Case Law Details
Mukkamala Srihari Rao Vs ACIT (ITAT Ranchi)
Whether the sale consideration received by a person from sale of capital asset if applied in the name of his wife or son for purchasing/constructing residential house whether the assessee can claim deduction u/s. 54F or 54 of the Act?.
From going through the decision(s) relied on by the ld. Counsel for the assessee in the case of in the case of Bhagwan Swroop Pathak (supra), we find that similar issue was for consideration regarding the deduction u/s. 54F of the Act for the investments made in purchase of property in the name of assessee’s son. The Coordinate Bench, Delhi relied on the judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Kamal Vahal 351 ITR 4, wherein the assessee purchased new house in the name of his wife and the Hon’ble High Court held that deduction u/s. 54 is valid. Respectfully following the same the Delhi Tribunal decided in favour of assessee and allowed the deduction u/s. 54F of the Act claimed for purchase of property in the name of assessee’s son.
Similar view was also taken by the Tribunal (ITAT Ranchi) in the case of Anand Dhanuka (supra), wherein assessee invested the corresponding long term capital gain in name of his wife. This Tribunal in view of the judgment of the Hon’ble Apex Court in the case of CIT Vs. Vegetable Products Ltd (1973) 88 ITR 192(SC) followed the judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Kamal Wahal (2013) 258 CTR 251 (Del) and decided in favour of assessee.
ITAT, therefore, respectfully following the judicial precedence referred hereinabove (supra) are of the considered view that since in the instant case the assessee has applied the sale consideration received from sale of capital asset towards purchase of residential flat in the name of his wife and son, the assessee is eligible to claim deduction u/s. 54F of the Act subject to fulfilment of all other conditions provided u/s. 54F of the Act. We, thus, reverse the finding of the ld. CIT(A) and allow ground no.1 raised by the assssee and direct the ld.AO to allow the benefit of deduction u/s. 54F of the Act at Rs. 89,45,000/- for two flats purchased in the name of assessee’s wife and son.
FULL TEXT OF THE ORDER OF ITAT RANCHI
This appeal of the assessee for the assessment years 2015-16 is directed against the order dt. 22-01-2019 passed u/s. 250 of the Income-tax Act, 1961 [ hereinafter, referred to as ‘the Act’] by the ld. Commissioner of Income-tax, Appeals [ in short, hereafter referred to as ‘the ‘ld. CIT(A), Ranchi, Jharkhand, which is arising from the assessment order dt. 20-11-2017 passed u/s. 143(3) of the Income-tax Act by the Assessing Officer (AO), A.C.I.T, Circle-2, Ranchi.
2. The assessee has raised the following common grounds of appeal for the AY 2015-16:-
1. For that Ld. CIT(A) was not justified is not allowing deduction U/s 54F to the tune of Rs. 89,45,000/- for two flats purchased in name of appellant wife and son. As a matter of fact appellant purchased 3 flats (constituting one unit) in name of his wife, son and himself. Ld. CIT(A) allowed deduction to part of investment made in name of assessee and disallowed the deduction claimed in name of wife and son. This action of Ld CIT(A) was illegal and unjustified. Deduction should be allowed for property purchased in name of wife and son constituting as I single residential unit. As such, the addition confirmed is fit to be deleted.
2. For that Ld. CIT(A) was not justified not allowing deduction claimed U/s 54F amounting to Rs.42,11,500/-claimed as cost of improvement on purchase of new flats. The deduction claimed is allowable as per the provisions of law U/s 54 and no disallowance is called for. All flats were interconnected and joined to constitute I single unit and as such, deduction claimed thereby is to beallowed. The addition confirmed thereby is fit to be deleted.
3. For that interest U/s 234A/IB should be charged on the returned income and not on the assessed income following the decision of Honble Jharkhand High Court.
4. For that other grounds in detail shall be argued at the time of hearing.
3. Brief facts of the case as culled out from records are that the assessee is an individual. He derives income from partnership firm. Income of Rs.91,16,880/- declared in the return filed on 16-11-2015. Case was selected for limited scrutiny followed by serving of notices issued u/s. 143(1) and 143(2) of the Act. During the course of assessment proceedings the ld. AO observed that the assessee has shown long term capital gain (LTCG) from sale of immovable property and claimed deduction u/s. 54F of the Act for the investment in purchase of three(3) flats, which included an amount of Rs.1,26,88,500/- towards cost of flats and Rs.42,11,500/- towards improvement and renovation made in these flats. After considering the submissions of the assessee, the ld. AO decided that since the assessee has made investments in flats purchased in the name of self, wife and son, the deduction u/s. 54F of the Act is allowable only to the extent made in the name of self i.e for flat no.102 for which consideration paid at Rs.37,43,500/-. For the remaining amount of investment made in the name of wife and son the deduction u/s. 54F was denied and also for want of necessary details the deduction for repairing and renovation cost at Rs.42,11,500/- was also rejected. Income assessed at Rs.3,10,30,490/-..
4. Aggrieved, the assessee preferred an appeal before the ld. CIT(A) and filed detailed submissions and also submitted that Flat Nos. 101, 102 and 103 were duly registered through a single registered deed. However, assessee again failed to get any relief before the ld. CIT(A) on both the issues.
5. Aggrieved, the assessee is now in appeal before this Tribunal.
6. The Ld. Counsel for the assessee vehemently argued referring to the written submissions filed before the ld. CIT(A) and also referred to the paper book dt. 20-08-20 running into (1 to 37) pages, which contains written submissions, copy of registered sale deed dt. 17th October, 2015, bills for furnishing and renovation items and also placed reliance on the decision of Co-ordinate Bench, Mumbai in the case of ITO (IT)-3(1), Mumbai Vs. Ms. Kavita Gupta, ITA No. 6884/Mum/2014 for the AY 2009-10 dt. 11-04-2018, Co-ordinate Bench, Ranchi in the case of Anand Kumar Dhanuka Vs. ITO, W1(1), Ranchi, ITA No. 163/Ran/2018 dt. 31.07.2020 and also the decision of Co-ordinate Bench, Delhi in the case of Bhagwan Swroop Pathak Vs.ITO. W-1(3), Gurgaon, Haryana, ITA No. 2754/Del/2019 for the AY 2010-11 dt. 05.03.2020.
7. Per contra the Ld. Departmental Representative vehemently argued supporting the orders of both the lower authorities.
8. We have heard the rival submissions and perused the records placed before us.
9. As far as ground no. 1 is concerned it relates to deduction u/s. 54F of the Act at Rs.89,45,000/- denied by the ld.CIT(A) as the flats were purchased in the name of appellant’s wife and son. We observe that the assessee has filed registered sale deed dt. 17-102015 for purchase of a building comprising of ground floor three flats and the purchaser(s) mentioned in this sale deed are Sri Mukkamala Srihari Rao(Self), Smt. Mukkmala Jhancy Lakshmi (Wife) and Sri Mukkamala Amar Rao (Son). As per said sale deed Flat No. 102 is registered under the name of assessee(self) and remaining two flats in the name of son and wife.
10. Now only dispute before us is that whether the sale consideration received by a person from sale of capital asset if applied in the name of his wife or son for purchasing/constructing residential house whether the assessee can claim deduction u/s. 54F or 54 of the Act?.
11. From going through the decision(s) relied on by the ld. Counsel for the assessee in the case of in the case of Bhagwan Swroop Pathak (supra), we find that similar issue was for consideration regarding the deduction u/s. 54F of the Act for the investments made in purchase of property in the name of assessee’s son. The Coordinate Bench, Delhi relied on the judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Kamal Vahal 351 ITR 4, wherein the assessee purchased new house in the name of his wife and the Hon’ble High Court held that deduction u/s. 54 is valid. Respectfully following the same the Delhi Tribunal decided in favour of assessee and allowed the deduction u/s. 54F of the Act claimed for purchase of property in the name of assessee’s son.
12. Similar view was also taken by the Tribunal (ITAT Ranchi) in the case of Anand Dhanuka (supra), wherein assessee invested the corresponding long term capital gain in name of his wife. This Tribunal in view of the judgment of the Hon’ble Apex Court in the case of CIT Vs. Vegetable Products Ltd (1973) 88 ITR 192(SC) followed the judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Kamal Wahal (2013) 258 CTR 251 (Del) and decided in favour of assessee.
13. We, therefore, respectfully following the judicial precedence referred hereinabove (supra) are of the considered view that since in the instant case the assessee has applied the sale consideration received from sale of capital asset towards purchase of residential flat in the name of his wife and son, the assessee is eligible to claim deduction u/s. 54F of the Act subject to fulfilment of all other conditions provided u/s. 54F of the Act. We, thus, reverse the finding of the ld. CIT(A) and allow ground no.1 raised by the assssee and direct the ld.AO to allow the benefit of deduction u/s. 54F of the Act at Rs. 89,45,000/- for two flats purchased in the name of assessee’s wife and son.
14. As regards ground no. 2 is concerned, it relates to deduction at Rs.42,11,500/- claimed by the assessee u/s. 54F of the Act towards cost of improvement of purchase of new flats. We notice that before the ld.AO assessee failed to file any evidence for the said expenditure of Rs.42,11,500/-. Even before the ld. CIT(A) the assessee failed to satisfy by filing necessary documentary evidence for the claim of expenditure for furnishing and renovation of the house. Before us the assessee filed bills for furnishing and renovation, copies of which placed at pages 17-19 of the P.B. The assessee certified in the paper book that the bills for furnishing and renovation have been filed before the authorities below. But the finding of the ld.CIT(A) is contrary. Also on perusal of the bills, we find that the bills placed at page-17 of the P.B is in the name of Kanishk Holdings dt.07-08-2015 for the renovation expenses of Rs.10,38,795/-. But this claim of the assessee remains in doubt because the flats in question has been purchased through sale deed executed on 17-10-2015 and there is no mention about any prior agreement and that include by the assessee and family members with the seller of the property and also the details of payment appearing in the back side of each copy of bills for renovation includes various payments made in cash. No evidence filed by the assessee to demonstrate the source of such expenditure. Under these given facts and circumstances of the case, we are of the view that this issue of claim of deduction u/s. 54F of the Act at Rs.42,11,500/- needs to be restored to the file of the ld. CIT(A), who shall call for remand report from the ld. AO ( if needed) regarding the genuineness of the expenditure claimed by the assessee. Needless to mention that adequate opportunity of being heard to be given to the assessee. The assessee is also directed to be vigilant and not to take adjournment unless otherwise required for reasonable cause. Thus, ground no.2 raised by the assessee is allowed for statistical purpose.
15. Ground no. 3 is consequential and ground no.4 is general in nature, which require no adjudication.
16. In the result, the appeal of the assessee is partly allowed for statistical purpose.
The order pronounced in the open Court on 01 .08.2022
