one residential properties could make assessee liable for non-eligibility of deduction under section 54F of the Act. The fact of the case as culled out from orders of lower authorities and submissions of the assessee are that the assessees 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 nature in each others 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 under section 54F of the Act. The learned assessing officer relied on the decision of the
Shri Jeetendra Chandrakant Nayak vs. ACIT (OSD) ITA no. 368/Nag./2023
Honble 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 Honble Supreme Court of India in the case of M.J. Siwani v. CIT (2014) 53 Taxmann.com 318 (SC) : 2015 Tax Pub(DT) 2834 (SC) 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. Facts of case M.J. Siwani v. CIT (supra) were as under: 1. During relevant assessment year, assessees sold their undivided interest in land. The assessee claimed deduction under sections 54 and 54F in respect of long-term capital gain arising from sale of land. 2. The revenue authorities finding that assessees had sold undivided share in land and no land plus residential house/apartments rejected assessees claim for deduction under section 54. 3. As regards deduction under section 54F, revenue authorities having found that assessees were having two residential houses having one half share each therein on date of sale of land, rejected assessees claim. 4. The Tribunal, however, allowed assessees claim for deduction under section 54F holding that a residential house, on date of sale of long term asset as mentioned in said section meant complete residential house and would not include shared interest in residential house. On revenues 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 word 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 and logy 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
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expressed by the Tribunal on this issue cannot be accepted. Thus, the order passed by revenue authorities rejecting assessees claim was to be restored. Thus, High Court held that in terms of provisions of section 54F, 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. 5. Before us, the learned counsel of the assessee has relied on the following three decisions of the Tribunal, Mumbai Benches to support that even if the assessee co-owner is more than house, since the fractional ownership in a property does not amounts to violating the condition laid down under section 54 of the Act: 1.Ashok Chauhan AGIT (TAT Mumbai A Bench) ITA No 1309/Mum/2016- 2019 TaxPub(DT) 2794 (Mum-Trib) 2. DCIT v. Shri Dawood Abdulhussain Gandhi (ITAT F Bench Mumbai ITA No 3788/Mum/2016: 2018 TaxPub(DT) 1319 (Mum-Trib) 3. Income Tax Officer v. Rasiklal N Satra ITAT Bench Mumbai (2006) 98 ITD 335 (Mum): 2006 TaxPub(DT) 0737 (Mum-Trib) 5.1 Further, the assessee also relied on the decision of the Hon’ble Madras High Court in the case of Dr. P.K. Vasanthi Rangarajan v. CIT (2012) 252 CTR 336 (Mad): 2012 Tax Pub(DT) 2757 (Mad-HC). The relevant finding of the Honble Madras High Court is reproduced as under: 12. A reading of the provisions contained in section 54F(1), as it stood at the relevant point of time, shows that exemption from payment of tax on the capital gains arising on the transfer of any long-term capital asset not being a residential house is available to an assessee being a Hindu Undivided Family or an individual, if the long-term capital gain is invested in purchasing a residential house or constructing the residential house within the time stipulated therein. Proviso to sub section (1) states that the exemption contemplated under sub section (1) would not be available where an assessee owns a residential house as on the date of the transfer and that the income from the residential house is chargeable under the head income from house property. The Finance Act, 2001 amended the proviso with effect from 2001- 02 to permit exemption under section 54F, even if the assessee has owned one residential house as on the date of transfer, other than the new asset, or purchase in investments any residential house other than the new asset within a period of one year or three years as the case may be, but after the date of transfer of the original asset and the income from such residential house other than the one owned on the date of transfer of the original asset is chargeable under the head income from house property. 13. As far as the present case is concerned, contrary to the contention of the assessee, the assessee as well as her husband had offered 50% share each in the clinic in the income tax assessment and had claimed depreciation thereon.
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So too 50% share in the property in the wealth tax proceedings is offered by the assessee and her husband. The note submitted to the Asstt. CIT, City Circle 5(1), Madras, by the assessee discloses that the assessee owned 50% of the property in 828, Poonamallee High Road, Chennai, for use as residential property and 50% as clinic; so too for the property at Door No. 8284, Poonamallee High Road, Chennai. The facts thus reveal that as joint owners of the property, the assessee and her husband had shown 50% share with reference to the clinic and the residential portion in their respective returns. Thus, it is clear that as on the date of the transfer, the assessee did not own a residential house in her name only, the income from which was chargeable under the head income from house property, to bring into operation, the proviso to section S4F. The rejection of the claim for exemption would arise if only the property stands in the name of the assessee, namely, individual or HUF. Given the fact that the assessee had not owned the property in her name only to the exclusion of anybody else including the husband, but in joint name with her husband, we agree with the submission of the learned senior counsel appearing for the assessee herein that unless and until there are materials to show that the assessee is the exclusive owner of the residential property, the harshness of the proviso cannot be applied to the facts herein. Apart from that, 50% ownership is with reference to the clinic situated in the ground floor. As such, the entire property is not an exclusive residential property. Hence, we are inclined to agree with the assessees contention that the joint ownership of the property would not stand in the way of claiming exemption under section 54F. 5.2 Before us, the learned counsel of the assessee submitted that where there are different views of non-jurisdictional High Court, then one favourable to the assessee has to be followed. The learned counsel of the assessee relied on the decision of the Hon’ble Supreme Court in the case of CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC): 1973 Tax Pub(DT) 0421 (SC). Further, the Tribunal in the case of ITO v. Upkar Retail Pvt. Ltd. ITAT B Bench Ahmedabad ITA No. 2237/Ahd/2014: 2018 Tax Pub(DT) 3561 (Ahd-Trib) relying on the decision of the Hon’ble Supreme Court in the case of CIT v. Vegetable Products Ltd. (supra), which was followed by the Tribunal in the case of Tej International Pvt. Ltd. v. DCIT (2000) 69 TTJ 650 (Del) 2000 Tax Pub(DT) 1529 (Del-Trib), held that in case of conflict in the decision of the non-jurisdictional High Court, the view which is favourable to the assessee should be followed. The relevant finding of the Tribunal (supra) is reproduced as under: 4. As to what should be the view to be taken in these circumstances, i.e. when there are conflicting decisions of Hon’ble Courts above and when we do not have the benefit of the guidance by Hon’ble jurisdictional High Court, we find guidance from the decision of a Co-ordinate bench in the case of Tej International Pvt Ltd. v. DCIT (2000) 69 TTJ 650 (Del) 2000 Tax Pub(DT) 1529 (Del-Trib) wherein the coordinate bench has, inter-alia, observed as follows:-
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We have considered the rival submissions and perused the records. It is not in dispute that two High Courts, namely, Gauhati High Court and Karnataka High Court, has expressed conflicting views regarding levy of interest under sections 234B and 234C on deemed income under section 115J. Honble Gauhati High Court has opined that when legal fiction is to be created for an obvious purpose, full effect to it should be given Quoting Lord Asquith who said, the statute says that you must imagine a certain state of affairs, it does not say that having done so, you must cause or permit your imagination to boggle when it comes to inevitable corollaries of that state of affairs, Honble Gauhati High Court has held that there is no statutory exception excluding the operations of section 115J of the Act. Honble Karnataka High Court, on the other hand, has held that the words for the purposes of this section in Explanation to section 115J(1A) are relevant and cannot be construed to extend beyond the computation of liability to tax. In the opinion of the Honble Karnataka High Court, when a deeming fiction is brought under the statute, it is to be carried to its logical conclusions but without creating further deeming fiction so as to include other provisions of the Act which are not made specifically applicable. It is thus evident that views of these two High Courts are direct conflict with each other. Clearly, therefore, there is no meeting ground between these two judgments and we are also usable to accept the suggestion that we can follow earlier decisions of this Tribunal, or such views, whichever seem more reasonable of one of these High Courts. 7. It may be mentioned that some Benches of the Tribunal have either taken independent view on the issue in this appeal or have later on followed Honble Gauhati High Court referred to above. However, with the latest judgment of Honble Karnataka High Court in Kwality Biscuits Ltd.s case (supra) the situation is materially different. In the hierarchical judicial system that we have, better wisdom of the Court below has to yield to higher wisdom of the Court above and, therefore, one a authority higher than this Tribunal has expressed an opinion on that issue, we are no longer at liberty to rely upon earlier decisions of this Tribunal even if we were a party to them. Such a High Court being a non-jurisdictional High Court does not alter the position as laid down by Honble Bombay High Court in the matter of CIT v. Godavari Devi Saraf (1978) 113 ITR 589 (Bom.): 1978 Tax Pub(DT) 0643 (Bom-HC). Therefore, we do not consider it permissible to rely upon the earlier decisions of this Tribunal even if one of them is by a Special Bench. It will be wholly inappropriate to choose views of one of the High Courts based on our perceptions about reasonableness of the respective viewpoints as such an exercise will de facto amount to sitting in judgment over the views of the High Courts something diametrically opposed to the very basic principles of hierarchical judicial system. We have to, with our highest respect of both the Honble High Courts, adopt an objective criterion for deciding as to which of the Honble High Court should be followed by us.
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We find guidance from the judgment of Honble Supreme Court in the matter of CIT v Vegetable Products Ltd. (1973) CTR (SC) 177: (1972) 88 ITR 192 (SC) Honble Supreme Court has laid down a principle that if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This principle has been consistently followed by the various authorities as also by the Honble Supreme Court itself. In another Supreme Court judgment, Petron Engg. Construction (P.) Ltd. & Anr. v. CBDT &Ors. (1988) 75 CTR (SC) 20 : (1989) 175 ITR 523 (SC) : 1989 TaxPub(DT) 0727 (SC), it has been reiterated ITA No.2237/Ahd/2014 assessment year 2011-12 that the above principle of law is well established and there is no adopt about that. Honble Supreme Court had, however, some occasion to deviate from this general principle of interpretation of taking statute which can be construed as exception to this general rule. It has been held that the rule of resolving ambiguities in favour of tax payer does not apply to deductions, exemptions and exceptions which are allowable only when plainly authorised. This exception, laid down in Littman v. Barron 1952 (2) AIR 393 and followed by Apex Court in Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commr. of CCT [1992] Suppl. (1) SCC 21: 1991 TaxPub(EX) 624 (SC)and Novopa India Ltd. v. CCE & C 1994 (73) ELT 769 (SC): 1994 TaxPub (EX) 895 (SC) has been summed up in the words of Lord Lohen, in case of ambiguity, a taxing statute should be construed in favour of a tax-payer does not apply to a provision giving tax- payer relied in certain cases from a section clearly imposing liability. This exception, in the present case, has no application. The rule of resolving ambiguity in favour of the assessee does not also apply where the interpretation in favour of assessee will have to treat the provisions unconstitutional, as held in the matter of State of M.P. v. Dadabhoys New Chirmiry Ponri Hill Colliery Co. Ltd. AIR 1972 (SC) 614 Therefore, what follows is that in the peculiar circumstances of the case and looking to the nature of the provisions with which we are presently concerned, the view expressed by the Honble Karnataka High Court in the case of Kwality Biscuits Ltd case (supra), which is in favour of assessee, deserves to be followed by us. We, therefore, order the deletion of interest under sections 234B and 234C in this case. 5. In view of the above discussion, quite clearly, even when the decision of Honble non- jurisdictional High Courts are in conflict with each other, the only objective criteria which followed by us is to take a view favourable to the assessee. Honble Calcutta High Court’s decision in the case of Asian Financial Services Ltd. (supra), therefore, is required to be followed by us. Respectfully following the same, we uphold the conclusions arrived at by the learned Commissioner (Appeals) and reject the grounds raised by the revenue.
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5.3 In view of the binding precedents referred above, we find that decision of the Hon’ble Madras Court is in favour of the assessee and not a single decision of the Jurisdictional High Court, which is adverse to the assessee has been referred by the learned DR and therefore, decision of the Madras High Court being favourable to the assessee, the claim of deduction under section 54F of the Act need to allowed, as there is no material to show that assessee is exclusively owner of the other five residential properties/flats which are occupied by the other family members. The grounds of appeal of the assessee are accordingly allowed. 6. In the result, the appeal filed by the assessee is allowed.” 7. We find that under identical circumstances, the Co-ordinate Bench has held upon careful analysis of various judgments that joint ownership cannot be considered to be equivalent to the exclusive ownership. The said order has subsequently been followed by the Mumbai Bench in Abdul Rahim Suleman Ghaswala vs. Deputy Commissioner of Income Tax [ITA NO. 3177/Mum/2023], dated 1st January, 2024. It has been held as follows: “7. The proviso clearly states that the exemption u/s. 54F is not available if the assessee owns more than one house other than the new house as on the date of transfer. Therefore, the argument of the revenue is that since the assessee has joint ownership to the extent of 16.67% in 6 flats, the assessee is not entitled for exemption u/s. 54F as per the proviso. Thus it is important to analyse whether the joint ownership of 16.67% in 6 flats amounts to owning more than one residential house in assessee’s case and that the assessee is the “owner” of 6 flats jointly. It is an admitted fact that there is no clear demarcation with regard to the Flats jointly owned, though as per the submissions of the assessee each flat is occupied by each of the joint owners. Therefore, it cannot be said that one of the joint owners i.e. the assessee in this case is the absolute owner of 6 flats and no individual person on his own can sell the entire property of all 6 flats. At best the joint owner can sell his share of interest in the property but the property would still continue to be owned by the rest of the co-owners. Joint ownership is therefore different from absolute ownership and in the case of residential unit which is jointly owned none of the co-owners can claim that he is the owner of residential house. Accordingly where a house is jointly owned by two or more persons, none of them can be said to be the absolute owner of the house. 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). For holding this view, we draw strength from the decision of the Hon’ble Supreme Court in the case of Seth
Shri Jeetendra Chandrakant Nayak vs. ACIT (OSD) ITA no. 368/Nag./2023
Banarsi Dass Gupta v. CIT [1987] 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 and as a consequence to this decision the Legislature had to amend the provisions of section 32 with effect from 1-4-1997 by using the expression “owned wholly or partly”. Since no such words are expressively mentioned in Section 54F, in our considered view the word “own” in section 54F would include only the case where a residential house is fully or wholly owned by assessee and consequently would not include a residential house partly owned by the assessee along with other persons. This view is supported by decision of the coordinate bench in the following cases. (i) ITO vs. Rasiklal N. Satra [2006] 98 ITD 335 (Mum) (ii) Ashok G. Chauhan vs. ACIT [2019] 105 Taxmann.com 204 (Mumbai-Trib.) (iii) Anant R. Gawande vs ACIT [2022] 144 Taxmann.com 127 (Mumbai-Trib.) 8. The revenue has placed heavy reliance on the decision of the Karnataka High Court in the case of M.J.Siwani (supra) where the Hon’ble High Court has held that in terms of provisions of section 54F, where assessee on the 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. It is also submitted by the ld DR that the SLP against the order of Hon’ble High Court is dismissed by the Hon’ble Supreme Court. However, we noticed that a contrary view is held by the Madras High Court in the case of Dr.P.K.Vasanathi Rangarajan (supra) where it is held that joint ownership of a second property is no bar to exemption on transfer of individual property and merely because assessee jointly owned another property on date of transfer of asset, its claim for exemption under section 54F could not be rejected in respect of capital gain earned from transfer of her individual property. It is a settled position that in the absence of decision of the jurisdictional High Court, where two contrary views are expressed by the non-jurisdictional High Courts, the view favourable to the assessee need to be followed and reliance in this regard is placed on the decision of the Hon’ble Supreme Court in the matter of CIT vs. Vegetable Products Ltd. ((1972) 88 ITR 192 (SC) where the Hon’ble Supreme Court has laid down a principle that “if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted”. It is also relevant to note that the coordinate bench in the case of one of the other co-owners Shri Sainul Abedin Ghaswala (supra) held a similar view and allowed the claim of exemption u/s 54F.” 8. In view of the discussion concluded by the judicial precedence, we hold that the assessee cannot be denied the benefit of exemption u/s 54F on the ground that he jointly owned 50% in two flats since joint ownership/ part
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ownership cannot be treated as absolute ownership in the absence of specific words to that effect in Section 54 of the Act. Accordingly, the Assessing Officer is directed to allow the claim of exemption u/s 54F as claimed in the return of income. 9. We also find that lower authorities had erred in observing and also in relying upon the decision in the case of M.J.Siwani v. CIT (2014)53 Taxmann.com 318 (SC) : 2015 TaxPub(DT_ 2834 (SC) considering the same to be the pronouncement of Hon’ble Apex Court, without appreciating that the same was merely dismissal of SLP filed against the decision of Hon’ble Karnataka High Court which does not attracts the doctrine of merger so as to stand substituted in place of order put in before it, nor would it be a declaration of law by the Supreme Court under Article 141 of the Constitution, thereby misleading the facts of the case of M.J.Siwani vs. CIT (supra). Once civil appeal is dismissed after hearing both the parties holding that appeal has no merit. Such order become one which attracts Art. 141 of the Constitution and the law laid down is binding on all the Courts. [1] Smt. Tej Kumari vs. Commissioner of Income Tax & ors (2001) 247 ITR 0210; [2] V.M.Salgaocar & Bros. vs. CIT; (2000) 243 UTR 383 10. Now the only question remains as to whether assessee can be said to be the owner of three residential house/flat. 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 owned by more than one person, it cannot be said that any one of them is the owner of the property. In such a
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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 concerned, it would continue to be owned by co-owners. Joint ownership is different from absolute ownership. In case of residential unit, none of the co-owner 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 also fortified by the judgment of the Hon’ble Supreme Court in the case of Seth Banarsi Das Gupta vs CIT 166 ITR 783, wherein it was held that a fractional ownership was not sufficient for claiming even fraction 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 Hon’ble Supreme Court in the case of Seth Banarsi Dass Gupta (supra), the legislature could also amend the provisions of Section 54F so as to include part ownership. Since the legislature has consciously not amended the provisions of Section 54F, it has to be held that the word “own” in Section 54-F would include only the case where a residential house is fully or wholly owned by the assessee and consequently would not include a residential house owned by more than one person. Accordingly, Ground No.2 is allowed. Since we have already held as above, it is not necessary to delve on Ground No.3 any further.
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Ground No. 4 was already allowed by CIT (A) in his order holding that two flats should be treated as one flat in view of common infrastructural facilities in para 5.3.3 as follows: “5.3.3 With regard to the converting the two flats in to single unit with common kitchen, reliance is placed on the following decision rendered by various i. Hon’ble Karnataka High Court in the case of Commissioner of Income Tax vs. D. Ananda Bassapa wherein it was held that the assessee is entitled to exemption u/s 54F on purchase of two flats which were combined to make one residential unit. ii. Hon’ble Bombay High Court in the case of Commissioner of Income Tax vs. Jeo B. Fernandes, wherein it was held that exemption u/s 54 r.w.s. 54F is allowable on investment made in two flats if it is found that both flats were being used as one residential house and the investment was made by the assessee himself. iii. The decision of Hon’ble Delhi High Court in the case of CIT vs. Gita Duggal (ITA 1237 OF 2011). Relying on the above judicial pronouncements and partially agreeing with the contention of the assessee that he has converted flat into one unit and using it as own residence having common kitchen, meeting point and dining area after such conversion. In view of the above facts, the AO is rightly allowed the exemption u/s 54F treating it as one residential house.” The AO has erred in considering that assessee is eligible for deduction u/s 54F in respect of only one flat as per amended provision. The AO is directed to grant deduction u/s 54F for Rs.83,85,792/0 as claimed in return in full treating two flats as single one.
As regards Ground No.5, from the computation of income, it appears that there were 3 employers of the appellant throughout the years. He has claimed Rs.28,800/- i.e. Rs.9,600/- per employer as exempted transport allowance. Since the assessee was working in three companies, he had to commute to three different work places. So entire conveyance allowance of Rs.28,800/- claimed is allowable.
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In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 27/06/2024.
Sd/-/- Sd/- V. DURGA RAO K.M. ROY JUDICIAL MEMBER ACCOUNTANT MEMBER NAGPUR, DATED: 27/06/2024 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Nagpur; and (5) Guard file. True Copy By Order Rajesh V. Jalit Private Secretary (On contract) Sr. Private Secretary ITAT, Nagpur
