pri Exemption U/s. 54F cannot be denied for Purchase of Plot in HUF name Exemption U/s. 54F cannot be denied for Purchase of Plot in HUF name

Case Law Details

Case Name : Kanaiyalal Muljibhai Patel Vs ITO (ITAT Ahmedabad)
Appeal Number : ITA No. 649/Ahd/2016
Date of Judgement/Order : 20/02/2019
Related Assessment Year : 2010-11

Kanaiyalal Muljibhai Patel Vs ITO (ITAT Ahmedabad)

The issue before us is, whether the house constructed by the assessee on a plot purchased in the name of HUF, exemption under section 54F, is available to the assessee or not ? The Revenue is of the opinion that for claiming exemption under section 54F, the investment ought to have been made in the assessee’s individual name and not in the name of HUF, because, HUF is a separate taxable entity. On the other hand, stand of the assessee is that new house has been constructed on a plot purchased in the name of HUF, but members of the HUF have not contributed any money, rather whole investment was made from the sale proceeds of earlier capital asset/land as well as contribution made by the assessee only, and therefore, it fulfilled all the requisite conditions. It was contended before us, that this aspect has been considered by the Hon’ble Delhi High Court and Karnataka High Court as well as ITAT, Ahmedabad Bench, wherein the Hon’ble High Courts and Tribunal concurred unanimously that it is not necessary to purchase new house only in the name of individual, and if other family members has also been made as co-owners, then also exemption under section 54F could be claimed.

In the case of CIT Vs. Kamal Wahal, 351 ITR 04 (Del), Hon’ble Delhi High Court has held  that

“9……….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 54F seeks 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. :

In the present case also, the assessee has his share to the extent of 1/4th in the HUF. The other members of HUF are not stranger. They are wife of the assessee and two sons. Money has only been contributed by the assessee. Therefore, to our mind, the facts as available in the decision of Hon’ble Delhi Court cited supra, are squarely applicable on this case. We allow the appeal of the assessee, and direct the AO to grant exemption under section 54F of the Income Tax Act to the assessee.

FULL TEXT OF THE ITAT JUDGMENT

Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-7, Ahmedabad dated 11.12.2015 passed for the Asstt.Year 2010-11.

2. Though the grounds taken by the assessee are not in consonance with Rule 8 of the Income Tax (Appellate Tribunal) Rules; they are descriptive and argumentative in nature. The only grievance of the assessee is that the ld.CIT(A) has erred in upholding the disallowance of exemption under section 54F of the Income Tax Act, 1961 amounting to Rs.57,74,673/- revised by the AO.

3. Brief facts of the case are that originally assessee has filed his return of income on 15.6.2010 declaring taxable income of Rs.3,76,810/-. This return was processed under section 143(1) of the Act. Thereafter, an assessment was made under section 143(3) on 18.1.2012 determining taxable income at Rs.3,76,810/-. Fresh assessment has been made in pursuance of order passed by the ld. Commissioner under section 263 of the Income Tax Act. It emerges out that the assessee along with 10 other co-owners had sold land admeasuring 11432 sq.yards for consideration of Rs.3,33,59,314/-. Capital gain of Rs.35,91,912/- was computed, but the assessee has claimed exemption under section 54F of the Act. It was contended by the assessee that a plot of land at Bopal was purchased vide purchase deed dated 12.6.2009 for Rs.10.05 lakhs and he constructed a house at the cost of Rs.31,38,000/-. Thus, total cost of the residence was shown at Rs.41.83 lakhs. This exemption was denied to the assessee on the ground that new plot was not purchased by him in his individual name, but it was purchased in the name of HUF. He has signed as Karta/Manager of the HUF. Appeal to the ld.CIT(A) did not bring any relief to the assessee.

4. With the assistance of the ld.representatives, we have gone through the record carefully. The issue before us is, whether the house constructed by the assessee on a plot purchased in the name of HUF, exemption under section 54F, is available to the assessee or not ? The Revenue is of the opinion that for claiming exemption under section 54F, the investment ought to have been made in the assessee’s individual name and not in the name of HUF, because, HUF is a separate taxable entity. On the other hand, stand of the assessee is that new house has been constructed on a plot purchased in the name of HUF, but members of the HUF have not contributed any money, rather whole investment was made from the sale proceeds of earlier capital asset/land as well as contribution made by the assessee only, and therefore, it fulfilled all the requisite conditions. It was contended before us, that this aspect has been considered by the Hon’ble Delhi High Court and Karnataka High Court as well as ITAT, Ahmedabad Bench, wherein the Hon’ble High Courts and Tribunal concurred unanimously that it is not necessary to purchase new house only in the name of individual, and if other family members has also been made as co-owners, then also exemption under section 54F could be claimed. A reference to the following decision was made:

i) CIT Vs. Ravinder Kumar Arora, 342 ITR 38 (Del)

ii) DCIT Vs. Mrs. Jeniffer Bhide, 349 ITR 080 (Kar)

iii) CIT Vs. Kamal Wahal, 351 ITR 04 (Del)

iv) Chitrang M. Dave, ITA No.2627/Ahd/2017

5. On due consideration of the above facts, we find that ITAT in the case of Shri Chitrang M. Dave rendered in ITA No.2627/Ahd/2017 (supra) has allowed the exemption under section 54F. In this case, the assessee has purchased a flat in a housing society and included the name of his father along with him. The deduction was disallowed to the assessee to the extent of the share of his father i.e. 50%, but Tribunal allowed the deduction to the assessee. In the case of CIT Vs. Kamal Wahal, 351 ITR 04 (Del), the assessee purchased new housing in the name of his wife. The exemption was disallowed under section 54F. However, it was allowed by the CIT(A) as well as by the Tribunal and the Hon’ble Delhi High Court has upheld the order of the Tribunal. Hon’ble Delhi High Court has made reference to the decision of Hon’ble Madras High Court as well as Karnataka High Court. The discussion made by the Hon’ble Delhi High Court is worth to note. It reads as under:

“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 v. Ravinder Kumar Arora [2012] 342 ITR 38/[2011] 203 Taxman 289/15 taxmann.com 307. 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 54F to 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 v. Gurnam Singh [2010] 327 ITR 278/[2008] 170 Taxman 160 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 54F seeks 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. The appeal is according dismissed with no order as to costs.”

6. In the present case also, the assessee has his share to the extent of 1/4th in the HUF. The other members of HUF are not stranger. They are wife of the assessee and two sons. Money has only been contributed by the assessee. Therefore, to our mind, the facts as available in the decision of Hon’ble Delhi Court cited supra, are squarely applicable on this case. We allow the appeal of the assessee, and direct the AO to grant exemption under section 54F of the Income Tax Act to the assessee.

7. In the result, appeal of the assessee is allowed. Order pronounced in the Court on 20thFebruary, 2019.

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