Case Law Details
Bhaskari Madhavan Vs ITO (ITAT Chennai)
As per provisions of section 54 of the Income Tax Act, 1961, the assessee can claim benefit of deduction, in case, sale consideration received from transfer of original asset was invested in purchase of another residential house property. As per plain reading of section 54 of the Act, it is very clear that investment should be made in the name of the assessee to get benefit of deduction. However, various courts, including the Hon’ble Madras High Court in the case of CIT vs. V.Natarajan (supra) had taken a lenient view considering beneficial provisions of section 54 of the Act, and held that even if investments is made in the name of spouse or minor daughter, the deduction cannot be denied. We have gone through the arguments of the learned A.R for the assessee in light of decision of the Hon’ble Madras High Court in the case of CIT vs. V. Natarajan (supra) and we ourselves do not subscribe to the arguments advanced by the learned AR for the assessee to claim benefit of deduction u/s.54 of the Act, in respect of purchase of new property in the name of married daughter, because courts have considered the provisions and after considering fact that the assessee has purchased house property in the name of spouse has allowed benefit, because as per provisions of section 64 & 64(1A) of the Act, in case of purchase of property is in the name of spouse and minor children, income from such property is assessable in the hands of the assessee. Therefore, under those facts, the Courts have held that when property was purchased in the name of spouse, benefit of deduction cannot be denied. In the present case, the assessee has purchased property in the name of married daughter, although she was divorced, but she is an independent for purpose of the Income Tax Act. Therefore, we are of the considered view that benefit of deduction u/s.54 of the Act cannot be allowed, when property has been purchased in the name of married daughter. The Assessing Officer as well as learned CIT(A), after considering relevant facts has righty denied deduction claimed u/s.54 of the Income Tax Act, 1961.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the assessee is directed against order passed by the learned Commissioner of Income Tax (Appeals)-14, Chennai dated 20.06.2019 and pertains to assessment year 2011-12.
2. At the outset, learned AR for the assessee submitted that appeal filed by the assessee is time barred by 115 days for which necessary petition for condonation of delay along with affidavit explaining reasons for delay has been filed. The AR further submitted that the assessee could not file appeal within the time allowed under the Act, mainly due to lockdown imposed by the Govt. on account of spread of Covid-19 infections and in view of Hon’ble Supreme Court suomotu Writ Petition No.3 of 2020, if the period of delay is covered within the period specified in the order of the Apex Court , then same needs to be condoned in view of specific problem faced by the public on account of Covid-19 pandemic.
3. The learned DR, on the other hand, fairly agreed that delay may be condoned in the interest of justice.
4. Having heard both sides and considered reasons given by the learned AR for the assessee, we find that the Hon’ble Supreme Court in suo motu Writ Petition No.3 of 2020, has extended limitation applicable to all proceedings in respect of courts and tribunals across the country on account of spread of Covid-19 infections w.e.f. 15.03.2020, till further orders and said general exemption has been extended from time to time. We further noted that delay noticed by the Registry pertains to the period of general exemption provided by the Hon’ble Supreme Court extending limitation period applicable for all proceedings before Courts and Tribunals and thus, considering facts and circumstances of the case and also in the interest of natural justice, we condone delay in filing appeal filed by the assessee and admitted for adjudication.
5. The assessee has raised following grounds of appeal:-
“1. The learned Income Tax Officer is not justified in making an addition of Rs.16,77,5741- by disallowing the deduction claimed U/s. 54, as the New property was purchased in the name of Appellant’s daughter.
2. The appellant relies on the ratio of decision of Madras High Court in CIT vs V Natarajan 287 ITR 271.
3. The appellant also relies on the Judgement of Income Tax Appellate Tribunal, Chennai in Smt.A.Tamil Ponni (I.T.A.No.3112/Chny/2019)
4. The ‘appellant’ denies her liability to be assessed in terms of Notice dated 27.03.2018 said to be issued under section 148 of the ‘Act’. That the AO erred in issuing the notice u/s. 148 of the Act to the appellant, although there was no reason to believe for her to issue notice to the appellant and thus the notice issued is without jurisdiction.
5. The ‘appellant’ craves leave to add, alter or vary the grounds of appeal before or at the time of hearing.
6. On the above grounds and on other grounds that may be submitted at the time of hearing it is prayed that the addition of Rs. 16,77,574 in the income may please be deleted.”
6. Brief facts of the case are that the assessee is an individual, did not file her return of income for the assessment year 2011-12. As per information available with the department, it was noticed that the assessee had made huge cash deposits into her bank account. Therefore, assessment has been reopened u/s.147 of the Income Tax Act, 1961,for the reason that income chargeable to tax had been escaped assessment. In response to notice u/s.148, the assessee filed her return of income on 01.11.2018. The case has been taken up for scrutiny. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had sold her property through an agreement of sale dated 11.10.2010 to Shri C.Rajendran, and had received a substantial portion of sale consideration of Rs.25,50,000/- in cash. Therefore, source of cash deposits into bank account has been accepted. The Assessing Officer further noticed that the assessee has computed long term capital gain derived from sale of property and further claimed deduction u/s.54 of the Income Tax Act, 1961, for purchase of another house property in the name of her married daughter. Therefore, the Assessing Officer rejected exemption claimed u/s.54 of the Act, and made addition of Rs.16,77,574/- towards long term capital gain derived from sale of property.
7. The assessee carried the matter in appeal before the first appellate authority. Before the learned CIT(A) the assessee, in light of certain judicial precedents, including the decision of the Hon’ble High Court of Madras in the case of CIT Vs. V.Natarajan (2006) 287 ITR 271, contended that if investments made in the name of married daughter, same needs to be allowed as deduction. The learned CIT(A), after considering relevant facts and also by relied upon various decisions, including the decision of co-ordinate Bench of the ITAT., Chennai, in the case of D.Devadoss Vs. ITO in ITA No. 246/Mds/2015 dated 07.04.2016 rejected arguments of the assessee and sustained additions made by the Assessing Officer towards disallowance of deduction claimed u/s.54 of the Act, by holding that investments made in the name of married daughter cannot be considered as investments made for the purpose of claiming deduction u/s.54 of the Income Tax Act, 1961. Aggrieved by the learned CIT(A) order, the assessee is in appeal before us.
8. The learned A.R for the assessee submitted that the learned CIT(A) not justified in sustaining addition of Rs.16,77,574/- by disallowing deduction claimed under section 54 of the Income Tax Act, 1961, because new property was purchased in the name of appellant’s daughter. The learned A.R for the assessee referring to the decision of the Hon’ble Madras High Court in the case of CIT Vs. V.Natarajan (supra) submitted that the Hon’ble High Court very categorically held that what is required to be seen is that investment of sale consideration received from transfer of property for buying new asset to allow benefit of deduction u/s.54 of the Act, but it is not relevant whether investment is made in assessee’s own name or his daughter’s name. Therefore, the learned AR submitted that deduction claimed by the assessee u/s.54 of the Act should be allowed.
9. The learned DR, on the other hand, supporting order of the learned CIT(A) submitted that there is no merit in the arguments of the assessee for the reason that when the courts have allowed deduction made in the name of spouse of the assessee, they have considered provisions of section u/s.64 and 64(1A), where income from property is assessed in the hands of the assessee, even if, property was purchased in the name of spouse or minor children. In the present case, the assessee has purchased property in the name of married daughter and argued she was divorced, but to claim deduction property should be purchased either in the name of the assessee or spouse or minor daughter. The Assessing Officer as well as the learned CIT(A) after considering relevant facts has rightly rejected exemption claimed u/s.54 of the Income Tax Act, 1961 and therefore, their orders should be upheld.
10. We have heard both the parties, perused material available on record and gone through orders of the authorities below. As per provisions of section 54 of the Income Tax Act, 1961, the assessee can claim benefit of deduction, in case, sale consideration received from transfer of original asset was invested in purchase of another residential house property. As per plain reading of section 54 of the Act, it is very clear that investment should be made in the name of the assessee to get benefit of deduction. However, various courts, including the Hon’ble Madras High Court in the case of CIT vs. V.Natarajan (supra) had taken a lenient view considering beneficial provisions of section 54 of the Act, and held that even if investments is made in the name of spouse or minor daughter, the deduction cannot be denied. We have gone through the arguments of the learned A.R for the assessee in light of decision of the Hon’ble Madras High Court in the case of CIT vs. V. Natarajan (supra) and we ourselves do not subscribe to the arguments advanced by the learned AR for the assessee to claim benefit of deduction u/s.54 of the Act, in respect of purchase of new property in the name of married daughter, because courts have considered the provisions and after considering fact that the assessee has purchased house property in the name of spouse has allowed benefit, because as per provisions of section 64 & 64(1A) of the Act, in case of purchase of property is in the name of spouse and minor children, income from such property is assessable in the hands of the assessee. Therefore, under those facts, the Courts have held that when property was purchased in the name of spouse, benefit of deduction cannot be denied. In the present case, the assessee has purchased property in the name of married daughter, although she was divorced, but she is an independent for purpose of the Income Tax Act. Therefore, we are of the considered view that benefit of deduction u/s.54 of the Act cannot be allowed, when property has been purchased in the name of married daughter. The Assessing Officer as well as learned CIT(A), after considering relevant facts has righty denied deduction claimed u/s.54 of the Income Tax Act, 1961. Hence, we are inclined to uphold findings of the learned CIT(A) and reject grounds taken by the assessee.
11. In the result, appeal filed by the assessee is dismissed.
Order pronounced in the open court on 11th April, 2022
