N. Ram Kumar, Hyd, Hyderabad V. ACIT, Circle-6(1), Hyderabad

ITA 1901/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66139 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 09-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1901/HYD/2011 ASSESSMENT YEAR : 2008-09 SHRI N. RAM KUMAR, HYDERABAD. .... APPELLANT PAN:AAFPN 0735 L VS. ACITY, CIR-6(1), HYDERABAD. RESPONDENT APPELLANT BY : SHRI MOHD. AFZAL RESPONDENT BY : SMT. NIVEDITA BISWAS DATE OF HEARING : 14-06-2012 DATE OF PRONOUNCEMENT : 10-08-2012 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST ORDER DATED30-9-2011 OF CIT (A)-IV, HYDERABAD PASSE D IN APPEAL NO. 253/ACIT 6(1)/CIT(A)-IV/10-11 AND IT PERTAINS T O THE ASSESSMENT YEAR 2008-09. 2. THE SOLE ISSUE ARISING IN THE PRESENT APPEAL OF THE ASSESSEE IS THE CLAIM OF EXEMPTION U/S 54F MADE BY THE ASSES SEE. 3. BRIEFLY THE FACTS ARE DURING THE RELEVANT PREVI OUS YEAR, THE ASSESSEE HAS SOLD 1,10,000 SHARES FOR A CONSIDERATI ON OF 2 ITA NO. 1901 OF 2011 SRI N. RAM KUMAR, HYDERABAD. RS.96,36,519. OUT OF SALE CONSIDERATION OF SHARES , THE ASSESSEE INVESTED A SUM OF RS.55,68,662/- FOR PURCHASING A F LAT IN THE NAME OF HIS MINOR DAUGHTER. THE ASSESSEE CLAIMED T HE AMOUNT INVESTED IN PURCHASE OF FLAT AS A DEDUCTION U/S 54F (1) OF THE ACT. THE AO DISALLOWED THE DEDUCTION CLAIMED ON THE GROU ND THAT THE FLAT WAS NOT PURCHASED BY THE ASSESSEE IN HIS OWN N AME. THE AO RELYING UPON DIFFERENT HIGH COURTS DECISIONS AND A LSO A DECISION OF ITAT, NAGPUR BENCH IN CASE OF ITO VS. PRAKASH TI MAJI DHANJODE 258 ITR (AT) 0114 HELD THAT THE ASSESSEE IS NOT ENT ITLED FOR DEDUCTION U/S 54F(I). ASSESSEE BEING AGGRIEVED BY THE ASSESSMENT ORDER FILED AN APPEAL BEFORE THE CIT (A) . SINCE THE AR OF THE ASSESSEE OR NO ONE APPEARED BEFORE THE CI T (A) ON THE LAST DATE FIXED ON 28-11-2011 THE APPEAL WAS DECI DED BY THE CIT (A) ON THE BASIS OF STATEMENT OF FACTS AND GROU NDS OF APPEAL FILED BEFORE HIM. THE CIT (A) UPHELD THE REASONING OF THE AO THAT SINCE THE PROPERTY WAS PURCHASED IN THE NAME OF THE ASSESSEES DOUGHTER AND NOT IN THE NAME OF THE ASSESSEE HIMSEL F, NO DEDUCTION U/S 54F CAN BE ALLOWED. 4. THE LEARNED AR FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE PROPERTY WAS PURCHASED IN THE NAME OF MINOR DAU GHTER WHO IS CONSIDERED TO BE VERY AUSPICIOUS FOR THE ASSESSEE. HOWEVER, THE ENTIRE INVESTMENT IN THE PURCHASE OF PROPERTY WAS M ADE BY THE ASSESSEE HIMSELF. IT WAS SUBMITTED THAT THE INCOME OF THE MINOR DAUGHTER IS ALSO ASSESSED AT THE HANDS OF THE ASSES SEE ONLY. THE LEARNED AR SUBMITTED THAT THE TERM /MEANING OF THE WORD PURCHASE HAS NOT BEEN DEFINED IN THE IT ACT. THE REFORE, THE MEANING IS TO BE CONSTRUED/UNDERSTOOD IN COMMON PAR LANCE AS ACCEPTED IN THE DAILY TRANSACTIONS OF THE BUSINESS WORLD. FURTHER, THE MEANING OF THE WORD PURCHASE IN SECTION 54F OF THE ACT HAS TO BE GIVEN THE MEANING AS UNDERSTOOD BY A LAYMAN AND THAT A 3 ITA NO. 1901 OF 2011 SRI N. RAM KUMAR, HYDERABAD. LIBERAL AND WIDER INTERPRETATION MUST BE GIVEN AS A GAINST LITERAL INTERPRETATION. IT WAS ARGUED THAT IN A CASE NO REGISTRATION IS MADE ON ACCOUNT OF CERTAIN TECHNICAL PROBLEMS AND T HE WHOLE CONSIDERATION IS PAID AND POSSESSION IS ALSO OBTAIN ED, IN SUCH SITUATIONS ALSO THE CLAIM OF EXEMPTION IS HELD AS V ALID. THE LEARNED AR SUBMITTED THAT WHEN THERE IS NO DISPUTE RAISED BY THE DEPARTMENT TO THE FACT THAT THE INVESTMENT WAS MADE BY THE ASSESSEE IN PURCHASING THE FLAT ONLY BECAUSE THE RE GISTRATION WAS MADE IN THE NAME OF MINOR DAUGHTER, THE ASSESSEE CA NNOT BE DEPRIVED OF THE EXEMPTION U/S 54 OF THE ACT. IN SUP PORT OF HIS CONTENTIONS, THE ASSESSEE RELIED UPON THE FOLLOWING CASE LAW. I) CIT VS. V. NATARAJAN (2006) (287 ITR 271 (MADRAS) II) CIT VS. GURNAM SINGH (2010) (327 ITR 278 III) CIT VS. RAVINDER KUMAR ATRORA (2011) 42 (I) ITCL 0498 THE LEARNED AR RELYING UPON A JUDGMENT OF JURISDICT IONAL HIGH COURT IN THE CASE OF LATE MIR GULAM ALI KHAN ( 165 ITR 228) SUBMITTED THAT THE WORD ASSESSEE ALSO INCLUDES TH E LEGAL HEIR. 5. THE LEARNED DR, ON THE OTHER HAND, CONTENDED THA T MINOR DAUGHTER HAS A SEPARATE LEGAL IDENTITY FROM HER FA THER AND HER INCOME IS CLUBBED FOR THE INCOME TAX PURPOSES WITH THE INCOME OF HER FATHER. THIS DOES NOT ABOLISHES HER LEGAL IDEN TITY AS AN INDIVIDUAL AND IT IS TO THE LIMITED PURPOSE OF CALC ULATING TAX UNDER THE INCOME-TAX ACT, HER INCOME IS CLUBBED TO THE FA THERS INCOME. THEREFORE, THE ASSESSEE AND HIS MINOR DAUGHTER CANN OT BE HELD TO BE THE SAME. DISTINGUISHING THE CASE LAWS CITED BY THE LEARNED AR, THE LEARNED DR SUBMITTED THAT THE ISSUES INVOLV ED IN THE CASES ARE FACTUALLY DISTINGUISHABLE SINCE THEY ARE RELATING TO 4 ITA NO. 1901 OF 2011 SRI N. RAM KUMAR, HYDERABAD. SECTION 54 OF THE ACT AND NOT RELATING TO SECTION 5 4F. THE LEARNED DR SUBMITTED THAT SECTION 54F IS MORE LEGAL IN APPR OACH SINCE U/S 54F, THE OWNERSHIP RIGHTS IN THE NAME OF THE ASSESS EE IS REQUIRED TO ENABLE HIM TO GET THE BENEFITS OF SECTION 54F OF THE ACT. IN SUPPORT OF HER CONTENTION, THE LEARNED DR RELIED UP ON FOLLOWING CASE LAW. I) JAINARAYAN VS. ITO (306 ITR 335 ) ( P & H) II) PRAKASH VS. ITO (MUMB)220 CTR 249 III) ITO VS. PRAKASH TIMAJI DHANJODE (ITAT NAGPUR) 81 T TJ 694 IV) RAM KISHAN VS. ITO 2007 TIOL 178 ITAT DELHI 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD AND ALSO GONE THROUGH THE DECISIONS RELIE D UPON BY BOTH THE PARTIES. UNDISPUTEDLY, THE ASSESSEE HAS MADE I NVESTMENTS IN PURCHASING THE FLAT OUT OF THE CONSIDERATION RECEIV E D FROM SALE OF SHARES. THE AO HAS DISALLOWED EXEMPTION CLAIMED U/ S 54F SOLELY ON THE GROUND THAT THE FLAT HAS BEEN REGISTERED IN THE NAME OF HIS MINOR DAUGHTER. THE AO ON INTERPRETING SECTION 54F CAME TO HOLD THAT FOR CLAIMING EXEMPTION U/S 54F, THE HOUSE HAS TO BE PURCHASED IN THE NAME OF THE ASSESSEE ONLY. AT THIS STAGE, IT IS NECESSARY TO LOOK INTO THE PROVISIONS OF SECTION 54 F(1) OF THE ACT WHICH ARE QUOTED HEREUNDER. .......THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YE ARS AFTER THAT DATE CONSTRUCTED A RESIDENTIAL HOUSE.... ... 5 ITA NO. 1901 OF 2011 SRI N. RAM KUMAR, HYDERABAD. A BARE READING OF SECTION 54F (1) MAKES IT CLEAR TH AT THERE IS NO REQUIREMENT THAT THE HOUSE HAS TO BE PURCHASED IN T HE NAME OF THE ASSESSEE ONLY. THE ONLY REQUIREMENT OF THE PRO VISION IS THE ASSESSEE MUST HAVE PURCHASED THE HOUSE. IN THE PRE SENT APPEAL, THE FACT REMAINS THAT THE MINOR DAUGHTER HAS NO OST ENSIBLE SOURCE TO MAKE SUCH INVESTMENT IN PURCHASE OF FLAT. IT IS THE ASSESSEE WHO HAD ACTUALLY MADE THE INVESTMENT OUT OF THE CON SIDERATION RECEIVED TOWARDS SALE OF SHARES. THE ASSESSEE HAS ALSO EXPLAINED THE REASON BEHIND REGISTRATION OF THE HOUSE IN THE NAME OF HIS MINOR DAUGHTER. IN THE AFORESAID FACTUAL BACKDROP, THE DECISIONS CITED AT THE BAR ARE FOUND TO BE EXPRESSING DIVER GENT VIEW. THE A P HIGH COURT IN THE CASE OF LATE MIR GULAM ALI KH AN VS. CIT (165 ITR 228) WHILE EXAMINING HE ALLOW ABILITY OF E XEMPTION U/S 54 OF THE ACT HELD THAT THE WORD ASSESSEE MUST B E GIVEN A WIDE AND LIBERAL INTERPRETATION SO AS TO INCLUDE HIS LE GAL HEIRS ALSO. THE HONOURABLE AP HIGH COURT FURTHER HELD THE PROV ISION CONTAINED U/S 54 OF THE ACT ALSO MUST BE GIVEN A LI BERAL INTERPRETATION. FOR THE SAKE OF CONVENIENCE, THE O BSERVATION MAD BY THE HONOURABLE HIGH COURT IS EXTRACTED HEREUNDER :- RELYING UPON THE EXPRESSION ASSESSEE OCCURRING I N SECTION 54 OF THE ACT, IT IS CONTENDED FOR THE DEPA RTMENT THAT IN ORDER TO CLAIM THE EXEMPTION, THE PERSON WH O SOLD THE HOUSE MUST BE THE SAME AS THE PERSON WHO PURCHA SED THE HOUSE, THAT IS, THE ASSESSEE MUST BE ONE AND TH E SAME PERSON. THE IDENTITY MUST BE THE SAME. WE ARE UNA BLE TO ACCEPT THIS CONTENTION. THE OBJECT OF GRATING EXEM PTION U/S 54 OF THE ACT IS THAT A PERSON WHO SELLS A RESI DENTIAL HOUSE FOR THE PURPOSE OF PURCHASING ANOTHER CONVENI ENT HOUSE MUST BE GIVEN EXEMPTION SO FAR AS CAPITAL GAI NS ARE CONCERNED. AS LONG AS THE SALE OF THE HOUSE AND PU RCHASE 6 ITA NO. 1901 OF 2011 SRI N. RAM KUMAR, HYDERABAD. OF ANOTHER HOUSE ARE PART OF THE SAME SCHEME, THE L APSE OF SOMETIME BETWEEN THE SALE AND PURCHASE MAKES NO DIFFERENCE. THE WORD ASSESSEE MUST BE GIVEN A WI SE AND LIBERAL INTERPRETATION SO AS TO INCLUDE HIS LEGAL H EIRS ALSO. THERE IS NO WARRANT FOR GIVING TOO STRICT AN INTERP RETATION THE WORD ASSESSEE AS THAT WOULD FRUSTRATE THE OBJ ECT OF GRANTING THE EXEMPTION AND WHAT IS MORE, IN THE INS TANT CASE, THE VERY SAME ASSESSEE IMMEDIATELY AFTER THE SALE OF THE HOUSE ENTERED INTO AN AGREEMENT FOR PURCHASING ANOTHER HOUSE AND PAID A SUM OF RS.1,000 AS EARNEST MONEY AND SUBSEQUENTLY THE LEGAL REPRESENTATIVE COMPLETED THE TRANSACTION WITHIN A PERIOD OF ONE YE AR FROM THE DATE OF THE DEATH OF THE DECEASED. THE SALE AN D PURCHASE ARE TWO LINKS IN THE SAME CHAIN. WE ARE F ORTIFIED IN THIS VIEW BY A DECISION OF THE MADRAS HIGH COURT IN C.V. RAMANATHAN V. CIT (198)) 125 ITR 191. 7. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAVINDER KUMAR ARORA (2011) 42(1) ITCL 0498 FOLLOWING THE PR INCIPLES LAID DOWN BY THE HONBLE ANDHRA PRADESH HIGH COURT IN TH E CASE OF LATE MIR GULAM ALI KHAN VS. CIT(SUPRA) HELD THAT TH E LANGUAGE OF SECTION 54F DOES NOT MANDATE THAT THE HOUSE PROPERT Y SHOULD BE PURCHASED IN THE NAME OF THE ASSESSEE ALONE. THE H ONOURABLE DELHI HIGH COURT HELD THAT THE WORD ASSESSEE MUST BE GIVEN WIDE AND LIBERAL INTERPRETATION AS HELD BY THE HON BLE AP HIGH COURT IN THE CASE OF LATE MIR GULAM ALI KHAN (SUPRA ). THE HONBLE DELHI HIGH COURT FURTHER HELD THAT LANGUAGE CONTAIN ED U/S 54F(1) IS PARI MATERIA WITH SECTION 54 OF THE ACT. SIMIL AR IS ALSO THE VIEW IN THE CASE OF CIT VS. GURNAM SINGH (2010) 327 ITR 278 AND HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. V . NATARAJAN (2006) 287 ITR 271. THE ITAT, MADRAS BENCH IN THE CASE 7 ITA NO. 1901 OF 2011 SRI N. RAM KUMAR, HYDERABAD. REPORTED IN 33 TTJ 466 WHILE CONSIDERING A CASE OF IDENTICAL NATURE WHERE THE ASSESSEE PURCHASED THE PROPERTY IN THE NAME OF HIS WIFE AND CLAIMED EXEMPTION U/S 54 HELD THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 54 OF THE ACT. HOWEVER, IT IS SEEN THAT THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF JAI NARAYAN VS. ITO 306 ITR 335 (P & H) AND IN THE CAS E OF PRAKASH VS. ITO 220 CTR 249 (MUMBAI) AND ITAT IN THE CASE OF ITO VS. PRAKASH TIMAJI DHANJODE ITAT NAGPUR 81 TTJ 694 HAVE HELD A DIFFERENT VIEW TO THE EFFECT THAT FOR GETTIN G EXEMPTION U/S 54F, THE PROPERTY HAS TO BE PURCHASED IN ASSESSEES NAME. THE INTENTION OF THE LEGISLATURE IN INTRODUCING SEC. 54 F AS EXPLAINED IN BOARDS CIRCULAR NO.346 DATED 30 TH JUNE, 1982 IS FOR ENCOURAGING HOUSE CONSTRUCTION. IT IS AN ENCOURAGEMENT GIVEN T O THE ASSESSEE TO EXCHANGE ONE OF THE RESIDENTIAL HOUSES FOR ANOTH ER OR WHERE HE HAS NONE TO CONVERT ANY OF HIS LONG TERM ASSETS INT O A RESIDENTIAL HOUSE. THE OBJECT BEHIND SUCH A PROVISION IS TO EN COURAGE LARGE SCALE HOUSE BUILDING ACTIVITY OR INVESTMENT IN HOUS E PROPERTY TO MEET ACUTE HOUSING SHORTAGE IN THE COUNTRY. THEREF ORE, LOOKING AT THE LEGISLATIVE INTENT, A LIBERAL INTERPRETATION HAS TO BE GIVEN TO SECTION 54F WHICH IS A BENEFICIAL PROVISION. THE HO NBLE SUPREME COURT IN CASE OF K.P. VERGHESE VS. ITO REPORTED IN 131 ITR 597 HAS OBSERVED IN THE FOLLOWING MANNER:- A STATUTORY PROVISION MUST BE SO CONSTRUED, IF POSS IBLE, THAT ABSURDITY AND MISCHIEF MAY BE AVOIDED. WHERE THE PLAIN LITERAL INTERPRETATION OF A STATUTORY PROVISI ON PRODUCES A MANIFESTLY ABSURD AND UNJUST RESULT WHIC H COULD NEVER HAVE BEEN INTENDED BY THE LEGISLATURE, THE CO URT MAY MODIFY THE LANGUAGE USED BY THE LEGISLATURE OR EVEN DO SOME VIOLENCE TO IT, SO AS TO ACHIEVE THE OBVIOUS I NTENTION OF THE LEGISLATURE AND PRODUCE A RATIONAL CONSTRUCT ION. 8 ITA NO. 1901 OF 2011 SRI N. RAM KUMAR, HYDERABAD. IT IS ALSO WELL SETTLED PRINCIPLE OF LAW THAT WHEN THERE ARE DIVERGENT VIEWS, TO GIVE EFFECT TO A BENEFICIAL PRO VISION THE VIEW FAVOURABLE TO THE ASSESSEE HAS TO BE ADOPTED. IN T HE AFORESAID VIEW OF THE MATTER, FOLLOWING THE RATIO LAID DOWN B Y THE JURISDICTIONAL HIGH COURT IN CASE OF LATE MIR G ULAM ALI KHAN(SUPRA), BY THE HONBLE DELHI HIGH COURT IN CA SE OF CIT VS. RAVINDER KUMAR ARORA (SUPRA) AND ALSO BY THE ITAT, MADRAS BENCH IN 33 TTJ 466 (SUPRA), WE HOLD THAT THE ASSES SEE WILL BE ENTITLED FOR DEDUCTION U/S 54F FOR THE FLAT PURCHA SED IN THE NAME OF HIS DAUGHTER SUBJECT TO THE RESTRICTIONS UNDER T HE PROVISO TO SECTION 54F(1) OF THE ACT. HENCE THE GROUNDS RAISE D BY THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 10- 8-2012. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 10 TH AUGUST, 2012. COPY TO:- 1) MOHD. AFZAL, ADVOCATE, 11-5-465, FLAT NO.402, SH ERSONS RESIDENCY, RED HILLS, HYDERABAD. 2) ACIT, CIR-6(1), HYDERABAD. 3) THE CIT (A)-IV, HYDERABAD 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 9 ITA NO. 1901 OF 2011 SRI N. RAM KUMAR, HYDERABAD.