Income Tax Appellate Tribunal - Delhi
Virender Kumar Sharma, Noida vs Ito, Ward-67(1), New Delhi on 16 January, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "SMC", NEW DELHI
BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
ITA No.5150/Del/2017
Assessment Year : 2013-14
Virender Kumar Sharma, ITO, Ward- 67(1),
1240, Sector-37, Arun Vihar, New Delhi.
Vs.
Noida, Uttar Pradesh.
PAN : AGCPS0675F
(Appellant) (Respondent)
Assessee by : Shri Sunil Agrawal, CA
Department by : Shri Arun Kumar Yadav, Sr.DR
Date of hearing : 01-01-2018
Date of pronouncement : 16-01-2018
ORDER
PER R. K. PANDA, AM :
This appeal filed by the assessee is directed against the order dated 26.05.2017 of CIT(A)- 21, New Delhi relating to assessment year 2013-14.
2. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 23.06.2013 declaring total income of Rs.7,75,340/-. During the assessment proceedings, the Assessing Officer observed that the assessee was employed at Union Bank of India and having income from salary and other sources. During the assessment proceedings, it has been noticed that the assessee has sold a property at Dwarka for the sale consideration of Rs.65 lac. and the whole amount of sale consideration was deposited by him in the Bank A/c No.626702010002440. This bank account is joint account in the 2 ITA No.5150/Del/2017 name of Virender Kumar Sharma and Mr. Arnav Sharma. The assessee has purchased a property being Flat No.1240, Sec-37, Arun Vihar, Noida for a consideration of Rs.90 lac. in the joint name with Sh. Arnav Sharma, his son. For the purchase of this property, the assessee has taken a loan of Rs.30 lac from Union Bank of India in the name of Mr. Arnav Sharma and Mr. V.K. Sharma, and the balance payments were made from joint a/c No.626702010002440 with Union Bank of India, in the names of the assessee and his son Mr. Arnav Sharma. The assessee has claimed exemption u/s 54 amounting to Rs.54,47,516/- for investment in residential property at Noida in December 2012. The Assessing Officer noted that the amount of Capital gain so arrived has been invested in a property at Noida, in joint name with his son Mr. Arnav Sharma. He noted that Mr. Arnav Sharma is also working and filing his ITR. Mr. Arnav Sharma is also having 50 percent right in the property purchased and also has taken loan with the assessee. Hence, the Assessing Officer allowed the claim of exemption u/s 54 at 50 percent of the total claim. Accordingly, disallowance of Rs.27,23,758/- out of the total claim of exemption u/s 54 of Rs.54,47,517/- under the head income from capital gain was made by him and was added to the total income of the assessee.
3. Before the ld. CIT(A), the assessee submitted that the full sale proceedings of the Dwarka flat has been invested in the new flat. The entire capital gain of Rs.54,47,517/- has been invested in purchase of new flat, which 3 ITA No.5150/Del/2017 was the sole flat at Dwarka in the name of the assessee only and the assessee has fully complied with all the conditions mentioned in section 54 of the I.T. Act. It was submitted that Shri Arnav Sharma son of the assessee has not invested a single rupee in purchase of the flat. The joint account standing in the name of the assessee and the son has been used for the purpose of deposit of sale proceeds of the Dwarka flat and the investment in Noida flat. It was argued that nowhere in any of the documents has the share ratio of 50:50 between the assessee and the son been mentioned and the whole addition/disallowances are based on surmise and conjecture of the Assessing Officer. Referring to the provisions of section 54 it was argued that the said section mandates that the house should be purchased by the assessee and it does not stipulate that the house be purchased in the name of the assessee only. Various decisions were also brought to the notice of the ld. CIT(A).
4. However, ld. CIT(A) was not satisfied with the arguments advanced by the assessee and upheld the action of the Assessing Officer by observing as under :-
"I have gone through the facts as discussed above and find that the only issue raised by the appellant is to decide whether the disallowance made by the AO to the extent of 50% in respect of exemption claimed by the assessee u/s 54 is valid or not. My observations on the issues involved in appeal in hand are as under: -
From the perusal of assessment order under appeal it is clearly visible that the assessee deposited the entire sale consideration from the sale of his property at Dwarka in his Joint Bank Account with his son Sh. Arnav Sharma. Further on perusal of purchase deed of property at Noida, it is also very clear that the new property purchased by the assessee at Noida is also registered on the Joint name with his son Sh. Arnav Sharma. Moreover the AO has very categorically mentioned in his assessment order that son of the assessee is also working and also took loan on the joint name with the assessee for purchase of new property at Noida. Furthermore on 4 ITA No.5150/Del/2017 perusal of documents of loan it is clearly visible that the First party for loan was the son of the assessee i.e. Sh. Arnav Sharma which clearly established the fact of real co- ownership of the son of the assessee in the new property purchased. The fact that the son of the assessee took loan for purchase of new property in which he is the co- owner also clearly indicates that he also invested his share for purchase of new property.
From above, it is clear that Section 54 Says that if any assessee had any long term capital gain, has constructed/purchased a residential house (new asset) within the specified period then instead of the capital gain being charge to the income u/s 45, the cost of the new asset shall be reduced by the amount of the capital gain. In other words, section 54 talks about exemption in respect of amount invested in new asset.
In the case in hand, assessee is a co-owner of the new asset therefore, as per section 54, exemption can only be allowed to the extent of his share of investment in the new asset, Here the share of the assessee is not mentioned anywhere in records so for the sake of established law 50:50 share was rightly taken presumed and assessee were allowed to get the benefit of exemption u/s 54 to the extent of 50% only. Moreover, on the examination of the facts, I also find that the conditions u/s 54 has been complied with in the case of the assessee but since assessee invested in the new property in the joint name with his son so he was eligible for deduction to the extent of his share of investment in new asset only. On perusal of the purchase deed of flat at Noida and documents of loan it is clear that the son of the assessee is a co-owner of the new flat purchased at Noida which is also evident from the fact that the son of the assessee took loan on joint name with his father i.e. assessee himself. Furthermore on perusal of sale deed of the property, it is also clear that on request of the transferee i.e. the assessee to the Noida Authority's vide letter No. Noida/ GHP/1240/37/2012/4989 dated 10.12.2012 the Naida Authority have permitted to make this Son Shri Aranv Sharma, as co- transferee in the above said property, vide Noida Authority's Letter No. Noida/AWHO NOC No. B/03003/19(NOC)/ AWH0/1240-/37/Noida dated 03.12.2012 which is a clear evidence of the son's in the property. Moreover, the fact cannot be overlooked that the payment for the purchase of new flat were also made from the joint bank account of the assessee which he has owning with his son. Even on the merits of the case, as discussed above, the appellant has also failed to furnish before me any supporting concrete evidence or material to substantiate his claim that he is the only owner of the new property purchased by him. He has no documentary evidence to rebut the findings of the AO that the assessee is a co-owner in the new property and took loan on the joint name with his son who was the first party for the bank for the purpose of loan. As such I am not inclined to interfere with the assessment order passed by the AO u/s 143(3) of the I.T. Act. Taking all the above into consideration the appeal is treated as dismissed."
5. Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds :-
"1. That, the assessing officer erred in assessing the total income of the assessee at Rs 3,499,100/- as against the Returned Income of Rs 775,340/- declared by the assessee.
2. That, the learned assessing officer erred in making the addition of Rs 5 ITA No.5150/Del/2017 2,723,758/- to the returned income of the assessee on account of disallowance of exemption u/s 54 of the Act out of the total exemption claimed of Rs 5,447,517/-.
3. That, on the facts and circumstances of the case the learned assessing officer erred in reducing the claim of exemption u/s 54 by Rs 2,723,758/- (50%) out of the total claim of Rs 5,447,517/-.
4. That, on the facts and circumstances of the case and in law the assessing officer has erred in restricting the exemption U/s 54 at 50% (Rs 2723758/- out of the total Rs 5,447,517/- considering the ownership ratio of 50:50, in complete disregard to the details and documents on record, where no such ratio has been mentioned anywhere.
5. That, on the facts and circumstances of the case the Commissioner of Income (Appeals) erred in upholding the order of the assessing officer and confirming the disallowance of exemption of Rs 2,723,758/- as against Rs 5,447,517/- claimed by the appellant.
6. That, on the facts and circumstances of the case and in law, the impugned assessment order is bad in law, being a order passed in complete disregard of the factual details and submissions filed by the appellant during the course of the assessment proceedings and appeal before the Commissioner of Income Tax (Appeals).
7. That, on the facts and circumstances of the case, notwithstanding the above the learned assessing officer erred in restricting the claim of exemption of U/s 54 at 50% of capital gain of Rs 5,447,517/- as against the total investment made by the assessee in purchase of new residential property.
8. The learned assessing officer erred in initiating the penalty proceedings u/s 274 r.w.s 271 (1)(c) of the Income Tax Act, 1961.
9. The learned assessing officer erred in levying the interest u/s 234B of the Act.
10. The Appellant craves leave to add, alter, modify or delete any of the grounds of appeal on or before disposal of the Appeal."
6. Ld. counsel for the assessee, at the outset, drew the attention of the Bench to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Ravinder Kumar Arora in ITA No.1106 of 2011 order dated 27.09.2011 and the decision in the case of CIT vs. Shri Kamal Wahal in ITA No.4/2013 order dated 11.01.2013 and submitted that under identical circumstances when the properties were purchased jointly by the assessees along with their wives, the restriction of deduction u/s 54F made by the Assessing Officer was held to be not correct and the decisions of the Tribunal allowing the claim of the respective 6 ITA No.5150/Del/2017 assessees were upheld. He accordingly submitted that this being a covered matter in favour of the assessee by the ratio of the decision of the Jurisdictional High Court, the order of the ld. CIT(A) be set-aside and the grounds raised by the assessee be allowed.
7. Ld. DR on the other hand heavily relied on the order of the ld. CIT(A).
8. I have considered the rival arguments made by both the sides and perused the material available on record. I have also considered the various decisions cited before me. There is no dispute to the fact that the assessee, in the instant case, after selling of the house property at Dwarka, which was in his own name, for a consideration of Rs.65,00,000/- purchased another property at Noida jointly with his son. The assessee claimed the capital gain so arrived as exempt u/s 54F. However, since the property was purchased jointly with the son of the assessee, the Assessing Officer restricted the claim of exemption u/s 54 to Rs.27,23,758/- as against Rs.54,47,517/- which has been upheld by the ld. CIT(A). I find almost identical issue had come up before the Hon'ble Delhi High Court in the case of Ravinder Kumar Arora (supra). In that case also, the assessee had purchased a property jointly with the name of self and his wife and claimed exemption u/s 54 with respect to the whole of the long term capital gain that arose in his name. The Assessing Officer restricted the deduction u/s 54F to the extent of his right in the new residential property and accordingly allowed only 50% exemption of claim. Ld. CIT(A) dismissed the appeal of the assessee. 7 ITA No.5150/Del/2017 On further appeal, the Tribunal allowed the claim of the assessee and held that the assessee is entitled for benefit of section 54 of the I.T. Act with reference to the whole investment of Rs.3,28,15,000/-. The Revenue filed an appeal before the Hon'ble High Court which was admitted by the Hon'ble High Court on the following substantial question of law :-
"Whether the ITAT was correct in law in granting the exemption u/s 54F of the Income Tax Act, 1961, to the assessee for the whole consideration of Rs.3,28,15,000/- for the purpose of the new asset (the residential property) in the joint name of the assessee and his wife, and not to the extent of 50% share of the assessee in the new asset?"
9. After considering various arguments advanced by both the sides, the Hon'ble High Court dismissed the appeal filed by the Revenue by observing as under :-
"7. Plain reading of the aforesaid provision indicates that in order to get benefit of this Section, the assessee should, inter alia, "purchase" a house. As per the Revenue, this house has to be purchased in the name of the assessee only and benefit is not given if it is purchased by the assessee jointly with his wife.
8. At the outset, important factual findings recorded by the Tribunal in this case are that it was the assessee who independently invested in the purchase of new residential house though in his own name but along with the name of his wife also and that it was the assessee who paid stamp duty and corporation tax at the time of the registration of the sale deed of the house so purchased and has also paid commission and legal expenses in connection with the purchase of the house. The Tribunal further records that whole of the purchase consideration has been paid by the assessee and not even a single penny has been contributed by the wife in the purchase of the house. The Tribunal also noted the argument that the property was purchased by the assessee in the joint name with his wife for „shagun‟ purpose and because of the fact that the assessee was physically handicapped. The Tribunal further concludes that as a matter of fact, the assessee was the real owner of the residential house in question.
9. On the aforesaid facts, we are of the view that the conditions stipulated in Section 54Fstand fulfilled. It would be treated as the property purchased by the assessee in his name and merely because he has included the name of his wife and the property purchased in the joint names would not make any difference. Such a conduct has to be, rather, encouraged which gives empowerment to women. There are various 8 ITA No.5150/Del/2017 schemes floated by the Government itself permitting joint ownership with wife. If the view of the Assessing Officer (AO) or the contention of the Revenue is accepted, it would be a derogatory step.
10. Even when we look into the matter from another angle, facts remain that the assessee is the actual and constructive owner of the house. In CIT Vs. Podar Cements (P) Ltd. & Ors., (1997) 226 ITR 625 (SC), the Supreme Court has also accepted the theory of constructive ownership. Moreover, Section 54F mandates that the house should be purchased by the assessee and it does not stipulate that the house should be purchased in the name of the assessee only. Here is a case where the house was purchased by the assessee and that too in his name and wife's name was also included additionally. Such inclusion of the name of the wife for the above-stated peculiar factual reason should not stand in the way of the deduction legitimately accruing to the assessee. Objective of Section 54F and the like provision such as Section 54 is to provide impetus to the house construction and so long as the purpose of house construction is achieved, such hyper technicality should not impede the way of deduction which the legislature has allowed. Purposive construction is to be preferred as against the literal construction, more so when even literal construction also does not say that the house should be purchased in the name of the assessee only. Section 54F of the Act is the beneficial provision which should be interpreted liberally in favour of the exemption/deduction to the taxpayer and deduction should not be denied on hyper technical ground. Andhra Pradesh High Court in the case of Late Mir Gulam Ali Khan Vs. CIT, (1987) 165 ITR 228 (AP) has held that the object of granting exemption under Section 54 of the Act is that an assessee who sells a residential house for purchasing another house must be given exemption so far as capital gains are concerned. The word "assessee" must be given wide and liberal interpretation so as to include his legal heirs also. There is no warrant for giving too strict an interpretation to the word "assessee" as that would frustrate the object of granting exemption.
11. We also find judgments of other High Courts giving benefit of Section 54F(1) of the Act when the house of the assessee is purchased jointly with his wife. In the case of CIT Vs. Natrajan, (2007) 287 ITR 271 (Mad), though this case was decided in relation to Section 54 of the Act, the said Section is pari materia of Section 54F(1) of the Act. Likewise, the Punjab & Haryana High Court in the case of CIT Vs. Gurnam Singh, (2010) 327 ITR 278 took the same view while discussing the provisions of Section 54 of the Act which is again pari materia of Section 54F(1) of the Act.
12. We, thus, answer the question in favour of the assessee and dismiss this appeal with cost quantified @ `10,000/-."
10. Similar view has been taken by the Hon'ble High Court in the case of Shri Kamal Wahal (supra) where the Hon'ble High Court has observed as under :- 9 ITA No.5150/Del/2017
"7. We have no hesitation in agreeing with the view taken by the Tribunal. Apart from the fact that the judgments of the Madras and Karnataka High Courts (supra) are in favour of the assessee, the revenue fairly brought to our notice a similar view of this Court in CIT Vs. Ravinder Kumar Arora : (2012) 342 ITR 38 (Del.). That was also a case which arose under Section 54F of the Act. The new residential property was acquired in the joint names of the assessee and his wife. The income tax authorities restricted the deduction under Section 54Fto 50% on the footing that the deduction was not available on the portion of the investment which stands in the name of the assessee's wife. This view was disapproved by this Court. It noted that the entire purchase consideration was paid only by the assessee and not a single penny was contributed by the assessee's wife. It also noted that a purposive construction is to be preferred as against a literal construction, more so when even applying the literal construction, there is nothing in the section to show that the house should be purchased in the name of the assessee only. As a matter of fact, Section 54F in terms does not require that the new residential property shall be purchased in the name of the assessee; it merely says that the assessee should have purchased/constructed "a residential house".
8. This Court in the decision cited alone also noticed the judgment of the Madras High Court (supra) and agreed with the same, observing that though the Madras case was decided in relation to Section 54 of the Act, that Section was in pari materia with Section 54F. The judgment of the Punjab and Haryana High Court in the case of CIT Vs. Gurnam Singh : (2014) 327 ITR 278 in which the same view was taken with reference to Section 54F was also noticed by this Court.
9. It thus appears to us that the predominant judicial view, including that of this Court, is that 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. It is moreover to be noted that the assessee in the present case has not purchased the new house in the name of a stranger or somebody who is unconnected with him. He has purchased it only in the name of his wife. There is also no dispute that the entire investment has come out of the sale proceeds and that there was no contribution from the assessee's wife.
10. Having regard to the rule of purposive construction and the object which Section 54Fseeks to achieve and respectfully agreeing with the judgment of this Court, we answer the substantial question of law framed by us in the affirmative, in favour of the assessee and against the revenue."
11. The facts of the instant case are almost similar to the facts of the cases decided by the Hon'ble High Court cited (supra) except that instead of purchase of the property jointly in the name of the wife, the assessee in the instant case has purchased the property jointly in the name of his son and the entire capital 10 ITA No.5150/Del/2017 gain has been invested in the new property. Therefore, respectfully following the decisions of the Jurisdictional High Court cited (supra) I hold that the assessee is entitled to deduction u/s 54 of the I.T. Act on the whole amount. The grounds raised by the assessee are accordingly allowed.
12. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on this 16th January, 2018.
Sd/-
(R. K. PANDA) ACCOUNTANT MEMBER Dated: 16-01-2018.
Sujeet Copy of order to: -
1) The Appellant
2) The Respondent
3) The CIT
4) The CIT(A)
5) The DR, I.T.A.T., New Delhi
By Order
//True Copy//
Assistant Registrar
ITAT, New Delhi