Income Tax Appellate Tribunal - Pune
Shri Shetty G.D. vs Income-Tax Officer on 2 March, 2007
Equivalent citations: [2008]112ITD103(PUNE), [2008]298ITR49(PUNE)
ORDER
C.L. Sethi, Judicial Member
1. ITA No 1180/PN/02 is filed by the assessee, directed against the CIT (A)'s order dt 23.1.2002 passed in the matter of an assessment made Under Section 143(3) of the Income-tax Act, 1961 by the AO for the assessment year 95-96. ITA No. 714/PN/03 and C.O. No. 13/PN/06 relating thereto are connected to the matter of imposing penalty Under Section 271(1)(c) by the AO for the same assessment year 95-96. These two appeals and the cross objection were heard together and, as such, a common order is being passed, for the sake of convenience.
ITA No 1180/PN/02 - AY : 95-96:
2.1. We shall first take ITA No 1180/PN/02 filed by the assessee arising from the CIT (A)'s order passed in the matter of an assessment made Under Section 143(3) of the Act by the AO. The solitary issue raised by the assessee in this appeal is as under:
1. The ld. CIT (A) has erred in not appreciating the facts and submissions placed before him in relation la the claim of exemption Under Section 54F of the IT Act, 1961.
2.2. The relevant facts giving rise to the issue in dispute may be summarized as under:
2.3. The assessee filed his return of income on 21.8.95 declaring total income at Rs. 50,261/-. During the relevant year, the assessee had sold a plot in Bibvewadi. The capital gain arising from the sale of the plot at Bibvewadi was claimed as exempted for the reason that the entire consideration amount received on sale of a plot was deposited in capital gain account scheme in Syndicate Bank. The return of income filed by the assessee was initially processed Under Section 143(1) as per the return filed by the assessee.
2.4. It is further stated by the AO in his assessment order that subsequently, on the basis of the information available on record, it was found that the assessee was residing in a flat No. 14/112, Agarkar Nagar, Pune, which was allotted to him by the Maharashtra Housing & Area Development Authority. Therefore, the AO had taken a view that as the assessee was already an owner of a residential house property, he was not eligible for deduction Under Section 54F of the Act in view of the provisions contained in proviso to Section 54F of the Act. The AO, therefore, reopened the assessment by issuing the notice Under Section 148 of the Act on 7.1.2000. The notice Under Section 148 was served on the assessee on 10.1.2000. In response to the notice issued Under Section 148 of the Act, the assessee gave a reply vide his letter dt 7.2.2000 received in AO's office on 28.2.2000 that the original return filed on 21.8.95 may be treated as in compliance to the notice Under Section 148 of the Act. In the said reply dt 7.2.2000, the assessee has also clarified to the AO that he was not the owner of the concerned flat allotted by Maharashtra Housing & Area Development Authority, but he was still a tenant of the said flat, inasmuch as the ownership of the flat was not transferred to him by Maharashtra Housing & Area Development Authority. The AO has considered the assessee's submissions as well as other materials brought on record by the assessee and then came to a conclusion that the assessee's case is hit by the provisions contained in the proviso to Section 54F and as such, the assessee was held not to be entitled to any deduction Under Section 54F of the Act. The AO's discussion and observations are set out here as under:
5. The assessee's submission vide letter dated 07/02/2000 has been considered.' According to the assessee he is still a tenant of the flat in Agarkanagar as the ownership of the flat is not transferred to him by MHADA. He has also furnished a copy of relevant part of rules of MHADA which empower them to evict the tenant for default in payment of rent, compensation for more than two months.
6. A reference was made to the Estate Manager. Maharashtra Housing Board calling for complete details of their Agarkanagar Scheme and hire purchase & ownership.
7. As stated by the Estate Manager, in his certificate dated 07/10/98 available on record, the flat in Agarkanagar was allotted to the assessee in 1971 on hire purchase basis. The assessee has paid the hire purchase installment and the said hire purchase period is over in 1990. A Co-op Housing Society of the members of the said building No. 14, has already been formed and registered with the Registrar of Co-op Societies.
8. It is stated by the Estate Manager, MHADA that they have provided some services, viz. water, electricity to the members and there is a dispute between the Society and MHADA over payment of the same. Only for this reason the transfer of Building to the Registered Society is hold up.
9. In allotment letter of the flat copy available on record, MHADA has clarified in para 4 that electricity is not available in the flat that time and when the same will be provided allottee has to pay the Bill.
10. From the facts narrated above the following points are noted:
i) The flat was allotted to the assessee in 1971 on hire purchase basis.
2) 'The assessee paid all the instalments till 1990 and the hire purchase is complete.
3) The Co-op Housing Society of the Members of Building No. 14 has been formed and Registered and assessee has been allotted membership of the Society.
4) Possession of the flat is with the assessee for the last many years and it is occupied by him as residence.
5) There is some dispute between the Co-op. Housing Society and the MHADA over payment of service charges viz. electricity, water and hence Building is not transferred to the Society by MHADA.
As per Sub-section (iii) and (iiia) of Section 27 of the Income-tax Act, 1961, a member of a co-op society to whom a building or part thereof is allotted or leased under a house building scheme of the society, company or association, he shall be deemed owner of that building or part thereof.
So also a person who is allowed to fake or retain possession of any building or part thereof shall be deemed to be the owner of that building or part thereof.
11. From the points noted in para 10 above it is clear that assessee is deemed owner of the property as he is a member of the Registered Co-op Housing Society of the Building. He is also occupier of the said flat for the last twenty five years. The flat is allotted to him by MHADA a Govt., undertaking on hire purchase and the hire purchase agreement is duly fulfilled by the assessee by paying all the monthly instalments from 1971 to 1990 making his intent ion of purchase of flat clear and fulfilling the said agreement.
12. Thus the assessee's claim of deduction Under Section 54F of the Act is required to be rejected as he does not fulfill the conditions as required by the proviso to Section 54F. The assessee has thus filed in accurate particulars of income and claimed incorrect deduction Under Section 54F to which he is not eligible. The deduction Under Section 54F is not allowable and hence disallowed in assessment.
Being aggrieved with the AO's order in denying the deduction claimed Under Section 54F, the assessee preferred an appeal before the CIT (A).
3.1. The CIT(A) has narrated the assessee's submission in para 4 of his order as under:
4. The Learned Authorised liepresentative has vehemently challenged the action of the Assessing Officer on the basis that the appellant had no legal ownership on the flat No. 112 of building No. 14, Agarkar Nagar, Pune-411 001 allotted by Maharashtra Housing & Area Development Authority (MHADA). In this context, the Authorised Representative has referred, to a certificate dated 07/10/1998 issued by Estate Manager, MHADA, which as per the English translation furnished by the Authorised Representative stales as under:
Flat holder has not paid arrears and not complied with terms of the contract, transfer of properly has not been taken place. After payment and compliance of the terms sale deed with society and Land Revenue agreement will be executed. At the same time till the transfer of property is taken place to the society ownership of the building remains with MHADA.
The Authorised Representative has also referred to Section 66 of the MHADA Act, which provides that any tenant does not pay the rent, compensation or amount lawfully due from him in respect of the house for a period of more than two months, MHADA has power to evict him from the house. The Authorised Representative has also placed reliance on the notice of Pune Municipal Corporation issued in regard to demand for property tax, in which property at 15/14 Bund Road, Pune-411 001 is stated to be owned by the Estate Manager, Maharashtra Housing Board. As regards the Assessing Officer's reference to Section 27 of the Act in para 10 of assessment order, the Authorised Representative has submitted that provisions of this section are intended only for Sections 22 to 26 & they could not be extended to other provisions of the Act. Accordingly, it has been urged that the appellant did not own any house on the date of transfer of the plot and as such capital gain arising on sale of the plot should not have been taxed in the Assessment Year 1995-96, since the entire sale consideration had been deposited in capital gain account with Syndicate Bank far investment in new residential house within the period stipulated under Section 54F.
3.2. After considering the assessment order as well as the assessee's submission, the CIT (A) decided the issue against the assessee by observing as under:
5. I have carefully considered the submissions of the Learned Authorised Representative but do not find the same acceptable because in my opinion also, the ownership of flat No. 112 in building No. 14, Maharashtra Housing Board Colony, Agarkarnagar, Pune-411 001 vested with the appellant both by virtue of the allotment letter dated 13/11/1969 of MHADA & possession enjoyed by the appellant of this flat since 1971. In fact, as per the letter dated 13/11/1969 addressed to the appellant, flat No. 112 of building No. 14 was allotted to the appellant under hire purchase scheme on the following terms & conditions:
I am directed to inform you that you have been allotted three/two room tenement No. 112 of bldg. No. 14 under Middle Income Group, Hire Purchase Scheme at Agarkarnagar w.e.f. 01/11/71 on monthly installment of Rs._____ per month exclusive of provisional service charges of Rs.______ per month.
You are therefore requested to call on the office of Estate Manager (East), Maharashtra Housing Board, Bombay and to see him between______to______P.M. except Saturday and Tuesday on or before 15/11/1969 to execute the hire purchase agreement and to pay:
a) Rs. 6338.50 As initial deposit.
b) Rs. 973.00 On account of permanent deposit.
c) Rs. 321.00 As advance month's installment &
service charges.
d) Rs. 390.00 Towards provisional stamp duty
on the hire purchase agreement.
e) Rs. 864.00 to be executed by you in respect of
the above tenement.
Total Rs. 8886.50 Eight thousand eight hundred
eighty six & paise fifty only.
It is not in dispute that the payment stipulated in the allotment letter dated 13/11/1969 have already been made by the appellant. Besides, it is to he presumed that on fulfillment of the conditions set out in the allotment letter only the appellant was allowed possession of the fiat since 1971 and thereafter no proceedings either for eviction or any other purpose us stipulated under Section 66 of MHADA Act, 1976 have been taken against the appellant. Accordingly, I do not find any merit in the submissions of the appellant/the Authorised Representative that the appellant was not the owner but a tenant as stated in the certificate dated 07/10/1998 of the Estate Manager, MHADA, since he had not paid certain arrears. In fact, the certificate dated 07/10/1998 issued by the Estate Manager, MHADA, is totally silent about the allotment letter dated 13/11/1969 & it does not specify the nature of the payment in arrears and the terms of the contract which the appellant has not fulfilled. Thus, merely on the basis of the letter dated 07/10/1998, it cannot he said that the appellant did not own flat No. 112 in building No. 14 at Agarkarnagur, Pune-411001 and I do not find any justification for relying on the letter dated 07/10/1998 of the Estate Manager, MHADA, by ignoring the allotment letter dated 13/11/1969 & the fact of continued possession enjoyed by the appellant since 1971. In this context, it may also be pertinent to refer to the decision of the Bombay High Court in the case of Mrs. Hilla J.B. Wadia 216 ITR 376, wherein honourable court has held as under:
...What one has to see is whether the assessee has acquired a right to a specific flat in such a building which is being constructed by the society and whether she has made a substantial investment within the prescribed period which will entitle her to obtain possession of the flat so constructed and in which she intends to reside. The material test in this connection is domain over the flat and investment in it. The assessee satisfies both these conditions. She has acquired such a domain and has invested almost the entire requisite amount of it within a period of 2 years prescribed under Section 54. In this connection attention is drawn to a circular of the CBD'T bearing No. 471 dt. 15th Oct., 1986 which dealt with the investment in flat under the Self financing Scheme of the Delhi Development Authority. The Board has staled in the circular that when an allotment letter is issued to an allottee under this scheme on payment of the first installment of the cost of construction, the allotment is final unless it is cancelled. The allottee thereupon gels title to the properly on the issuance of the allotment letter and the payment of installments is only a follow up action and taking delivery of possession is only a formality.
6. In fact, unlike the case of Mrs. Hills J.B. Wadia (supra), wherein the conditions regarding purchase of the house was treated as satisfied on the basis of allotment letter & payment of installments even without delivery of possession, in the case of the appellant possession has already been given since 1971 pursuant to allotment letter dated 13/11/1969 and merely because agreement has not been registered, it cannot be said that the appellant was not the owner of flat No. 112 of building No. 14 at Agarkarnagar, Pune-411 001 as on 15/09/1964. Accordingly, I agree with the Assessing Officer that the case of the appellant fell within the proviso to Section 54F since on the dale of transfer of the plot at Bibwewadi he owned a residential house being flat No. 112, building No. 14, Maharashtra Housing Colony, Agarkarnagur, Pune-411 001 as per allotment letter dated 13/11/1969. Further, the fact that the entire sale consideration was deposited in capital gain account with Syndicate Bank with intention to purchase a residential house within the period stipulated under Section 54, which ultimately did not happen & the appellant on his own offered capital gain in the Assessment Year 1998-99 on expiry of the period of three years can be of no avail, in view of the specific provisions of the proviso to Section 54F. Therefore, the action of the Assessing Officer in taxing the capital gain of Rs. 9,12.400/- on sale of plot of land during the Assessment Year 1995-96 is confirmed and appeal fails in the Assessment Year 1995-96.
Still aggrieved, the assessee has preferred this appeal before us.
4.1. In the course of hearing of this appeal, the assessee invited our attention to his written submission filed before the CIT (A), which runs as under:
1. The appellant has sold plot of land during the year and deposited the sale consideration in Capital Gain Account with Syndicate Bank. The appellant claimed exemption under Section 54F of the Act. The learned assessing officer rejected the appellants' claim on the ground that appellant owns residential house at the time of sale.
2. The learned assessing officer recorded reasoning in para 10 of his assessment order for establishing ownership of the residential house of the appellant.
3. The learned assessing officer has not considered the most important point mentioned by the Estate Manager in his certificate dl. 07/10/1998 which stales as under:
Flat holder has not paid arrears and not complied with terms of the contract, transfer of property has not been taken place. After payment and compliance of the terms sale deed with society and Land Revenue agreement will be executed. At the same time till the transfer of property is taken place to the society ownership of the building remains with MHADA.
4. Further, Section 66 of MHADA Act, 1976 provides that any tenant do not pay the rent, compensation or amount lawfully due from him in respect of the house for a period of more than two months MHADA has power to evict him from the house. We are enclosing herewith Xerox copy of Section 66 of MHADA Act, 1976 for your reference.
5. As per the records of Time Municipal Corporation also the property is owned by the Estate Manager, Maharashtra Housing Board, Pune. We are enclosing here with Xerox copy of the latest corporation tax bill for your reference.
6. The learned assessing officer in para 10 and 11 of his statement order referred Sub-section (iii) and (iiia) of Section 27 of the Income Tax Act, for determining deemed ownership.
However Section 27 starts with the words: "For the purposes of Sections 22 to 26--"That means the provisions of Sub-section (iii) and (iiia) of Section 27 of the Act could not be extended for determining ownership of the house for other Sections of the Act. Section 27 has got limited operations for taxing income from house property. The scope of this Section could not he extended to other Sections of the Act.
7. In view of the foregoing discussion, we respectfully submit that appellant was tenant in residential property possessed by him. As such exemption under Section 54F was rightly claimed by the appellant.
8. Moreover when appellant could not invest the sale proceeds of the plot of land in acquiring residential property within stipulated period as per Section 54F of the Act, appellant offered the long terms Capital Gain for tax and paid taxes accordingly in the Assessment Year 1998-1999.
9. Appellant had intention to buy the residential house in case this particular property which is still in dispute could not be transferred in his name. However within stipulated time he could not buy the property, he offered long terns Capital Gain for tax.
In view of the above appellant prays that the exemption under Section 54F be allowed to him.
Thanking you, Yours faithfully.
Sd/-
Rajeev Kulkarni Chartered Accountant Encl: 1. Xerox copy of the certificate from Estate Manager
2. Xerox copy of the extract of Section 66 of MHADA Act
3. Xerox copy of the PMC Bill.
4.2. By making a reference to Section 66 of the Maharashtra Housing and Area Development Act, 1976, the Id Counsel for the assessee further contended that in the light of the provisions contained in Section 66 of the Maharashtra Housing and Area Development Act, 1976, and in the light of a letter dt 7.10.98 given by the Estate Manager, Pune Housing and Development Board, Pune-1, the assessee cannot be considered to be an owner of the flat allotted to me assessee by the Housing Development Authority. He further contended that in order to apply the provisions of proviso to Section 54F of the Act, the assessee should own one house other than the new one, in his own right. He further submitted that the word "owner of house property" has been defined, for the purpose of Sections 22 to 26 under Section 27 of the Income-tax Act, where a member of a co-operative society, company or other association of persons to whom a building or part thereof is allotted or leased under a house building scheme of the society, company or association, as the case may be, shall be deemed to be the owner of that building or part thereof, but no such definition has been provided in the Income-tax Act for the purpose of Section 54F of the Act. It was further submitted by him that the definition of owner of house property provided Under Section 27 of the Act is for a limited purpose of Sections 22 to 26 of the Act and, as such, the said definition cannot be imported for the purpose of Section 54F of the Act. It was, therefore, contended that since the Legislature has not inserted a similar definition of owner of house property in Section 54F of the Act, the word 'owner' for the purpose of Section 54F should be understood in the general and ordinary meaning as understood under the common law. He, therefore, summarized his contention by contending that for the purpose of Section 54F, the assessee cannot be deemed to be the owner of the flat that has been allotted to him by the Housing Development Authority and, as such, the assessee was not owning a residential house, other than the new house, on the date of transfer of the plot at Bibvewadi and, therefore, the assessee's claim Under Section 54F was very much in order and deserves to be allowed.
4.3. The ld. DR, on the other hand, supported the orders of the authorities below. He further submitted that since the flat in question was being occupied by the assessee in his own right having been allotted by the Housing Authority to him on hire purchase system and all the payment thereof was also fully paid by the assessee, the assessee should be deemed to be the owner of that flat. Whatever reason has been given by the AO and by the CIT(A) for rejecting the assessee's claim of deduction Under Section 54F has been reiterated by the Id DR in the course of hearing of this appeal. Since the AO's contention as well as the CIT(A)'s contention has already been set out hereinabove, we do not deem it necessary to reproduce the same here again.
5. We have considered the rival contentions of both the parties. The orders of the authorities below have been gone through. Relevant provisions as well as decisions cited at the Bar has been deliberated upon.
6.1. In so far as the fact that during the year under consideration the assessee has sold a plot situated at Bibvewadi for Rs. 23,11,000/- and long term capital gain amounting to Rs. 9,12,400/- has arisen therefrom, no controversy has been raised by the parties. It is also an undisputed fact that total sale consideration has been deposited by the assessee in the capital gain account scheme for the purpose of claiming deduction Under Section 54F of the Act. In other words, the sale consideration arising from the sale of plot has been utilized by the assessee by way of depositing the same in capital gain account scheme as the same could not be utilized for the purpose of constructing or purchasing a house before the due date of filing the return of income Under Section 139 of the Act. The dispute is only with regard to the applicability of the proviso to Section 54F of the Act. On reading the proviso to Section 54F(1), it is clear that nothing contained in Sub-section (1) of Section 54F shall apply if the conditions enumerated in the said proviso are satisfied. Section 54F(1) and Proviso thereto, as it then stood relevant to the assessment year 1995-96, runs as under:
54F(1) Subject to the provisions of Sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long term capital asset, not being residential house (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 dale on which the transfer look place purchased, or has within a period of three years after that dale constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say.-
(a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not he charged under Section 45;
(b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under Section 45:
Provided that nothing contained in this sub-section shall apply where the assessee owns on the date of the transfer of the original asset, or purchases, within the period of one year after such dale, or constructs, within the period of three years after such dale, any residential house, the income from which is chargeable under the head "Income from house property", other than the new asset Explanation-....
6.2. As clarified in the said proviso to Section 54F(1), the benefit of Section 54F(1) shall not be granted, where the assessee owns, on the date of transfer of the original asset, (i.e. here a plot of land sold by the assessee) or purchases, within the period of one year after such date, or constructs, within a period of three years after such date, any residential house, the income from which is chargeable under the head "income from house property", other than the new asset.
6.3. The department's case is that the benefit of Section 54F is not available to the, assessee, inasmuch as the assessee owns a house being a flat allotted by the housing society to him on the date of the transfer of the plot of land. This house or flat owned by the assessee is other than the new asset that was to be constructed or purchased by the assessee within a specified period. On the other hand, the assessee's case is that the flat allotted to the assessee by the housing society cannot be said to be owned by the assessee and, as such, the assessee did not own any residential house on the date of the transfer of the plot of land. Now, the question that falls for our consideration is to determine as to whether the assessee owned any residential house other than the new asset, on the date of transfer of the plot in question.
6.4. In the proviso to Section 54F(1), the word used by the Legislature is, "where the assessee owns, on the date of transfer of the original asset, ..., any residential house, income from which is chargeable under the head "income from house property", other than the new asset." The similar concept "own" or "owned" or "ownership" is also used by the Legislature in Sections 22 to 26 and 32 of the Income-tax Act. For the purpose of Sections 22 to 26, "owner of house property" has been defined Under Section 27 of the Act, which reads as under:
27. For the purposes of Sections 22 to 26
(i) an individual who transfers otherwise than for adequate consideration any house property to his or her spouse, not being a transfer in connection with an agreement to live apart, or to a minor child not being a married daughter, shall he deemed to he the owner of the house properly so transferred;
(ii) the holder of an impartible estate shall he deemed to he the individual owner of all the properties comprised in the estate;
(iii) a member of a co-operative society, company or other association of persons to whom a building or part thereof is allotted or leased under a house building scheme of the society, company or association, as the case may be, shall be deemed to be the owner of that building or part thereof;
(iiia) a person who is allowed to lake or retain possession of any building or part thereof in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 (4 of 1882), shall be deemed to be the owner of that building or part thereof;
(iiib) a person who acquires any rights (excluding any rights by way of a lease from month lo month or for a period not exceeding one year) in or with respect to any building or part thereof by virtue of any such transaction as is referred to in clause (f) of Section 269UA, shall be deemed lo be the owner of that building or part thereof;
(iv) [***]
(v) [***]
(vi) taxes levied by a local authority in respect of any property shall be deemed to include service taxes levied by the local authority in respect of the property.
Clause (iii), (iiia) and (iiib) to Section 27(1) has been inserted by the Finance Act, 1987 with effect from 1.4.1988.
6.5. The word and phrase "owner" in the context of Section 22 of the Income-tax Act had come for consideration before the Hon'ble Supreme Court in the case of CIT v. Podar Cement P. Ltd. and Ors. . In this case, it was held that the amendment made to Section 27 of the Act by the Finance Act, 1987 was intended to supply an obvious omission or to clear up doubts as to the meaning of the word "owner" in Section 22 of the Act. The Hon'ble Supreme Court, therefore, held that the amendment introduced by the Finance Act, 1987 was declaratory or clarificatory in nature so far as it related to Section 27(iii), (iiia) and (iiib) and, consequently these provisions are retrospective in nature. In this case, it was further held that though under the common law, "owner" means a person who has got valid title legally conveyed to him after complying with the requirements of law, such as Transfer of Property Act, Registration Act, etc. in the context of Section 22 of the Income-tax Act, 1961 having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, to tax the income, "owner" is a person who is entitled to receive income from the property in his own right. The requirement of registration of the sale deed in the context of Section 22 is not warranted. Therefore, in this case, in the context of Section 22 of the Income-tax Act, 1961, the word "owner" was meant to be a person who is entitled to receive income from the property in his own right, notwithstanding the fact that he might not have got valid title legally conveyed to him after complying with the requirements of law, such as Transfer of Property Act, Registration Act etc. The case of Poddar Cement P. Ltd. (supra) before the Hon'ble Supreme Court was related to the assessment year 75-76 and 76-77 before the insertion of clause (iii), (iiia) and (iiib) to Section 27(1) of the Act by the Finance Act, 1987. It is, thus, clear that the meaning of the word "ownership of property" was interpreted by the Hon'ble Supreme Court in the case of CIT v. Poddar Cement P Ltd and Ors. (supra), in the context in which it is used in Section 22 of the Act as it stood even before the insertion of Clause (iii), (iiia) and (iiib) to Section 27(1) of the Act. Therefore, the meaning of the word "owner" in Section 22 of the Act even in the absence of Clause (iii), (iiia) and (iiib) inserted in Section 27(1) of the Act with effect from 1.4.88 would be a person who is entitled to receive income from property in his own right, notwithstanding the fact that the requirement of law, such as transfer of Property Act, Registration Act etc. might not have been complied with. The requirement of registration of the sale deed in the context of Section 22 was held to be not warranted. The Hon'ble Supreme Court only derived a strength and support from the subsequent amendment to Section 27 of the Act by the Finance Act, 1987 whereby the old Clause (iii) was substituted by new Clauses (iii), (iiia) and (iiib) with effect from April 1, 1988, which have been held to be declaratory and clarificatory in nature to avoid any doubts. In the context of Section 32 of the Act, the meaning of "owner" had come for consideration before the Hon'ble Supreme Court in the case of Mysore Minerals Ltd v. CIT (1999) 239 ITR 75 (SC). In this case, the Hon'ble Supreme Court held thus as under:
Extracted from Head Notes:
Section 32 of the Income-tax Act, 1961, confers a benefit on the assessee. The provision should be so interpreted and the words used therein should be assigned such meaning as would enable the assessee to secure the benefit intended to be given by the Legislature to the assessee. It is also well-settled that where there are two possible interpretations of a taxing provision the one which is favourable to the assessee should be preferred.
Section 32 of the Act allows certain deductions, one of them being depreciation of buildings etc. owned by the assessee and used for the purpose of the business or profession. The terms "own", "ownership" and "owned" are generic and relative terms. They have a wide and also a narrow connotation. The meaning would depend on the context in which the terms are used. CIT v. Podar Cement Pvt. Ltd. [1997] 226 1TR 625 (SC), is a case under the Income-tax Act and has to be taken as a trend-setter in the concept of ownership. Assistance from the law laid down therein can be taken for finding out the meaning of the term "owned" as occurring in Section 32(1) of the Act. The term owned as occurring in Section 32(1) of the Income-tax Act must be assigned a wider meaning. Anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having the right to use and occupy the properly and/or to enjoy its usufruct in his own right would be the owner of the building though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. "Building owned by the assessee", the expression as occurring in Section 32(1) of the Income-tax Act, means the person who having acquired possession over the building in his own right uses the same for the purposes of the business or profession though a legal title has not been conveyed to him consistently with the requirements of laws such as the Transfer of Property Act and the Registration Act, etc. Generally speaking depreciation is an allowance for the diminution in the value due to wear and tear of a capital asset employed by an assessee in his business. The very concept of depreciation suggests that the tax benefit on account of depreciation legitimately belongs to tone who has invested in the capital asset and is utilizing the capital asset and thereby losing gradually the it vestment caused by wear and tear, and would need to replace the same by having lost its value fully over a period of lime. It is well-settled that there cannot be two owners of the property simultaneously and in the same sense of the term. The intention of the Legislature in enacting Section 32 of the Act would be best fulfilled by allowing deduction in respect of depreciation to the person in whom for the time-being vests the dominion over the building and who is entitled to use it in his own right and is using the same for the purposes of his business or profession. Assigning any different meaning would not subserve the legislative intent.
6.6. From the said decision of Hon'ble Supreme Court in the case of Mysore Minerals Ltd. v. CIT (supra), it is more than clear that the meaning of the term "own", "ownership", and "owned" would depend on the context in which the terms are used. In this case, it was further observed by the Court that the decision of the Hon'ble Supreme Court in the case of CIT v. Podar Cement P. Ltd. and Ors. (supra) is a case under the Income-tax Act and has to be taken as a trend-setter in the concept of ownership. It was further observed herein that assistance from the law laid down in Poddar Cement P. Ltd's case can be taken for finding out the meaning of the term "owned" as occurring in Section 32(1). Guided by the law laid down by the Hon'ble Supreme Court in the case of CIT v. Poddar Cement P. Ltd. the Hon'ble Supreme court in the case of Mysore Minerals Ltd. v. CIT (supra) assigned tre term "owned" occurring in Section 32(1) of the Act a wider meaning. The Hon'ble Supreme Court further observed that the term "owned" occurring in Section 32(1) of the Act must be assigned a wider meaning, and any one in possession of property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the building though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act etc. 6.7. In the light of the ratio laid down by the Hon'ble Supreme Court in the case of Mysore Minerals Ltd., one can hold, without any difficulty, that the decision of Hon'ble Supreme Court in the case of CIT v. Podar Cement P. Ltd and Ors. (supra) is to be taken as a trend-setter in the concept of ownership, and in order to find out the meaning of the word "own", "owner" or "owned" in the Income-tax Act, an assistance from the law laid down by the Hon'ble Supreme Court in this case of CIT v. Podar Cement P. Ltd. and Ors. (supra) can be taken. It is also equally true that meaning of the word "owner" or "own" or "owned" would also depend on the context in which these terms are used. It is therefore, essential to see as to whether the word "own" has been used in Section 54F of the Income-tax Act in the same context in which this term has been used in Section 22 and/or 32 of the same Act.
6.8. Section 54F has been inserted by the Finance Act, 1982 with effect from 1st April, 1983, i.e. for and from the assessment year 1983-84. This new Section grants exemption from tax on capital gains, in certain cases, on investment of the net consideration in a residential house. Section 54F was inserted in the statute with a view to encourage house construction. The scope of Section 54F inserted by the Finance Act, 1982 has been explained in a Departmental circular No. 346 dt 30th June, 1982 as under:
20.1 Under the existing provisions of the Income-tax Act, any profits and gains arising from the transfer of a long term capital asset are charged to lax on a concessional basis. For this purpose, a capital asset which is held by an assessee for a period of more than 36 months is treated as a "long term" capital asset.
20.2 With a view to encouraging house construction, the Finance Act, 1982, has inserted a new Section 54F to provide that where any capital gain arises from the transfer of any long term capital asset, other than a residential house, and the assessee purchases within one year before or after the date on which the transfer took place or constructs within a period of 3 years after the date of transfer, a residential house the capital gain arising from the transfer will be treated in a concessional manner as under:
(i) If the cost of the house that has been purchased or constructed is not less than the consideration in respect of the capital asset transferred, the entire capital gain arising from the transfer will be exempt from tax.
(ii) If the cost of the newly acquired house is less than the net consideration in respect of the capital asset transferred the exemption from long term capital gain will be granted proportionately on the basis of investment of net consideration either for purchase or construction of the residential house.
This concession will not be available in a case where the assessee owns on the date if the transfer of the original asset any residential house, or purchases within the period of one year after such date, or constructs, within the period of three years after such date, any other residential house. Where the assessee purchases or constructs any other residential house within the period aforesaid, the exemption under the proposed provision, if allowed, shall stand forfeited and the amount of capital gain arising from the transfer of the original asset, which was not charged to tax, shall be allowed to be the income chargeable under the head "capital gain" relating to long term capital assets of the previous year in which such residential house is so purchased or constructed. "Net consideration" in respect of the transfer of a capital asset means the full value of the consideration received or accruing as a result of the transfer of the capital asset after deduction of any expenditure incurred wholly and exclusively in connection with the transfer.
20.3 If the assessee transfers the newly acquired residential house within three years of its purchase or construction, then the amount of capital gain arising from the transfer of the original asset which was not charged to tax shall be deemed to be the income of the year in which the new asset is transferred and such income shall be charged to lax under the head "capital gains" relating to long term capital assets.
20.4 This provision will become effective from 1st April, 1983, and will accordingly apply in relation to the assessment year 1983-84 and subsequent years.
(Sections 12, 23(c) and 32(i) of the Finance Act, 1982) (Source: Excerpts from Departmental Circular No. 316, dated 30thJune, 1982.) 6.9. From the object and purpose of inserting Section 54F of the Act, it is clear that the exemption Under Section 54F has been granted to the assessee with a view to encourage construction of one residential house. The construction or purchase of a house other than one residential house are not covered by Section 54F of the Act. It is also clear that the concession provided Under Section 54F would not be available in a case where the assessee already owns, on the date of the transfer of the original asset, any residential house. Therefore, it is cear that emphasis has been given on owning of one residential house only by any assessee. The assessees, who already own, on the date of transfer of the original asset, any residential house, are not eligible for the concession provided Under Section 54F even if any other residential house may be either purchased or constructed by them. Therefore, concession has been given only to encourage that any assessee should have his own one residential house. In other words, when any assessee, who possesses or occupies any residential house in his own title exercising such dominion over the residential house as would enable others being excluded therefrom and having the right to use and occupy the said house and/or to enjoy its usufruct in his own right should be deemed to be the owner of a residential house for the purpose of Section 54F of the Act.
6.10. In order to avail the benefit of Section 54F, one of the essential conditions is that the assessee should purchase within the specified period, or constructs within the specified period, a residential house. The various situations under which the assessee can be said to have purchased within specified time, or constructs within the specified time, a residential house so as to make him entitled to avail the benefit of deduction under Section 54 or 54F of the Act, have come for consideration in some cases before the Courts. In this connection, a reference may be made to the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Smt. Beena K. Jain , where the view of the Tribunal that the relevant date in this connection is the date when the assessee paid the full consideration amount on the flat becoming ready for occupation and obtained possession of the flat, was upheld by the Hon'ble High Court by observing as under:
Under Section 54F of the Income-tax Act, in the case of an assessee if any capital gain arises from the transfer of any long term capital asset, if not being a residential house, and the assessee has, within a period of one year before or two years after the date on which the transfer took place, purchased a residential house, the capital gain shall be dealt with as provided in that section. As per the section certain exemption has to be allowed in respect of the capital gains to be calculated as set out therein. The department contends that the assessee did not purchase the residential housel either one year prior to or two years after the sale of the capital asset which resulted in the long term capital gains. According to the department, the agreement for purchase of the new flat was entered intro more than one year prior to the sale. Hence, the petitioner is not entitled to the benefit Under Section 54F. In our view, the Tribunal has rightly negatived this contention and has held that the new residential house had been purchased by the assessee within two years after the sale of the capital asset which resulted in long term capital gains. The Tribunal has held that the relevant date in this connection is July 29, 1988, when the petitioner paid the full consideration amount on the flat becoming ready for occupation and obtained possession of the flat. This has been taken by the Tribunal as the dale of purchase. The Tribunal has looked at the substance of the transaction and come to the conclusion that the purchase was substantially effected when the agreement of purchase was carried out or completed by payment of full consideration on July 29, 1988, and handing over of possession of the flat on the next day.
6.11. Further, the CBDT vide its circular No. 471 dt 15.10.86 has also clarified that cases of allotment of flats under the self-financing scheme of the Delhi Development Authority shall be treated as cases of construction for the purpose of capital gains and, therefore, investment of capital gain in purchase of DDA flats in the form of first instalment of purchase of flat within two years of sale of original property would entitle the assessee to claim exemption in respect of capital gain, even though construction of flat was not completed in two years. Applying the aforesaid circular, the Hon'ble Madhya Pradesh High Court in the case of Smt. Shashi Varma v. CIT (1997) 224 ITR 106 (MP) has allowed the assessee's claim for deduction Under Section 54F by holding that condition of constructing a house has been satisfied on payment of the first instalment for the purchase of a flat to the Delhi Development Authority. A useful reference may also be made to the decision of Hon'ble jurisdictional High Court in the case of CIT v. Mrs. Hilla J.B. Wadia , where the Hon'ble High Court held as under:
Extracted from Head Note:
Section 54 of the Income-tax Act, 1961. has to be construed in the context of the manner in which residential properties are now being constructed in a city like Bombay where, looking to the cost of the land, co-operative housing societies are being formed for constructing a building in which flats are allotted to members. This must also be viewed as a method of constructing residential tenements. What we have to see is whether the assessee has acquired a right to a specific flat in such a building which is being constructed by the society and whether he has made a substantial investment within the prescribed period which will entitle him to obtain possession of the flat so constructed and in which he intends to reside. The material test in this connection is domain over the flat and investment in it. Central Board of Direct Taxes Circular No. 471, dated October 15, 1986, deals with investment in flats under the self-financing scheme of the Delhi Development Authority. The Board has slated in the circular that when an allotment letter is issued lo an allotted under this scheme on payment of the first installment of the cost of construction, the allotment is final unless it is cancelled. The allottee, thereupon, gets title lo the property on the issuance of the allotment letter and the payment of installment is only a follow-up action and taking delivery of possession is only a formality. The, Board has directed that such an allotment of a flat under this scheme should be treated us a case of construction for the purpose of capital gains.
6.12. Further, the Hon'ble Delhi High Court in the case of CIT v. Smt. Brinda Kumari (2001) 114 Taxman 266 (Del) wherein in respect of the positive finding from the Tribunal given in the following terms, the Hon'ble High Court held that no question of law arises:
4. We find substance in the assessee 's stand. The Tribunal has, inter alia, recorded a positive finding in the following terms:
In the present case on the facts there is no dispute that the late Maharani advanced a sum of Rs 5,25,000 for the specific purpose of construction of flats for her on third floor of the Akash Deep Building. The Akash Deep Building was constructed after demolishing 9, Hailey Road, which was sold by late Maharani to Ansal & Sehgal Properties (P) Ltd. If therefore, the latter constructed the flats on behalf of the late Maharani with the funds advanced by her, there appears to be no difficulty in treating the construction as the construction made by her.
In view of the aforesaid findings, which were factual, no quest ion of law arises. We, accordingly, decline to answer the questions referred.
6.13. From the aforesaid decisions as well as from the Board's Circular, it becomes clear that the cases of allotment of flats under self-financing scheme of any development authority where capital gain is invested in purchase of flats of development authorities in the form of payment of first instalment of purchase of flat, has been treated to be cases of construction or purchase of a house for the purpose of allowing the deduction in respect of capital gain Under Section 54F of the Act, though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. It is, thus, clear that for the purpose of granting the benefit of deduction Under Section 54F of the Act on account of purchase or construction of any residential house within the specified period, the requirement of Transfer of Property Act, the Registration Act etc. has not been held to be compulsory. Applying the rules of harmonious construction of a statute, a similar analogy should be held to be applicable for interpreting the word "own" of any residential house, used in the other part of the same section. To put it differently, the ratio laid down by the Courts and the position explained by the Board in its circular in defining or interpreting the meaning of "purchase or construction of any residential house by any assessee" for the purpose of benefit granted under Section 54F of the Act, shall equally apply while interpreting the word "own any residential house" used in the other part of the same section having the same intent and object thereof. Therefore, we hold that the reasoning given by the Courts and the Board's Circular in the purpose of giving the meaning to the expression "purchases or constructs" occurring in same Section 54F of the Act should be equally applied for the purpose of firding out the true and correct meaning of the expression "own" occurring in same Section 54F of the Act.
6.14. We may also have a look to the controversy arising in this case from one more angle. On reading of the proviso to Section 54F, it is seen that the expression "assessee owns, on the date of transfer of the original asset, any residential house" is used in the proviso with reference to "the residential house, the income of which is chargeable under the head "income from house property" (underlined ours). In other words, the expression "own any residential house" is used with a reference to the income of which is chargeable under the head "income from house property". The Legislature has inserted Sections 22 to 26 in the Income-tax Act for the purpose of determining the income, which is chargeable under the head "income from house property. Section 22 to Section 26 of the Act provides the manner of computing the income from house property chargeable to tax under the head "Income from house property". Section 22 charges to tax, in the hands of the owner, the annual value of house property. Section 23 lays down the manner of determining the annual value. Section 24 lays down allowable deduction from the annual value and Section 25 lays down the amounts which are not deductible, notwithstanding the provisions of Section 24. Section 25A enacts special provision for cases where unrealized rent allowed as deduction is realized subsequently. Section 26 provides the manner of computing income in cases where the property is owned by more than one co-owner. In other words, the income chargeable to tax under the head income from house property is to be computed in the manner laid down in Sections 22 to 26 of the Act. In the case of CIT v. Podar Cement P. Ltd. and Ors. (supra), the Hon'ble Supreme Court has held that for the purpose of charging the income under the head "income from house property", the owner is a person who is entitled to receive income from the property in his own, right and the requirement of registration of the sale deed in the context of Section 22 is not warranted. Therefore, in this view of the matter, the meaning given to the word "owner of house property" for the purpose of charging income of which under the head "income from house property" by the Hon'ble Supreme court in the case of CIT v. Podar Cement P. Ltd. and Ors. (supra) is to be imported for the purpose of defining the word "own of any residential house" occurring in Section 54F of the Act. Therefore, for the purpose of Section 54F of the Act, the meaning of "own" or "owner" is to be understood in the same sense in which it is understood for the purpose of Section 22 to 26 of the Act.
6.15. Therefore, applying the principle laid down by the Hon'ble Supreme Court in the case of Poddar Cement P. Ltd. (supra) as well as in the case of Mysore Minerals Ltd. (supra), and following the ratio of the Hon'ble Supreme Court in the case of Mysore Minerals Ltd. holding that the decision of Hon'ble Supreme Court in the case of CIT v. Podar Cement P. Ltd. and Ors. (supra) should be taken as a trend-setter in the concept of ownership, and in order to find out the meaning of the word "own" or "owned" or "owner" in the Income-tax Act, assistance from the law laid down by the Hon'ble Supreme Court in the case of Poddar Cement P. Ltd. and Ors. can be taken, and having found that that the word "own", "owner" or "owned" in Section 54I is used in similar context in which it is used in Section 22 of the Act, we are of the considered view that, for the purpose of Section 54F of the Act read with proviso thereto, any one in possession of any residential house in his own title exercising such dominion over the residential house as would enable others being excluded therefrom and having the right to use and occupy the same and/or to enjoy its usufruct in his own right and/or is entitled to receive income from the residential house in his own right, would be the owner of the residential house, though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. We further hold that the definition of "owner of the house property" defined in Clauses (iii), (iiia) and (iiib) of Section 27 of the Act, which are held to be clarificatory and declaratory in nature by the Hon'ble Supreme Court, shall be equally applicable in the context of Section 54F of the Act.
7.1. Having said so, we shall now proceed to consider the facts and circumstances of the present case. In the present case, the facts, as found by the authorities below on the basis of the various documents and papers collected during the assessment proceedings, which has remained unrebutted or uncontroverted, may be summarized as under:
1) That residential flat was allotted to the assessee in 1971 on hire purchase basis.
2) The assessee had paid all the instalments by 1990 and the hire purchase was completed.
3) The assessee was allowed to possess the flat in his own right. No other person other than the assessee had any right or interest to occupy or possess the property.
4) The Co-op Housing Society of the Members of Building No. 14 where the flat was situated was duly formed and registered and assessee was allotted membership of the Society.
5) Possession of the flat was with the assessee for the last many years, and it was occupied by him as residence. The property was in the nature of a residential property.
6) The dispute between the Co-op. Housing Society formed of the members of the building and the MHADA was only with regard to payment of certain electricity and water charges and for which reason the execution and registration of any deed required under the Transfer of Property Act, Registration Act, etc. was not made by MHADA in favour of the Society.
7) No proceedings Under Section 66 of the Maharashtra Housing and Area Development Act, 1976 were ever initiated against the assessee to evict him from the said residential flat nor any final order Under Section 66 evicting the assessee from the flat was ever passed against the assessee.
7.2. Having regard to the facts narrated above, it is thus clear that the assessee was in possession of the residential flat in his own title exercising dominion over the property by excluding others therefrom and has the right to use and occupy the property and/or to enjoy its usufruct in his own right, notwithstanding the fact a formal deed of title might not have been executed and registered by MHADA in favour of the co-operative society formed by the members.
8.1. Before parting with this issue, it is also necessary to deal with the assessee's contention that in view of Section 66 of the Maharashtra Housing and Area Development Act, 1976, he has acquired no right or title over the flat allotted to him but he is merely a tenant thereof. In this respect, the Id Counsel for the assessee has given a strong emphasis on a certificate dt 7.10.88 issued by the Estate Manager, Maharashtra Housing & Area Development Authority saying that as the flat holders has not paid arrears and has not complied with terms of the contract, the transfer of property in their favour has not taken place, and it is only after the payment and compliance of the terms of the contract that the sale deed with society and land revenue agreement will be executed, and till such transfer of property is taken place in favour of the society, the ownership of the building remains with the MHADA.
8.2. In order to decide this issue, we find it useful to refer to Section 66 of the Maharashtra Housing and Area Development Act, 1976, which reads as under:
66. (1) If the Compelent Authority is satisfied-
(a) that the person authorised to occupy any Authority premises has-
(i) not void rent or compensation or amount lawfully due from him in respect of such premises for a period of more than two months, or
(ii) Sub-let, without the previous permission of the Authority, the whole or any part of such premises, or
(iii) committed, or is committing any act which is destructive or permanently injurious to such premises, or
(iv) made, or is making, material addition to, or alteration in, such premises without the previous permission of the Authority, or
(v) other wise acted in contravention of any of the terms, express or implied, under which he is authorised to occupy such premises, or
(vi) failed to vacate the premises required by the Authority for the purposes of implementing any plan or project for the sale of tenements and to accept the alternative accommodation offered by the Authority:
(b) that any person is an unauthorised occupation of any Authority premises, the Competent Authority may, for reasons to he recorded in writing, by notice served (i) by post, or (ii) by affixing a copy of it on the outer door or some other conspicuous part of such premises, or (iii) in such other manner as may he prescribed, other that person, as well as any other person, who may he in occupation of the whole or any part of the premises, to vacate the premises in unauthorised occupation, within 24 hours of the date of service of notice, and in any case within a period of seven days of the date of such service.
(2) Before an order under Sub-section (1) is made against any person, the Competent Authority shall issue, in the manner hereinafter provided a notice in writing calling upon all persons concerned to show cause within ten days why an order of eviction should not he made.
The notice shall-
(a) specify the grounds on which he order of eviction is proposed to be made and
(b) require all persons concerned that is to say, all persons who are or may he in occupation of or claim interest in the Authority premises, to show cause against the proposed order, on or before such dale is specified in the notice.
If such persons makes an application to the Competent Authority for the extension of the period specified in the notice, such Authority may grant the same on deposit of one hundred rupees and on such terms as to payment and recovery of the amount claimed in the notice, as such Authority thinks fit.
Any written statement put in by any person and documents produced in pursuance of the notice, shall be filed with the record of the case, and such person shall be entitled to appear before the Competent Authority by advocate, attorney or other legal practitioner.
The notice to be served under this sub-section shall be served in the manner provided for the service of a notice under Sub-section (1); and thereupon, the notice shall he deemed to have been duly given to all persons concerned.
(3) If any person refuses or fails to comply with an order made under Sub-section (1), the Competent Authority may evict that person and any other persons who obstructers him and take possession of the premises, and may for that purposes use such forces as may be necessary.
(4) The. Competent Authority may, after giving ten clear days notice to the person from whom possession of the Authority premises has been taken under Sub-section (3) and after publishing such notice in the prescribed manner, remove or cause to be removed or disposed of by public auction, any property remaining on such premises. Such notice shall be served in the manner provided for the service of a notice under Sub-section (1).
(5) Where the property is sold under Sub-section (4), the sale proceeds shall, after deducting the expenses of sale, he paid to such person or persons as may appear to the Competent Authority to be entitled to the same:
Provided that, where the Competent Authority is unable to decide as lo the person or persons to whom the balance of the amount is payable of as lo the apportionment of the same, he shall refer such dispute lo a civil court competent jurisdiction and the decision of the court thereon shall be final.
(6) If a person, who has been ordered to vacate any premises under Sub-clause (i) or (v) of Clause (a) of Sub-section (1), within seven days of the date of service of the notice, pays to the Authority the rents or compensation or amount in arrears or carries out or otherwise complies with the term contravened by him lo the satisfaction of the Competent Authority, such Authority shall, on such terms, if any (including the payment of any sum by way of damages or compensation for the contravention aforesaid), in lieu of evicting such person under Sub-section (3) cancel his order made under Sub-section (1) and thereupon, such person shall continue to hold the premises on the same terms on which he held them immediately before such notice was served on him:
Provided that, if a person authorized to occupy the Authority premises fails to pay the arrears of rent, compensation or amount for three limes within a period of two consecutive years, he shall be liable to be evicted under the provisions of this section.
Explanation I. - For the purpose of this Chapter, the expression 'unauthorised occupation' in relation lo any person authorised lo occupy any Authority premises includes the continuance of occupation by him or by any person claiming through or under him of the premises after the authority under which he was allowed lo occupy the premises has expired or has been duly determined.
Explanation II. - For the purpose of this Chapter, the term rent, compensation or amount includes any payment to he made by a person in respect of any premises taken by him from the Authority under hire-purchase agreement and also any penalty [imposed such rate as may be prescribed] for the default in the payment of rent, compensation or amount. The amount of such penalty shall not exceed 10 per cent. Of such rent, compensation or amount.
(7) Notwithstanding anything contained in this Chapter including this section, if any person fails lo vacate the premises required by the Board for the purpose of demolition of building containing such premises which are unfit for human habitation then, the Board may require the occupants thereof to vacate the premise within 24 hours of the date of service of the notice; and at the same time allot them alternative accommodation in any building of the Authority at such place us it thinks fit. The accommodation may not be in the same locality or of the same floor area as the premises vacated by the occupiers. If any occupier fails to accept and occupy the alternative accommodation allotted lo him within the time specified by the Board the responsibility of the Board to provide him with any alternative accommodation shall cease. Such occupier shall, however, have a right to re-occupy his premises in the building if a building is re-erected on the land on which the demolished building stood.
(8) Where an occupier does not vacate his premises, the Board may take or cause to be taken such steps and use or cause to be used such force as may be reasonably necessary for the purpose of getting the premises vacated.
(9) The decision of the Board under Sub-sections (7) and (8) shall be final and conclusive and shall not be called in question in any court nor any injunction against the order of demolition or vacation of the premises shall be made by any court.
8.3. On reading the aforesaid Section 66, we find that before any order Under Section 66 is made against any person authorised to occupy any Authority premises, the competent authority have to issue, in the manner provided therein, a notice in writing calling upon the person concerned to show cause within 10 days as to why an order of eviction should not be made against him. It is also provided therein that the notice shall specify the ground on which the order of eviction is proposed to be made. Therefore, the service of notice is a pre-condition for taking action Under Section 66(1) of the Maharashtra Housing and Area Development Act. Moreover, Sub-section (6) of section 66 further provides that if a person, who has been ordered to vacate any premises under Sub-clause (i) or (v) of Clause (a) of Sub-section (1) of Section 66, within seven days of the date of service of the notice, pays to the authority the rents or compensation or the amount in arrears or carries out or otherwise complies with the term contravened by him to the satisfaction of the competent authority, the authority shall, on such terms, in lieu of evicting such person under Sub-section (3), cancel his order made under Sub-section (1) and thereupon, such person shall continue to hold the premises on the same terms on which he held them immediately before such notice was served on him. Therefore, on reading the Section 66 as a whole, it is clear that merely because the occupier has not paid any rents or compensation or any amount lawfully due from him within a specified time, it by itself would not make the occupier disentitled for ever to occupy the house in his own right unless the proceedings contemplated Under Section 66 are finally concluded or determined against the occupier. In the present case, no such action as contemplated Under Section 66 of the Maharashtra Housing and Area Development Act was ever taken against the present assessee. On the relevant date, i.e. 31.3.95, the assessee was not ordered to be evicted from the premises by the Competent Authority by way of passing any valid order under Section 66 of the Maharashtra Housing and Area Development Act. In the course of hearing of this appeal, a query was raised to the Id Counsel for the assessee as to whether any action Under Section 66 had been taken against the assessee. In reply thereto, the Id Counsel for the assessee has stated that no such order or notice as contemplated Under Section 66, had ever been issued or passed against the assessee. Therefore, in the light of the facts and circumstances of the case, and in the light of the provisions contained in Section of the Maharashtra Housing and Area Development Act, 1976, we are of the considered view that merely by making a general reference to Section 66, it cannot be said that the assessee has lost all his dominion or control or possession over the flat in question as on the relevant date. Since the flat No. 112 in building No 14 of Maharashtra Housing Board Colony, Agarkarnagar, Pune 411001 was allotted to the assessee, vide allotment letter dt 13.11.69 of MHADA, and possession was given to the assessee and the assessee has paid hire purchase instalments, and has been in possession of the said flat since 1971 in his own right to the exclusion of others till the relevant date, the assessee shall be deemed to be the owner of that flat as on the relevant date, for the purpose of Section 54F of the Act.
8.4. In the light of the discussion made above, we are, therefore, inclined to uphold the order of the CIT (A), who has rightly confirmed the order of the AO, holding that the assessee's case is hit by the proviso to Section 54F of the Act, inasmuch as, on the date of the transfer of the plot at Bibvewadi, the assessee owned a residential house being flat No. 112, Building No. 14, Maharashtra Housing Colony, Agarkarnagar, Pune and, thus, the assessee is not entitled to any deduction Under Section 54F of the Act. We hold and order accordingly. In the result, the appeal filed by the assessee is dismissed.
ITA No. 714/PN/03 & C O No. 13/PN/069. ITA No. 714/PN/03 is directed against the CIT (A)'s order in confirming the penalty to the extent of 100% of the tax sought to be evaded on an addition made by the AO by way of disallowing the assessee's claim of deduction Under Section 54F of the Act as against penalty at the rate of 200% of the tax sought to be evaded, levied by the AO. The assessee has preferred a cross objection raiding a ground that the CIT (A) was unjustified in confirming the penalty amounting to Rs. 1,82,500/- being 100% of the tax sought to be evaded on the addition made by the AO by way of disallowing the assessee's claim of deduction Under Section 54F of the Act. The ground raised in revenue's appeal as well as in the cross objection filed by the assessee are with regard to the question as to whether penalty Under Section 271(1)(c) is imposable on the assessee in respect of the addition made by the AO by way of disallowing the assessee's claim of deduction Under Section 54F of the Act and, if it is found to be imposable, whether it is to be imposed at the rate of 100% or 200% of the tax sought to be evaded.
9.1. In the assessment made Under Section 147 read with Section 143(3), the assessee's claim of deduction Under Section 54F was disallowed by the AO on the ground that the assessee owned a residential house on the date of the transfer of a plot at Bibvewadi, and as such, the assessee's case was covered by the proviso to Section 54F of the Act. Because of the disallowance of the assessee's claim of deduction Under Section 54F, the AO initiated penalty proceedings Under Section 271(1)(c) for filing inaccurate particulars of income with regard to the claim of deduction Under Section 54F of the Act.
9.2. In the course of penalty proceedings, the assessee submitted as under:
1) Our client sold the plot of land during A.Y. 1995-96 and deposited the sale consideration in Capital Gain A/c with Syndicate Bank. Assessee claimed exemption Under Section 54F of the Act. The learned assessing officer rejected the assessee's claim on the ground that assessee owns residential house at the time of sale.
2) Assessee could not invest the sale proceeds of the plot of land in acquiring residential properly within stipulated period as per Section 54F of the Act, as such assessee offered the long term capital gain for the tax and paid faxes accordingly in the A.Y. 1998-99.
3) The Commissioner of Income Tax (Appeals) II, Pune has confirmed the assessing officers view and taxed long term Capital Gain in the A.Y. 1995-96.
4) Assessee has never concealed any particulars of his income or furnished inaccurate particulars of such income. All the particulars were before assessing officer and the year taxability was the point of dispute.
9.3. After going through the assessee's submission, the AO imposed the penalty by observing as under:
8. On going through the above submission, it is seen that there is no force in assessee's contention. In Section 54-F it has clearly mentioned that in the circumstances mentioned in the captioned case, the assessee is not entitled for any benefit, if he is having other residential house at the lime of sale of original asset. For the sake of clarity proviso to Section 54F as inserted by 1982 is reproduced hereunder-
Provided that nothing contained in this subsection shall apply where the assessee owns an the date of the transfer of the original asset, or purchases, within the period of one year after such date, or constructs within the period of three years after such date, any residential house, the income from which is chargeable under the head "Income from house property", other than the new asset.
9. Thus, it is clear that assessee has claimed the exemption which otherwise he was not entitled.
10. Under these circumstances. I am satisfied that the assessee has furnished inaccurate particulars of income in the original return of income by way of claiming wrongly the exemption Under Section 54F and thereby concealed the income. The fact of furnishing inaccurate particulars of income has come to the notice of the Department during re-assessment proceedings only. I am therefore of the opinion that assessee is liable for penalty Under Section 271(1)(c) of the I.T. Act. 1961. I, therefore impose a penalty @ 200% of tax on concealed income which comes to Rs. 3.65.000/-.
9.4. On appeal, the CIT (A) confirmed the AO's order in imposing the penalty in principle by observing as under:
4. I have considered the submissions of the appellant and have also gone through the facts brought out in the assessment order as well as penalty order. At the outset, it may be mentioned that the dental of deduction under Section 54F claimed by the appellant had been sustained in appeal by the CIT(Appeals), after considering the appellant's submissions and going through various evidences gathered in this respect. As is evident from the assessment order, the flat in question had been allowed to the appellant by MHADA under hire purchase scheme in 1971 and the entire installments had already been paid by the appellant in 1990 as per the certificate from MHADA obtained by the Assessing Officer. Thus, as contended by the Assessing Officer, appellant was the deemed owner of the flat at Agarkar Nagar in accordance with the provisions of Section 27 of the Act. The judgments relied upon by the appellant do not help his case, as they are delivered on some different issues and not directly on the issue under consideration. Even the appellant's contention relying on various judgments that the onus was on the Department lo prove the mens rea is not tenable, in view of the judgment of the Supreme Court in the case of Addl. CIT v. Jeevan Lal Shah reported in 205 ITR 244, wherein it has been held that ''presumption of concealment remains unless assessee discharges burden of proof that failure to return correct income did not arise from fraud or gross or willful neglect the other judgments relied upon by the appellant to contend that there was a bona fide belief in claiming the deduction under Section 54F and penalty under Section 271(1)(c) was not leviable. I am of the opinion that these judgments also will not help him, because there was no bonafide belief on the part of the appellant that he was not the owner of another residential house at the time of transfer if the land, in view of the various evidences subsequently gathered by the Assessing Officer as also on account of appellant's failure to indicate such bona fide belief while filing the return in the form of a note below computation of income. The other judgment reported in 166 ITR 534 relied upon by the appellant on a presumption that the Assessing Officer has levied the penalty by invoking the provisions of the Expln.-I to Section 271(1)(c) also does not survive as a result of the subsequent judgment of the Supreme Court reported in 251 ITR 99. Moreover, for the detailed discussion in the appellate order, the CIT (Appeals) has come to the conclusion that the appellant was the owner of the flat at Agarkar Nagar and has sustained the action of the Assessing Officer in denying deduction under Section 54F to the appellant. Therefore, considering the facts of the case. I am of the view that the Assessing Officer has rightly imposed the penalty under Section 271(1)(c), as the explanation given by the appellant was neither bona fide, not satisfactory. However, looking to the facts of the case, the penalty imposed @. 200% appears to be not justified and is directed to be restricted to the minimum leviable @ 100% of the tax sought to be evaded. The appellant will get a relief of Rs. 1,82,500/-. 'The Assessing Officer shall accordingly modify the penalty order.
However, the CIT(A) has reduced the quantum of penalty from 200% to 100% of the tax sought to be evaded. Hence, the assessee is in further appeal before us.
10.1. We have considered the rival contentions of both the parties and have gone through the orders of the authorities below. On reading the provision contained in Section 271(1)(c) read with Explanation 1 thereto, it is clear that in case the assessee has been able to prove and establish that all the facts material to the computation of assessee's income were fully and truly furnished before the AO, and the explanation offered by the assessee is not found to be false, but is a bona fide one, the penalty Under Section 271(1)(c) would not be imposed. Section 271(1)(c), in its Explanation, refers to the explanation offered by the person being found to be false or not being one which the person offering the explanation is unable to substantiate. A penalty can only be imposed in case the explanation is found to be false and not bona fide one. It is also well settled that when two views are possible, no penalty can be imposed. It is also settled position of law that merely because the assessee's claim has been disallowed without establishing anything more that the assessee has made a false claim and the assessee had failed to furnish relevant details and particulars thereof, it would not be justified for the authority concerned to levy a penalty Under Section 271(1)(c) of the Act. In the light of this view we have taken, we shall proceed to decide as to whether the assessee is liable to a penalty Under Section 271(1)(c) of the Act on account of the addition made by way of disallowing the assessee's claim of deduction Under Section 54F of the Act.
10.2. The dispute as to whether, on the facts of the present case, the assessee is entitled to deduction Under Section 54F, has come up for consideration before us, which has been decided hereinabove vide this consolidated order. On reading the AO's order as well as the CIT(A)'s order and having regard to our order in connection with the assessee's claim of deduction Under Section 54F of the Act, it is found that the issue is centered around the controversy as to meaning of the word "own", "owner" or "owned" used in the context of Section 54F of the Act. The assessee's claim of deduction Under Section 54F has been rejected by resorting to the interpretation of the word "own", "ownership" or "owned". The assessee's claim that the flat allotted to him by Maharasthra Housing and Area Development Authority on hire purchase basis cannot be said to be owned by the assessee as understood in the context of the Maharashtra Housing and Area Development Act, 1976 read with Transfer of Property Act and Registration Act etc. In our considered view, the dispute in issue is undoubtedly a debatable one. The assessee's claim of deduction Under Section 54F is found to be net maintainable by us after making extensive deliberation on the definition of "owner", for the purpose of Section 54F of the Act. But that by itself would not lead to a conclusion that the assessee's cairn of deduction Under Section 54F was a false one. All the relevant particulars relating to assessee's claim of deduction Under Section 54F has not been withheld by the assessee, but rather have been fully placed before the authorities below in the course of proceedings before them. It is also pertinent to note that in order to claim a deduction Under Section 54F of the Act, the assessee has even deposited the sale consideration into capital gain account scheme with the specified bank, which goes to show that the assessee had no intention to make a false claim. It is not a case where a false claim as distinct from a wrong claim, Under Section 54F of the Act, was made by the assessee. The claim made by the assessee Under Section 54F of the Act can at best be considered to be not maintainable and allowable in the light of the interpretation given by the Courts to the word "owner", "owned" or "own" used in the Income-tax Act. Therefore, it is not a case of false claim, but a case where a claim is not found to be maintainable in the eyes of law after making exhaustive deliberation on the dispute. Having regard to the totality of facts and circumstances of the case, we are, therefore, of the view that the assessee has been able to discharge his burden that lay upon him by Explanation 1 to Section 271(1)(c) of the Act, inasmuch as all the particulars relating to the assessee's claim of deduction Under Section 54F were duly furnished by the assessee and the assessee's claim is not found to be false. In the penalty order, the AO has failed to give any finding to the effect that explanation offered by the assessee was false or was otherwise found to be not bona fide one. The CIT (A) has confirmed the AO's order by saying that there was no bona fide belief on the part of the assessee that he was not owner of the residential house at the time of transfer of the land, but we fail to understand as to how the assessee's claim can be considered to be not bona fide one, when there exists two possible and reasonable meaning of a particular term used in the statute. We, therefore, do not agree with the CIT (A) that the assessee had no bona fide belief in making the claim of deduction Under Section 54F of the Act. It is also not in dispute that if one has to take into account the general law contained in the Transfer of Property Act, Registration Act etc., the assessee may not be found to be an owner of a house allotted to him by the housing society till final deed of sale is executed in favour of the assessee. From this point of view also, it is more than clear that the assessee's claim cannot be said to be false and non bona fide one.
10.3. In the light of our discussion made above, we, therefore, have no hesitation in holding that, in this case, no penalty Under Section 271(1)(c) is leviable in respect of the assessee's claim of deduction Under Section 54F of the Act. We, therefore, delete the penalty imposed Under Section 271(1)(c) of the Act. Resultantly, the cross objection filed by the assessee is allowed and the appeal filed by the Revenue is dismissed.
11. To sum up, the appeal filed by the assessee involving the claim of deduction Under Section 54F is dismissed, and the appeal filed by the Revenue from the penalty order Under Section 271(1)(c) is dismissed, and the cross objection filed by the assessee arising from the penalty order imposed Under Section 271(1)(c) is allowed.