V.R.USHA,CHENNAI vs. ITO, CHENNAI

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

This appeal of the assessee is directed against the order of

the Commissioner of Income Tax (Appeals)-4, Chennai, dated

29.10.2015 and pertains to assessment year 2011-12.

submitted that the only issue arises for consideration is with regard

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to denial of exemption under Section 54F of the Income-tax Act,

1961 (in short 'the Act'). He further submitted that the Assessing

Officer disallowed the claim of the assessee under Section 54F of

the Act on the ground that the assessee was owner of two houses

on the date of sale of the land at Pallikaranai. Referring to the copy

of the settlement deed as extracted by the CIT(Appeals), the

Ld.counsel submitted that the settlement deed was executed

subject to the life interest retained by the settlor, the assessee’s

mother. When the assessee’s mother retained the life interest over

the property, according to the Ld. counsel, no interest on the

property will pass on to the assessee so long as the assessee’s

mother is alive. According to the Ld. counsel, on the date of

execution of sale deed, the assessee’s mother was very much alive,

therefore, the assessee is not the owner of the property which was

said to be conveyed to her by means of the settlement deed.

Referring to the decision of the Mumbai Bench of this Tribunal in

ITO v. Rasiklal N. Satra (2006) 98 ITD 335, the Ld.counsel

submitted that on identical circumstances, when the assessee

owned interest in the property along with others, it was found by the

Mumbai Bench that joint ownership is different from absolute

ownership. Ownership of a residential house means ownership to

3 I.T.A. No.2288/Mds/15

the exclusion of all others. Therefore, the Tribunal found that the

joint ownership of a residential house cannot be a reason to deny

exemption under Section 54F of the Act. The Ld.counsel has also

placed reliance on the judgment of Madras High Court in CIT v. K.

Ramachandra Chettiar (1983) 141 ITR 771, judgment of Madras

High Court in R. Janardhanan v. CWT (1987) 165 ITR 144 and on

the decision of Delhi Bench of this Tribunal in WTO v. Smt.

Kaushalya Rani (1989) 28 ITD 435.

Representative, submitted that even though the life interest was

retained by the settlor in the settlement deed, the settlement deed at

page 8 clearly says that the settlee, namely, the assessee shall

enjoy the property settled absolutely and the settlement is

irrevocable. Similarly, the settlement deed further says that the

settlee, namely, the assessee shall henceforth be entitled to deal

with the same as full owner of the property without any obstruction

or hindrance from the settlor or anyone claiming under them.

Therefore, according to the Ld. D.R., even though there was a

reference in the preamble of the settlement deed about the

reservation of life interest retained by the settlor, in the body of

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settlement deed, the absolute property was transferred to the

assessee by means of gift / settlement deed and the physical

possession of the property was handed over to the assessee as a

token of acceptance of the gift. Therefore, according to the Ld.

counsel, the assessee is the absolute and full owner of the property

which was conveyed to her by means of settlement deed. Hence,

the assessee cannot claim that the property conveyed by means of

settlement deed is not her property. Therefore, the CIT(Appeals)

has rightly confirmed the order of the Assessing Officer.

perused the relevant material available on record. The claim of

exemption under Section 54F of the Act was disallowed by the

Assessing Officer on the ground that the assessee owns more than

one house on the date of sale of the land at Pallikaranai. The

assessee claims that the property conveyed by her mother by

means of settlement deed is only a partial interest on the property

and such partial interest cannot be considered to be full ownership

for the purpose of denying the exemption under Section 54F of the

Act.

5 I.T.A. No.2288/Mds/15

122 of the Transfer of Property Act, 1882. Section 122 of that Act

defines “Gift” as follows:-

“ "Gift" is the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee.”

In view of the above definition, the gift shall be voluntary and without

consideration. In the case before us, the settlor, namely, the

assessee’s mother retained the life interest over the property.

Subject to life interest retained by the assessee’s mother, the

property was conveyed to the assessee by means of a registered

settlement deed. On the date of the sale of the land at Pallikaranai,

admittedly, the assessee’s mother, who settled the property, was

alive. Therefore, the life interest retained by the assessee’s mother

over the property was very much available and the assessee could

enjoy the property only subject to life interest of her mother.

Therefore, this Tribunal is of the considered opinion that the

property which was conveyed by her mother by way of settlement

deed cannot convey full ownership. In other words, the assessee

has ownership subject to the life interest retained by the assessee’s

6 I.T.A. No.2288/Mds/15

mother. The question arises for consideration is whether such

property can be considered as one of the residential houses for the

purpose of denying exemption under Section 54F of the Act? The

Mumbai Bench of this Tribunal in Raskilal N. Satra (supra)

examined the issue and found that the word “own” in Section 54F of

the Act would include only a residential house which is fully and

wholly owned by the assessee. In the case before us, the assessee

owns the house subject to life interest retained by the assessee’s

mother, namely, settlor. Therefore, it cannot be said that the

assessee owns a house fully and wholly. The ownership of the

assessee over the property is subject to life interest retained by the

assessee’s mother. Therefore, this Tribunal is of the considered

opinion that the house property conveyed to the assessee by

means of settlement deed subject to life interest over the property

cannot be a reason for denying deduction under Section 54F of the

Act. By following the decision of Mumbai Bench of this Tribunal and

for the reason stated therein, this Tribunal is unable to uphold the

orders of the lower authorities. Accordingly, the orders of the lower

authorities are set aside. The Assessing Officer is directed to grant

exemption under Section 54F of the Act.

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Order pronounced on 12th May, 2016 at Chennai.

sd/- sd/- (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) (A. Mohan Alankamony) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member

चे�नई/Chennai, �दनांक/Dated, the 12th May, 2016.

Kri. आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A)-4, Chennai-34 4. Principal CIT-5, Chennai 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.