2017 (1) TMI 183 - AT - Income Tax

Appeal Granted: Tax Deduction Allowed for Legal Heirs

Mahadev Balai Versus I.T.O., Ward 7 (2), Jaipur

The Tribunal partly allowed the appeal, directing the Assessing Officer to allow the deduction under Section 54F of the Income Tax Act, 1961. The Tribunal ... Claim made U/s 54B - disallowance of claim on the ground that the property has been purchased in the name of his wife and the investment made in construction of the house on the property belonging to the wife of the assessee - Held that:- As decided in Kalya Vs. CIT & Ors [2012 (6) TMI 239 - RAJASTHAN HIGH COURT ] a bare reading of Section 54B of the Income Tax Act does not suggest that assessee would be entitled to get exemption for the land purchased by him in the name of his son and daughter-in-law. In the facts and circumstances of the case also aforesaid inference has not been drawn. Same is question of fact. No substantial question of law arises in appeal. Question whether purchase was by assessee or by son, is a question of fact. Secondly, the word 'assessee' used in the Income Tax Act needs to be given a 'legal interpretation' and not a 'liberal interpretation', as contended by the learned counsel for the appellant. If the word 'assessee' is given a liberal interpretation, it would be tantamount to giving a free hand to the assessee and his legal heirs and it shall curtail the revenue of the Government, which the law does not permit. The Income Tax Appellate Tribunal, having considered all the facts and circumstances of the case, is found to have rightly disallowed the exemption under Section 54B of the Act. - Decided against assessee Disallowance of deduction U/s 54F - Held that:- Hon’ble Jurisdictional High Court in the case of Kalya Vs. CIT & ors. (supra) had occasion to deal with the question of eligibility of Section 54B of the Act but has not examined the claim made U/s 54F of the Act, therefore, the revenue has not brought our notice any other binding precedent of the eligibility of deduction U/s 54F of the Act. Therefore, by respectfully following the judgment of the Hon’ble Karnataka High Court in the case of CIT Vs P.R. Seshadri (2009 (7) TMI 814 - Karnataka High Court ) wherein held though the land may be in the ownership of the assessee' s spouse, nevertheless the Tribunal has recorded a categorical finding that construction work was in progress during April 21, 1995 till August 31, 1996, and the wife of the assessee could have included the value of construction for mortgage purposes and this alone does not mean that construction was carried out by the wife of the assessee out of her own funds so as to deny the assessee the benefit of deduction under section 54F, we direct the Assessing Officer to allow deduction U/s 54F of the Act to the assessee - Decided against revenue Issues:1. Addition under section 144/147 of Income Tax Act, 19612. Validity of notice u/s 148 of Income Tax Act, 19613. Disallowance of deduction under sections 54B and 54F of IT Act, 19614. Assessment order validityIssue 1: Addition under section 144/147 of Income Tax Act, 1961The case involved an appeal against an order passed by the ld. CIT(A)-III, Jaipur, relating to the A.Y. 2007-08. The Assessing Officer computed long term capital gain and agricultural income based on the sale of land by the assessee. The ld. CIT(A) partly allowed the appeal, disallowing claims made under sections 54B and 54F of the Act due to property being purchased in the name of the assessee's wife. The assessee appealed this decision.Issue 2: Disallowance of deduction under sections 54B and 54F of IT Act, 1961Regarding the disallowance of deduction under section 54B, the ld. AR argued that the investment made in agricultural land in the name of the assessee's wife should qualify for deduction as per Section 54B. The ld. DR supported the authorities' decision, citing a High Court judgment. The Tribunal referred to previous judgments and held that the word 'assessee' in Section 54B should be interpreted liberally to include legal heirs, affirming the ld. CIT(A)'s decision.Issue 3: Disallowance of deduction under section 54F of IT Act, 1961Concerning the disallowance under section 54F, the ld. Counsel contended that the construction of a residential house on agricultural land owned by the assessee's wife should still qualify for deduction under Section 54F. Citing a Karnataka High Court judgment, the Tribunal allowed the deduction under Section 54F, as the land ownership by the spouse did not disqualify the assessee from claiming the deduction.Issue 4: Assessment order validityThe Tribunal dismissed the appeal's general ground, stating it required no separate adjudication. The appeal was partly allowed, directing the Assessing Officer to allow the deduction under Section 54F. The Tribunal upheld the ld. CIT(A)'s decision on disallowance of deduction under Section 54B, based on the interpretation of the term 'assessee' and previous judicial precedents.In conclusion, the Tribunal's judgment addressed various issues related to the disallowance of deductions under sections 54B and 54F of the Income Tax Act, 1961, emphasizing the interpretation of legal terms and reliance on judicial precedents to determine the eligibility of deductions based on property ownership and investment scenarios.