INCOME AX OFFICER, WARD-6(1), PUNE vs. SAMBHAJI MARUTI KATKAR, PUNE

1 ITA.No.645, 666 & CO.No.19/PUN./2024 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE “B” BENCH : PUNE

BEFORE SHRI RAMA KANTA PANDA, VICE PRESIDENT AND SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER

ITA.Nos.645, 666 & CO.No.19/PUN./2024 Assessment Year 2021-2022

Mr. Sambhaji Maruti The Income Tax Officer, Katkar, S.No.26/6, Ward – 6 (1), PMT Bldg., Singhad Road, Wadgaon Shankar Sheth Road, vs (Bk), PUNE - 411 051 Swargate, PUNE – 411 037. Maharashtra.PAN AEZPK8714Q Maharashtra. (Appellant/Cross Objector) (Respondent/Appellant)

For Assessee : Shri Bhuvanesh Kankani For Revenue : Shri Arvind Desai, Addl. CIT-DR

Date of Hearing : 09.09.2024 Date of Pronouncement : 11.09.2024

ORDER PER SATBEER SINGH GODARA, J.M.

This assessee’s and Revenue’s appeal(s) ITA.Nos.645

and 666/PUN./2024 and former’s cross objection

C.O.No.19/PUN./2024 in the latter’s above appeal, arise

against the CIT(A)-National Faceless Appeal Centre [in short

the “NFAC”] Delhi’s Din and Order No.ITBA/NFAC/S/250/

2023-24/1060556280(1), dated 06.02.2024, in proceedings

u/s.143(3) of the Income Tax Act, 1961 (in short “the Act”);

respectively.

Heard both the parties. Case files perused.

2 ITA.No.645, 666 & CO.No.19/PUN./2024 2. It emerges during the course of hearing that

although both these parties have instituted their instant two

respective appeals ITA.Nos.645 and 666/PUN./2024 with

cross objection CO.No.19/PUN./2024 (supra); raising the

solitary substantive issue of the assessee’s entitlement to

claim sec.54F deduction claim of Rs.5,42,71,818/-; disallowed

to the extent of Rs.2,52,50,000/; in the course of assessment

dated 05.12.2022 and partly upheld in CIT(A)-NFAC’s detailed

discussion as under :

“5.1. Ground of Appeal No.1: The appellant objects to

restricting the deduction to 50% of the Purchase cost of

New Property, by the AO on the reasoning that he is not

the absolute owner of the Property as the property was

jointly registered in his name as well as in the name of his

son Sh Rakesh Katkar. The appellant claims that the

appellant is a senior citizen and due to his age he had put

his son's name so that he can succeed him in the property

as a legal heir, without any hassle and at the same time

claims that the admissible deduction to the extent of 100%

must be allowed to him.

5.2. The appellant quoted a catena of judicial decisions

in support of the view that deduction u/s 54F must be

allowed in such a case, if the source of investment in the

3 ITA.No.645, 666 & CO.No.19/PUN./2024 new property are coming entirely from the claimant of the

deductions.

5.3. The AO has brushed aside the above contentions

stating

"The judgements quoted by the assessee are not

applicable on the facts of the case. Moreover

assesssee has failed to bring on record any binding

judicial precedent of jurisdictional HC or Hon SC.

Further since the ratio of the quoted judgement of

Hon. Bombay High Court is squarely applicable on

the facts of the present case, the issue has been

decided in view of the judgement of jurisdictional

High Court of Bombay as discussed above."

The AO has relied upon the judgement of Hon'ble Bombay

High Court I in the case of Prakash vs ITO, Ward No 1(5),

[2008] 173 Taxman 311 (Bombay).

5.3. I have gone through the said judgement quoted by

the AO. In that case the seller of original property did not

buy in joint name but in the sole name of his son and his

name was not mentioned as a owner in the new property.

Thus the facts of the case are totally distinguishable. On

the other hand, the appellant's case is supported by

4 ITA.No.645, 666 & CO.No.19/PUN./2024 numerous decisions given by Hon'ble Delhi High Court and

various tribunal, some of them are noted below:

Commissioner of Income tax v. Ravinder Kumar Arora

[2011] 15 taxmann.com 307 (Delhi)

In this case, the assessee sold a land owned by him

and claimed exemption of capital gain under section

54F on account of purchase of new house. The AO

decided that the assessee was entitled to exemption

under section 54Fonly to the extent of his right in the

new residential house purchased jointly with his wife

and allowed only 50% of the exemption claimed

under section 54F. The Hon'ble high court held that

the assessee was the real owner of the residential

house in question and mere inclusion of his wife's

name in the sale deed would not make any

difference.

CIT vs Kamal Wahal [2013] 30 taxmann.com 34

(Delhi)

In this case, the Hon'ble court went further and

allowed exemption u/s 54F where the investment in

new property was made in the name of assesse's

wife and not even in joint name. Sale proceeds from

property were invested in a vacant plot and purchase

5 ITA.No.645, 666 & CO.No.19/PUN./2024 of a residential house in the sole name of his wife.

AO denied the exemption. The HC observed that

Section 54F being a beneficial provision enacted for

encouraging investment in residential houses should

be liberally interpreted. Referring to various judicial

decisions, the HC observed that "predominant

judicial view, for the purposes of Section 54F, the

new residential house need not be purchased by the

assessee in his own name nor is it necessary that it

should be purchased exclusively in his name.

DIT vs. Mrs. Jennifer Bhide [2011] 15 taxmann.com

82 (Kar HC) - The assessee sold her residential

property and invested sale proceed on purchase of

residential property and bonds & claimed exemption

u/s 54 and 54EC of the Act. The above property was

not in the name of the assessee alone but was in the

name of her husband jointly. Though the name of the

assessee's husband was shown in the sale deed as

well as in the bonds, entire consideration for

acquisition of the same is flown from the assessee.

The Hon'ble HC observed that on careful reading of

section 54, it is not expressly stated that the

purchase to be made or the construction to be put up

by the assessee, should be there in the name of the

6 ITA.No.645, 666 & CO.No.19/PUN./2024 assessee only. The Hon'ble court further observed

that 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. It was held that in

absence of an express provision contained in these

sections that the investment 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. The claim of

exemption was allowed.

CIT v. Gurnam Singh [2008] 170 Taxman 160, 327

ITR 278 (P&H-HC) - The Assessee sold an

agricultural land and out of sale proceeds purchased

another agricultural land in his name and in name of

his only son and claimed deduction u/s 54B. The

Hon'ble HC held that admittedly, purchased land

was being used by assessee only for agricultural

purpose and merely because in sale deed his only

son was also shown as co-owner, assessee could be

denied deduction under section 54B.

7 ITA.No.645, 666 & CO.No.19/PUN./2024 CIT v. V. Natarajan [2006] 154 ΤΑΧΜΑΝ 399 (MAD

HC) - The assessee, sold a house property and

purchased a property in name of his wife. The

Assessee claimed exemption under section 54. The

Hon'ble HC held that since assessee was owner of a

house property, he would be entitled to exemption

under section 54.

CIT v Sh. Mahadev Balai ITA 136/2017 (Raj HC) The

Hon'ble HC allowed exemption u/s 54B for

investment made by the assessee in the name of his

wife.

5.4. In view of the above the appellant is allowed

100% of the admissible claim of deduction u/s 54F. This

ground of appeal is allowed.

5.5. Ground of Appeal No. 2: The appellant objects

to restricting the qualifying amount of deduction From Rs.

5,72,80,000/- claimed by him to Rs. 5,05,00,000/-. The

AO restricted the claim to Rs. 5,05,00,000/- to the extent

of the acquisition cost of land and did not consider further

amount, as the appellant failed to justify the claim

towards construction of the house property.

5.6. The appellant claimed that he had started the

construction of Residential house on the same land and

8 ITA.No.645, 666 & CO.No.19/PUN./2024 had availed a home Loan of Rs.4.5 crores for the

construction from IDFC First Bank and submitted the

sanction letter. He disputed the AO's apprehension that

whether the loan was taken foe same property, whether

the construction has actually started and whether on the

same plot stating that necessary evidences of the

construction cost shall be submitted.

5.7. It is notable that the appellant has not

furnished any such evidence either in the assessment

proceedings or the appellate proceedings. The only

documents submitted even remotely related to construction

are Sanction Plan and Commencement certificate. Even in

his submission dated 06.01.2024, the appellant has not

made any submission about ground of appeal no. 2 and

has also not submitted any evidence which can

substances the fact that construction on the plot has

commenced has or any amount has been incurred in this

regard.

5.7. In view of the same no interference is required

on the AO's action of restricting the qualifying amount of

deduction From Rs. 5,72,80,000/- to Rs. 5,05,00,000/-.

This ground of appeal is accordingly dismissed.

9 ITA.No.645, 666 & CO.No.19/PUN./2024 5.8. Grounds of appeal No. 3 & 4:- These grounds of

appeal need not be separately adjudicated as they are

general and consequential in nature.

allowed to the extent of Rs.5,05,00,000/- and the AO's

action of not considering the amount of Rs.37,71,818/-

(5,72,80,00 5,05,00,000) claimed as construction is

upheld.”

ITA.No.645/PUN./2024 claims sec.54F deduction in entirety

along with the cost of acquisition representing stamp fee and

other miscellaneous items. The Revenue’s cross-appeal

ITA.No.666/PUN./2024 on the other hand raised two

substantive grounds challenging correctness of the CIT(A)-

NFAC’s action granting sec.54F deduction despite the fact that

there is no compliance to the scheduled stipulation of

construction of residential house and allowability of the very

claim in principle to the extent of 50% in his son’s name;

respectively.

C.O.No.19/PUN./2024 at the same time, we find that it is

found to be supportive of the CIT(A)-NFAC's findings allowing

sec.54F deduction.

10 ITA.No.645, 666 & CO.No.19/PUN./2024 5. It is in this factual backdrop that we first take-up

the allowability of assessee’s sec.54F deduction in principle.

There is hardly any dispute between the parties that he had in

fact sold/transferred the capital asset in question on

27.10.2020 for Rs.7,81,38,108/-; giving rise to capital gains of

Rs.5,42,71,818/- [after reducing the cost of acquisition

amounting to Rs.2,38,66,290/-]. The assessee thereafter

invested the said capital gains in the specified residential asset

admittedly on 21.01.2021 to the tune of Rs.5,72,80,000/-

along with his son. We make it clear that there was no

mention of any specified share in their respective names in the

purchase deed. Learned Assessing Officer’s detailed

assessment discussion dated 05.12.2022 at pages-7 onwards

indicates that he quoted Prakash vs. ITO [2008] 173 Taxman

311 (Bom.) to restrict the assessee’s impugned deduction

claim to the extent of 50% only and concluded that his son

was not entitled for the very relief as per their lordships’

decision. All this resulted in disallowance of Rs.2,90,21,818/-

which in turn has been reversed in the CIT(A)-NFAC's above

extracted detailed discussion.

ITA.No.666/PUN./2024 first of all is that assessee had not re-

invested his impugned capital gains within the stipulated time

and therefore, his sec.54F deduction is not allowable. We find

11 ITA.No.645, 666 & CO.No.19/PUN./2024 that there is neither any such objection in the assessment nor

in the CIT(A)-NFAC's adjudication and therefore, in light of the

fact that assessee had purchased his immovable asset on

21.01.2021 (supra), we reject the Revenue’s instant former

substantive ground.

the Assessing Officer herein had rightly restricted the

assessee’s impugned deduction claim only to the extent of 50%

once his son/co-purchaser is not entitled for the same going

by hon’ble jurisdictional high court’s decision (supra). We find

no substance in the Revenue’s instant latter argument as well

as admittedly, the assessee had re-invested the capital gains

in his name and his son has been taken only as a proforma

purchaser. We further note that as against these clinching

facts emerging herein; the appellant before their lordships’ had

re-invested the capital gains only in his son’s name and

therefore, the said judicial precedent does not apply in the

given facts of the case before us. This is indeed coupled with

the fact that various other hon’ble jurisdictional high courts

have already decided the issue in assessee’s favour whilst

dealing with such a deduction claim involving co-purchases

made by the taxpayer and the concerned family member(s).

Learned counsel further quotes sec.45 of the Transfer of

Property Act, 1882 that when funds used in a co-purchase

12 ITA.No.645, 666 & CO.No.19/PUN./2024 deed involving two or more vendees are clearly identifiable,

their interest or title is to the extent of the corresponding

investment made. He explains to the fact that the assessee

only had invested these capital gains which have not been

disputed. We thus reject the Revenue’s instant twin

substantive grounds as well as the main appeal

ITA.No.666/PUN./2024 in very terms.

2024 stands rendered infructuous since found supportive of

the CIT(A)’s findings.

ITA.No.645/ PUN./2024 wherein his first substantive ground

claims stamp duty and registration fee amounting to

Rs.35,35,000/- and Rs.30,000/-; totaling to Rs.35,65,000/-

as also part of his sec.54F deduction claim. He has also filed a

copy of the relevant purchase deed before us to this effect. The

Revenue could not controvert the said clinching figures

emerging therefrom. We thus accept the assessee’s instant

former head of claim amounting to Rs.35,65,000/- in very

terms.

assessee’s paper book pages 3 to 6 comprising of various

sample invoice(s) demonstrating cost of acquisition of his

13 ITA.No.645, 666 & CO.No.19/PUN./2024 house property. These invoices admittedly indicate expenses of

Rs.10,53,742/-; Rs.74,191/-; Rs.7,12,783/- and

Rs.3,04,145/-; respectively; which have nowhere been put to

verification in both the lower proceedings. The fact also

remains that such expenses indicating various miscellaneous

heads in construction/purchase of a new residential house

could not be altogether ruled-out. Faced with this situation

and in larger of interest of justice, we deem it as a fit case to

restrict the assessee’s impugned claim to a lump sum amount

of Rs.15 lakhs only [forming part of the record throughout]

with a rider that the same shall not be treated as a precedent.

These assessee’s remaining claim sum raised in all these four

invoices shall stand declined in otherwords. Necessary

computation shall follow as per law. Ordered accordingly.

partly allowed in above terms.

2024 is dismissed, assessee’s appeal ITA.No.645/PUN./2024

is partly allowed and cross objection of assessee C.O.No.19/

PUN./2024 has become infructuous. A copy of this common

order be placed in the respective case files.

14 ITA.No.645, 666 & CO.No.19/PUN./2024 Order pronounced in the open Court on 11.09.2024.

Sd/- Sd/- (RAMA KANTA PANDA) (SATBEER SINGH GODARA) VICE PRESIDENT JUDICIAL MEMBER Pune, Dated 11th September, 2024 VBP/- Copy of the Order forwarded to :

// TRUE COPY //

Senior Private Secretary: ITAT : PUNE.