1995 (9) TMI 112 - AT - Income Tax

Assessee loses property exemption due to ownership ruling on Jor Bagh property transfer

VD. M. RM. M. RM. Muthiah Chettiar. Versus Assistant Commissioner Of Income-Tax.

VD. M. RM. M. RM. Muthiah Chettiar. Versus Assistant Commissioner Of Income-Tax. - ITD 056, 232, Issues Involved:1. Exemption Claim under Section 54F of the Income-tax Act, 1961.2. Ownership of Residential Property at Jor Bagh.3. Distribution of Estate under the Will.4. Applicability of Section 168 of the Income-tax Act, 1961.5. Legal Implications of Mutation in Property Records.Issue 1: Exemption Claim under Section 54F of the Income-tax Act, 1961The primary issue revolves around the assessee's claim for exemption under Section 54F of the Income-tax Act, 1961, which pertains to capital gains from the sale of shares. The assessee sold shares for Rs. 21,71,680, resulting in a capital gain of Rs. 21,48,680. The assessee then invested in a house property in New Friends Colony, jointly with her daughter, for Rs. 80 lakhs. The Assessing Officer (AO) rejected the exemption claim because the assessee was deemed to own another residential property at Jor Bagh, which disqualified her from the exemption under Section 54F.Issue 2: Ownership of Residential Property at Jor BaghThe AO's decision was based on the fact that the assessee was the owner of another residential property at Jor Bagh. This was supported by income-tax and wealth-tax returns and the will of Mrs. S.D. Puri, which bequeathed a share of the Jor Bagh property to the assessee. The assessee argued that she was not the legal owner since the mutation of the property had not been done by the Land and Development Office (L&DO) authorities. The Tribunal found that the assessee had disclosed her 1/4th share in the Jor Bagh property in her wealth-tax returns and had stated on oath that her husband was a co-owner of the property. This indicated that the property had been distributed among the legatees, making the assessee the owner.Issue 3: Distribution of Estate under the WillThe will of Mrs. S.D. Puri directed the distribution of her property, including the Jor Bagh property, among specific legatees. The Tribunal examined whether the administration of the estate had been completed and whether the property had been distributed. The Tribunal found that everything required for the distribution of assets had been done, and the rent was being collected by the co-owners, not by the executor as an administrator. The Tribunal concluded that the distribution of the Jor Bagh property had been completed, and the assessee was the owner of the property.Issue 4: Applicability of Section 168 of the Income-tax Act, 1961The assessee argued that the assessment of the Jor Bagh property should be made in the hands of the executors under Section 168 of the Income-tax Act, 1961, until the property was distributed among the legatees. The Tribunal found that the administration of the estate had been completed, and the property had been distributed among the legatees. Therefore, the provisions of Section 168 were not applicable, and the income from the property was assessable in the hands of the legatees.Issue 5: Legal Implications of Mutation in Property RecordsThe assessee contended that mutation in the L&DO records was necessary for her to be considered the legal owner of the Jor Bagh property. The Tribunal rejected this contention, stating that the assent of the executor to the legacy, whether express or implied, was sufficient to transfer the property to the legatees. The mutation in the L&DO records was not essential for the assessee to become the owner of the property. The Tribunal emphasized that the legal title of the property vested in the legatees upon the assent of the executor and related back to the date of the testator's death.Conclusion:The Tribunal dismissed the appeals of the assessee, concluding that the assessee was the owner of the Jor Bagh property when she purchased the property at New Friends Colony and, therefore, was not entitled to the benefit under Section 54F of the Income-tax Act, 1961.