Case Law Details

Case Name : Shri Rajkumar Mandhani Vs DCIT (ITAT Hyderabad)
Appeal Number : ITA No.835/Hyd/2017
Date of Judgement/Order : 20/11/2018
Related Assessment Year : 2012-13
Courts : All ITAT (6382) ITAT Hyderabad (357)

Shri Rajkumar Mandhani Vs DCIT (ITAT Hyderabad)

In the case before us, the assessee and his wife are independent income tax assessees and the assessee already owned one house at Kilpauk, Chennai. The assessee therefore, cannot be said to have invested in order to avoid capital gains to tax in his hands, as u/s 54F(1), the assessee is entitled to exemption u/s 54F even if he already holds one property in his name. Therefore, the investment by the assessee of the capital gains in purchase or construction of a residential house at Alagappa Nagar, Chennai in the name of his wife will not disentitle the assessee from exemption u/s 54F of the Act.

FULL TEXT OF THE ITAT JUDGMENT

This is assessee’s appeal for the A.Y 2012-13 against the order of the CIT (A)-11, Hyderabad, dated 31.01.2017. The assessee has raised the following grounds of appeal:

1. The Order of the Hon’ble Commissioner of Income Tax, in so far as it is against the appellant, is contrary to the facts of the case and provisions of law .

2 The Hon’ble Commissioner of Income Tax is not justified in sustaining the disallowance of exemption U/s.54F of the Income Tax Act.

3. The Hon’ble Commissioner of Income Tax is not justified in holding that the appellant is not entitled to the deduction as the house constructed stands in the name of the appellant’s wife.

4. The Hon’ble Commissioner of Income Tax should have appreciated that the appellant did show the investment as house in his Balance Sheet and that his intention is to acquire a house for living, though in the name of his wife.

5. The Hon’ble Commissioner of Income Tax should have appreciated that the object of the provision to Section 54 and 54F is to promote investment in residential property and that the appellant has complied with that condition. Therefore, the Hon’ble Commissioner of Income Tax should have directed the Assessing Officer to allow the exemption provided in Section 54F of the Income Tax Act.

For these and other grounds that may be urged at the time of hearing, it is submitted that the Order of the lower authorities be set aside or modified as may be deemed fit”.

2. Brief facts of the case are that the assessee, an individual and Director of M/s. Maheshwari Brothers Coal Ltd and other group concerns of Maheshwari group, filed his return of income for the A.Y 2012-13 on 28.03.2013 admitting an income of Rs.4,36,59,390. During the assessment proceedings u/s 143(3) of the Act, the assessee filed a revised return of income on 18.03.2015 claiming exemption of Rs.47,44,308 u/s 54F of the Act in respect of the long term capital gains earned by him on the sale of shares during the year under consideration. The assessee also requested to grant exemption u/s 54F of the Act in respect of the amounts appropriated by him before 30.09.2012 towards constructing a house at Chennai in the name of his wife Smt. Nirmala Devi Mandhani. The AO did not allow the exemption u/s 54F, on the ground that the assessee has not submitted proof of house being constructed and that he has furnished the plan of approval from the prescribed authority. He also observed that it is not known whether it is a residential or commercial building and that he has not produced any supporting vouchers for construction expenditure. Further, he also observed that the assessee is already an owner of a property and is receiving income from house property, hence 54F is not allowable. He also considered the fact that the house is in the name of assessee’s wife and therefore, he disallowed the claim of deduction u/s 54F on this ground also. Aggrieved, the assessee preferred an appeal before the CIT (A) along with necessary evidence that the house constructed at Chennai was a residential house. The CIT (A) accepted the assessee’s contention with regard to the house being a residential house, but disallowed the claim of the assessee on the ground that the property is in the name of assessee’s wife and further that the said property is not the only property of the owner as required u/s 54F(1) of the Act. The CIT (A) however accepted the assessee’s contention that his claim u/s 54F is Rs. 28,02,308 only and accordingly restricted the disallowed the said sum. Aggrieved, the assessee is in appeal before us.

3. The learned Counsel for the assessee submitted that there is no doubt or dispute about the investments of the capital gains in the house constructed at Chennai in the name of assessee’s wife. He submitted that the issue as to whether the capital gains can be invested in his wife’s name and still be eligible for the exemption u/s 54F, it is covered in favour of the assessee by various decisions of the Tribunal and particularly in the case of Shri N. Ram Kumar vs. Add. CIT in ITA No.1901/Hyd/2011 dated 10.08.2012 wherein the Tribunal has taken note of the decisions both in favour of the assessee and against the assessee and has held that the assessee will be entitled for deduction u/s 54F of the Act for the flats purchased in the name of assessee’s daughter therein, subject to restrictions under the provisions of section 54F(1) of the Act. He submitted that in the case of the assessee, investment is made in the name of the wife and in similar cases, the Coordinate Benches of this Tribunal have been allowing the exemption u/s 54F of the Act to the assessee.

4. The learned DR, on the other hand, supported the orders of the authorities below and placed reliance upon the decision of the Hon’ble Bombay High Court in the case of Prakash vs. ITO dated 12.09.2018 reported in 312 ITR 40 (Bom.) wherein the investments made in the name of the son was not allowed as exemption u/s 54F and it has been particularly held that for qualifying the exemption, it is necessary to have investments made in the residential house in the name of the assessee only.

5. Having regard to the rival contentions and the material on record, we find that the only issue is whether exemption u/s 54F can be granted to the assessee when the residential property is purchased/constructed in the name of his spouse? In the case before us, both the assessee and his wife are independent income tax assessees. In the decisions relied upon by the learned Counsel for the assessee, we find that the facts are slightly distinguishable as the spouse/son/daughter in whose name the property was purchased/constructed did not have independent source of income. Let us therefore examine the applicability of those cases to the facts of the case before us. In the case of CIT vs. Natarajan reported in 287 ITR 271 (Mad), the assessee therein had sold a property at Bangalore and purchased a property at Anna Nagar in the name of his wife and the Tribunal had held the issue in favour of the assessee and the Hon’ble High Court had refused to interfere with the findings of the fact by the ITAT. There is no finding about the status of the wife therein, i.e., whether, she had independent source of income or not.

6. In the case of Raj Kumar Arora vs. Ajay Kumar [CS(OS) 788/2010, dated 18.12.2014], the Hon’ble Delhi High Court was dealing with the case of a suit for partition between the brothers and the plaintiff therein, who was physically handicapped, had purchased a residential house in the joint names with his wife, for ‘shagun’ purposes, and the Hon’ble High Court held that the plaintiff therein was the real owner of the residential house in question.

7. In the case of Gurnam Singh reported in 327 ITR 278, the Hon’ble Punjab & Haryana High Court was considering the case of an assessee who had purchased the residential house in the name of his wife. The Hon’ble High Court considered the decision of Hon’ble Delhi High Court in the case of Raj Kumar Arora to hold that where the assessee had paid the entire sale consideration and merely has included his wife as the owner of the property, it would not make any difference and in fact such a contract has to be encouraged which helps in empowerment of women and that the government itself has floated various schemes permitting joint ownership with wife. The Hon’ble High Court further proceeded to consider the assessee therein to be a constructive owner of the property. The Hon’ble High Court also considered the decision of the Hon’ble Andhra Pradesh High Court in the case of Late Gulam Ali Khan vs. CIT reported in 165 ITR 228 (A.P), wherein it was held that the object of granting exemption u/s 54F of the Act, is that the house should have been purchased for residential purposes, must be given exemption so far as capital gains are concerned that the word “assessee” must be given a wide and liberal interpretation so as to include his legal heirs also and there is no warrant for giving too strict interpretation on the word “assessee” as that would frustrate the object of granting the exemption. In the case before us, the assessee and his wife are independent income tax assessees and the assessee already owned one house at Kilpauk, Chennai. The assessee therefore, cannot be said to have invested in order to avoid capital gains to tax in his hands, as u/s 54F(1), the assessee is entitled to exemption u/s 54F even if he already holds one property in his name. Therefore, the investment by the assessee of the capital gains in purchase or construction of a residential house at Alagappa Nagar, Chennai in the name of his wife will not disentitle the assessee from exemption u/s 54F of the Act. In view of the same, we allow the assessee’s appeal.

8. In the result, assessee’s appeal is allowed.

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One Comment

  1. ARIJIT GHOSH says:

    Similar case is going on in regard to Benami Properties Act before DGIT and also pending before Hon’ble Calcutta Highcourt-Ref Case-32118/2014,order dated16th june,2015 passed by Dr.Sambuddha Chakraborty,Hon,ble judge.Another same case pending before the judge case no-FA 184 OF 2017 WITH CAN 12045/2017.
    Also pending before 5th court Jr.Division-Civil judges court Howrah-Title suite-9328/2014 and 6220/2014 in regard to illegal mutation,illegal construction and Mis use of Ad interim injunction.
    Kindly check .All properties are obtained benami name and muated by Block land and reforms department -Govt of W.B ALONG WITH ORDER OF DEMOLITION ILLEGAL PART BY HOWRAH ZILLA PARISHAD FROM 2012 ON WARDS.

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