Kaushal Kishore Maheshwari Vs ACIT (ITAT Delhi)
What is important is that for deduction under section 54F of the Act that investment in the new property has to be made by the assessee. But in the present case before us, though the property has been purchased in the name of the wife of the assessee but the investment in purchase of the property has been made out of the loan sanctioned to the wife of the assessee and the assessee has joined name in the loan sanction letter. In the circumstances, the issue before us is whether the investment in the new property can be treated as investment made by the assessee. We find that the wife of the assessee is an independent taxpayer having her own sources of income. We also find that property has been purchased exclusively in the name of the wife of the assessee and the assessee is not co-owner of the property. The bank has sanctioned loan for purchase of the property, which is purchased in the name of wife of the assessee. The assessee has claimed that the loan has been sanctioned in the joint name of the wife of the assessee and the assessee. In our opinion, in the circumstances, it cannot be said that the assessee has made investment for purchase of the property due to the reason that loan has been primarily sanctioned to the wife of the assessee, who is having title over the property and the assessee has been joined in the loan for the purpose of repayment of the loan. The repayment of loan by the assessee is a transaction different from the transaction of investment in the property. Moreover, the assessee has not submitted any evidence of repayment of loan by him. Thus, we conclude that investment in the new property worth Rs. 1,30,31,250 has not been made by the assessee. In view of the above facts and circumstances, we are of the opinion that finding of the learned Commissioner (Appeals) with regard to the investment of Rs. 1,30,31,250 in new property is well reasoned and we do not find any error in the said finding and accordingly uphold dis allowance of deduction under section 54F of the Act in respect of the said investment of Rs. 1,30,31,250.
Full Text of the ITAT Order is as follows:-
This appeal by the assessee is directed against order dated 27-2-2014 of the Commissioner (Appeals)-XXVIII, New Delhi [in short “the CIT(A)”] for assessment year 2009-10, raising following grounds :–
“1. That on the facts and circumstances of the case and in law, the learned Commissioner (Appeals), XXVIII, New Delhi [hereinafter referred to as ‘the learned CIT(A)’] has grossly erred in denying the exemption to the Appellant under section 54F of the Income Tax Act, 1961.
2. That on the facts and circumstances of the case and in law, the order passed by the learned Commissioner (Appeals) is unsustainable in law since the learned Commissioner (Appeals) has exceeded the jurisdiction vested under law in addressing and adjudicating upon an issue not raised or disputed by the learned assessing officer.
3. That on the facts and circumstances of the case and in law, the learned Commissioner (Appeals) has erred in holding that for the purpose of claiming exemption under section 54F of the Income Tax Act, 1961, the investment in new asset cannot be made in the name of the wife of the Appellant.
4. That on the facts and circumstances of the case the learned Commissioner (Appeals) has erred in holding that investment in new property was not traceable to the sale proceeds received on account of sale of the original property.
5. That on the facts and circumstances of the case and in law, the order passed by the learned Commissioner (Appeals) violates judicial discipline in as much the learned Commissioner (Appeals) did not follow the law laid down by the coordinate bench of Hon’ble Delhi Tribunal as upheld by the Hon’ble jurisdictional Delhi High Court.
6. That on the facts and circumstances of the case an in law, the learned Commissioner (Appeals) erred in law in not adjudicating upon the claim of exemption under section 54F of the Act made by the Appellant as regards the consideration of Rs. 200,000 received by the Appellant in cash.”
2. The facts in brief of the case are that the assessee a Chartered Accountant by profession, filed return of income for the year under consideration on 26-9-2009 declaring total income of Rs. 48,23,250. During the year, the assessee sold one immovable property and the long-term capital gain of Rs. 33,74,045 on such sale was claimed as deduction under section 54F of the Income Tax Act, 1961 (in short “the Act”). The case was selected for scrutiny and notice under section 143(2) of the Act was issued and complied with. The assessing officer observed that during the year under consideration, the assessee sold one vacant plot of land at Shakti Khand, Indirapuram for sale consideration of Rs. 50,00,000 and after reducing the indexed cost of acquisition of the said plot of land, the assessee computed long-term capital gain of Rs. 33,74,045. He further observed that the assessee claimed to have invested the said sale consideration towards purchase/construction of another residential house property, namely, M-33, Ground Floor, Saket, New Delhi and claimed deduction under section 54F of the Act. According to the assessing officer, on the date of transfer of the original asset on which long-term capital gain has been computed, the assessee owned two residential house properties, namely, F-1/23, Krishan Nagar and A-4 Kaushambi, Gaziabad. The assessing officer denied the deduction under section 54F of the Act due to the following reasons :–
(i) on the date of transfer of the original asset, the assessee owned more than one residential house other than the new asset purchased.
(ii) the new property was purchased out of the loan taken of Rs. 1,35,00,000 from HDFC ltd and thus the sale consideration was not invested in the new property.
3. The assessing officer also verified the sale consideration of the immovable property sold, from the buyer ‘M/s. Milan Contractor & Promotors Ltd.’ and found that assessee also received cash of Rs. 2,00,000 alongwith Rs. 50,00,000 received through cheque. However, the assessing officer observed that the assessee declared only sale consideration of Rs. 50,00,000 and, therefore, he added the sale consideration of Rs. 2,00,000 as income from long-term capital gain.
4. Aggrieved, the assessee filed appeal before the learned Commissioner (Appeals). The learned Commissioner (Appeals), accepted the contention of the assessee that the property, namely, F-1/23 Krishan Nagar, New Delhi, was not a residential house property and the assessee owned only one residential house, namely, A-4, Kaushambi, Gaziabad therefore, the assessee fulfilled the condition of section 54F of the Act of owning not more than one residential house. However, the learned Commissioner (Appeals), observed that neither the investment in the new residential house property was made in the name of the assessee nor the investment was traced to the sale proceeds received from sale of the property. According to him, the sale proceeds of the property have gone to different accounts maintained in the joint name of the assessee and his father, whereas the new residential house property has been purchased out of the loan taken from the bank in the joint name of the wife of the assessee and the assessee. According to the learned Commissioner (Appeals), wife of the assessee, is an independent assessee and the loan was disbursed directly to the vendor ‘Smt Salochna Goyal’ and to the ‘wife of the assessee’. Further, the learned Commissioner (Appeals) observed that the source from which loan has been paid, was not produced before him. In view of the observations the learned Commissioner (Appeals) held that the assessee was not entitled for deduction under section 54F of the Act. Aggrieved with the finding of the learned Commissioner (Appeals), the assessee is in appeal before the Tribunal raising the grounds as reproduced above.
5. In grounds no. 1 to 5, the assessee has challenged the action of the learned Commissioner (Appeals) in denying the deduction under section 54F of the Act to him. All the grounds being connected to the sole issue of deduction under section 54F of the Act, same were argued together.
5.1 The learned counsel of the assessee filed a paper book containing pages 1 to 158 and submitted that investment in new asset was made in the name of the wife of the assessee. The learned counsel referred to the decision of the Hon’ble Delhi High Court in the case of CIT v. Ravindra Kumar Arora (2012) 342 ITR 38 (Del), wherein it is held that section 54F does not require that the new residential property should be purchased in the name of the assessee only. Relying on the aforementioned decision of the Hon’ble Delhi High Court, the learned counsel submitted that learned Commissioner (Appeals) was not correct in denying the deduction under section 54F of the Act for investment made in the property purchased in the name of wife of the assessee. The learned counsel referred to ground No. 5 and submitted that learned Commissioner (Appeals) has not followed the decision of the Hon’ble Jurisdictional Delhi High Court. The learned counsel supporting ground No. 4 of the appeal, referred to page 158 of the paper book, which is an affidavit of the wife of the assessee, wherein, she has deposed that total consideration for purchase of the property was given by the her husband i.e. the assessee. In view of the submission, he argued that the learned Commissioner (Appeals) was not correct in holding that sale proceeds has not been utilized for investment in the new property. Accordingly, he submitted that order of the learned Commissioner (Appeals) and the assessing officer might be reversed.
5.2 On the other hand, learned Senior DR relied on the order of the learned Commissioner (Appeals), submitted that sale consideration received was deposited in the bank account maintained by the assessee alongwith his father. He submitted that actually the property sold was also jointly owned by the assessee alongwith his father. He submitted that according to the registration deed of the purchase of the new residential property, the vendor ‘Smt Sulachna Goyal’ has been paid Rs. 1.35 crores out of the loan sanctioned to wife of the assessee. He submitted that assessee is not even co-owner of the said new property and merely inserting the name of the assessee by the bank in loan sanction letter or in loan agreement, it cannot be established that investment in the new property has been made by the assessee. He supported the finding of the learned Commissioner (Appeals) that wife of the assessee is an independent taxpayer and the assessee has also not furnished any evidence of repayment of loan by him except filing an affidavit by his wife. The learned counsel further submitted that the claim of investment made in the new residential property in excess of Rs. 1.35 crores, is towards purchase of air conditioners and other furnishing items and which cannot be treated as investment towards construction of the property and therefore that amount is also not eligible for deduction under section 54F of the Act.
5.3 We have heard the rival submission and perused the relevant material on record. We find that the learned Commissioner (Appeals) has adjudicated the issue in dispute from para 5.7 to para 5.9 of the impugned order as under :–
“5.7 The documents of purchase of Saket Property were perused and these showed in that property was purchased in name of Mrs. Manisha Kishore and not in the name of the appellant. Therefore, vide order sheet entry dated 11-2-2014 was asked to explain why the exemption under section 54F should be allowed by virus of the fact that the property was not purchased by the appellant in his own name. The appellant replied vide letter dated 25-2-2014 and claimed that —
(a) The Indrapuram property had been sold through Special Power of Attorney and Agreement to Sell.
(b) The copies of bank statement showing the sale consideration of Indrapuram property are enclosed.
(c) In order to claim exemption under section 54F the appellant utilized the sale consideration received from Shakti Khand, Indrapuram property towards purchase of Residential property at Saket, however, the property was purchased in the name of wife Mrs. Manisha Kishore.
(d) As per section 54F there is no obligation to purchase the New Residential House in the name of the same person who wants to avail exemption under section 54F.
(e) The appellant relied upon the decision of the Hon’ble’ble Delhi High Court in the case of Commissioner of Income Tax v. Kamal Wahal and Commissioner of Income Tax v. Ravinder Kumar Arora.
5.8 The facts brought out by the appellant have been examining vis-a-vis the crux of the decisions relied upon by the appellant. These show that the facts of the cases are clearly distinguishable from the facts of the case of the appellant. In the case of Kamal Wahal the Hon’ble’ High Court relied upon the decision in the case of Ravinder Kumar Arora that provisions of section 54F do not require that the New Residential House be purchased by the assessee in his own name or it should be purchased exclusively in his name. It is to be noted that the assessee has purchase it only in the name of his wife and there is no dispute that the entire investment has come out of the sale proceeds and there was no contribution from the assessee wife. Thus the Hon’ble’ court has held three things :–
