Income Tax Appellate Tribunal - Ahmedabad
Income-Tax Officer vs Chimanlal Thakordas. on 31 July, 1991
Equivalent citations: (1991)41TTJ(AHD)526
ORDER
1. In the appeal by the Department the following ground has been raised :-
"On the facts and in the circumstances of the case, the learned Dy. Commissioner of Income-tax (Appeals), Surat has erred in allowing deduction of Rs. 69,999 under section 54 of the income-tax Act. 1961."
2. During the relevant accounting year the assessee sold his residential house in Govindpura on 23-11-1979 for Rs. 67,000. The above sale proceeds were invested by the assessee in the purchase of new residential house in Ghanshyamnagar Society, Surat. The investment in the new house property was made as under :-
(i) Rs. 5,000 paid on 9-11-1979
(ii) Rs. 69,999 paid on 23-11-1979.
The said house property was purchased by the assessee for Rs. 69,999. The assessee claimed deduction under section 54 of the Income-tax Act in respect of capital gain. The ITO noticed that the registered sale deed in respect of the property in Ghanshyamnagar Society was executed by the assessees vendor on 9-3-1981 which was beyond the time limit of one year prescribed under section 54 of the Act. He therefore, rejected the assessees claim for deduction under section 54 of the Act.
3. The submissions of the assessee before the Dy. CIT (A) was that he had paid the entire purchase price of the new property on 23-11-1979 within one year of the date of sale of the old property and he had also obtained possession of the new property on 23-11-1979, i.e., within one year from the sale of old property. It was submitted that it was necessary for the vendor to obtain permission from the Collector, Surat for execution of the sale deed of the said property and the vendor obtained permission only on 22-12-1980. It was submitted that on the facts of the case, the assessee should be regarded to have purchased the property on 23-11-1979 and as such deduction under section 54 was allowable. The Dy. CIT (A) accepted the submissions of the assessee and directed the ITO to grant deduction under section 54 of the Act. The Department is now in appeal before the Tribunal and the above mentioned ground has been raised.
4. The submission on behalf of the Department was that unless the vendor executed the registered sale deed, the assessee would not become legal owner of the property and as such it could not be said that the assessee had purchased the property in question. Consequently, deduction under section 54 was not available. The learned Departmental Representative relied on certain decisions in which it has been held that it is only on execution of registered sale deed that legal title would pass to the transferee. The submission on behalf of the assessee on the other hand, was that in section 54 the word used is "purchase" and not "transfer". In the present case, the assessee must be regarded to have purchased the property when he paid the entire price and obtained possession from the vendor. It was because of certain legal proceedings that execution of the sale deed would not be a bar for allowing deduction under section 54 of the Act. Reliance was placed on the decision in CIT v. Mrs. Shahzada Begum [1988] 173 ITR 397 (AP). Attention was also invited by the learned counsel for the assessee to the fact that income from this house property has been taxed under section 22 of the Act in the assessment order.
5. I have considered the rival submissions and facts on record. Section 54 of the Act, so far as relevant for the assessment year in question lays down that where in the case of an assessee being an individual, the capital gain arises from the transfer of a long term capital asset, being a residential house, and the assessee has within a period of one year before or after the date on which the transfer took place purchased a residential house, then deductions specified therein would be allowable. It is clear from the words of this section that as far as the old house is concerned, a transfer should have taken place in respect thereof. What is "transfer" is defined in section 2(47) of the Act. As far as acquisition of new house was concerned, what the section lays down is that the assessee should have "purchased" the same. As far as assessee was concerned, what is required is that he should have invested the amount in question in "purchase" of new residential house. Section 54(1) contains a beneficial provision and should be construed liberally having regard to the object with which the said provision was enacted. It would depend on entire facts of the case whether the transaction amounted to "purchase" of new residential house before the expiry of the statutory period within the meaning of section 54(1) of the Act. It is true that execution of registered sale deed would be necessary in order to acquire legal title in respect of the new residential house. However, what is to be seen is not whether the assessee has acquired legal title before the expiry of the period mentioned in section 54(1) of the Act. In the present case, the assessee has paid full price of the new residential house to the vendor and has also obtained possession thereof before expiry of period mentioned in section 54(1) of the Act. He has acquired dominion over the new residential house before expiry of that period. The vendor was read and willing to execute the sale deed before the expiry of the said period. However, delay occurred because of the fact that sanction of certain authority was necessary before execution of sale deed. Delay in execution of sale deed on account of such technical reason would not mean that the assessee has not purchased the property in question before the expiry of the period. The said delay had not occurred on account of any default made by the assessee. When the assessee had paid the entire price and had obtained possession and was exercising dominion over the property with the consent of the vendor, he had acquired legal title against the whole world, except, of course, the legal owner and as far as legal owner was concerned the assessee had a right to get a registered sale deed executed by him. The expression "purchase" in section 54 would take its meaning from the context in which it occurs in said provision and on the facts of the present case, the assessee should be regarded to have purchased a new residential house before expiry of the statutory period. I am supported in this view of the matter by the decision of the Andhra Pradesh High Court in the case of Mrs. Shahzada Begum (supra) in which the assessee was held to have purchased the property within statutory period when during that period he had paid substantial price and obtained possession of the property although sale deed was executed after expiry of that period. Besides, in the present case, the assessee had offered for taxation income from house property in respect of new residential house in question and ITO has assessed the same. For all practical purposes the assessee has exercised control and dominion over the property in question with the consent of the vendor and has exercised rights of ownership. In the circumstances, relief under section 54(1) of the Act was allowable. The ground raised by the Department is rejected.
6. The dispute raised in the cross objection pertains to fair market value of the old property on 1-1-1964. This dispute pertains to computation of capital gains. The assessee did not produce any evidence to indicate as to what was the fair market value on 1-1-1964. The ITO estimated the said value at Rs. 37,000. No evidence was produced before the Dy. CIT (A) by the assessee. The Dy. CIT (A) held that the value adopted by the ITO was reasonable. The assessee has not produced any material on the point in controversy before the Tribunal also. Consequently, no interference is called for.
7. The Departmental appeal as well as assessees cross objection are dismissed.