Tribunal Upholds Daughter's Coparcenary Rights & Multiple House Deductions Under Income-tax Act, Dismissing Revenue Appeal.

Income-tax Officer, City Ward - 1 (6), Chennai. Versus PC Ramakrishna.

Income-tax Officer, City Ward - 1 (6), Chennai. Versus PC Ramakrishna. - ITD 108, 251, TTJ 107, 351, Issues Involved:
1. Recognition of partition of Hindu Undivided Family (HUF) under section 171 of the Income-tax Act, 1961.
2. Entitlement to deduction under section 54 of the Income-tax Act, 1961 for acquiring more than one residential house.

Issue-wise Detailed Analysis:

1. Recognition of Partition of HUF under Section 171 of the Income-tax Act, 1961:

The assessee's appeal concerned the refusal by the CIT (Appeals) to recognize the partition of the HUF under section 171 of the Income-tax Act, 1961. The facts revealed that an oral partition took place on 16-9-1994, later confirmed by a Deed of Declaration on 9-3-1995. The Assessing Officer (AO) deemed the partition a sham, intended to reduce tax liability, and refused recognition under section 171.

The AO's rejection was based on the interpretation of the Hindu Succession (Tamil Nadu Amendment) Act, 1989, which he believed did not confer inherent partition rights to female members. Additionally, the AO noted that the partition did not provide for the maintenance of the assessee's wife, Smt. Hymavathi Ramakrishna.

The CIT (Appeals) upheld the AO's decision, citing that under Hindu Law, a partition requires two or more coparceners, and an HUF with only one coparcener cannot be partitioned. The CIT (Appeals) relied on various case laws, including V.V.S. Natarajan v. CIT and S. Sadasivam v. Commissioner of Agrl. IT, to support this view.

The Tribunal, however, referred to the Supreme Court's judgment in S. Sai Reddy v. S. Narayanan Reddy, which interpreted similar amendments in the Hindu Succession Act by the Andhra Pradesh Legislature. The Supreme Court emphasized that the amendment conferred coparcenary rights to daughters, enabling them to claim partition and share in the family property on par with sons.

The Tribunal concluded that the Tamil Nadu Amendment Act, 1989, similarly conferred coparcenary rights to daughters, making them entitled to claim partition. The Tribunal found no infirmity in the partition of the HUF, recognizing it under section 171 of the Act.

2. Entitlement to Deduction under Section 54 of the Income-tax Act, 1961:

The Revenue's appeal concerned the denial of deduction under section 54 for acquiring more than one residential house. The AO denied the exemption, interpreting 'a residential house' to mean only one house.

The Tribunal examined sections 54 and 54F of the Act, noting the distinction between them. Section 54 pertains to the transfer of a residential house, while section 54F deals with the transfer of any long-term capital asset other than a residential house. The Tribunal observed that section 54 does not restrict the exemption to one residential house, unlike section 54F.

The Tribunal considered the assessee's acquisition of two flats, one on the ground floor and another on the third floor, and the reasons for such acquisition, including the accommodation needs of the assessee's mother. The Tribunal referred to the case law of K.G. Vyas v. ITO, where the Tribunal allowed exemption under section 54 for multiple flats in the same building used as a single residence.

The Tribunal concluded that there is no bar in section 54 against claiming exemption for more than one residential house, provided the conditions of the section are met. Consequently, the Tribunal allowed the deduction under section 54 for both flats acquired by the assessee.

Conclusion:

The Tribunal recognized the partition of the HUF under section 171 of the Income-tax Act, 1961, and allowed the deduction under section 54 for acquiring more than one residential house, dismissing the Revenue's appeal and allowing the assessee's appeal.