TaxTMI 
TaxTMI 
2007 (2) TMI 275
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....e assessee arising from the CIT(A)'s order passed in the matter of an assessment made under section 143(3) of the Act by the Assessing Officer. The solitary issue raised by the assessee in this appeal is asunder: "1. The ld. CIT(A) has erred in not appreciating the facts and submissions placed before him in relation to the claim of exemption under section 54F of the Income-tax Act, 1961." 4.2 The relevant facts giving rise to the issue in dispute may be summarized as under: 4.3 The assessee filed his return of income on 21-8-1995 declaring total income at Rs. 50,261. During the relevant year, the assessee had sold a plot in Bibvewadi. The capital gain arising from the sale of the plot at Bibvewadi was claimed as exempted for the reason that the entire consideration amount received on sale of a plot was deposited in capital gain account scheme in Syndicate Bank. The return of income filed by the assessee was initially processed under section 143(1) as per the return filed by the assessee. 4.4 It is further stated by the Assessing Officer in his assessment order that subsequently, on the basis of the information available on record, it was found that the assesse....
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....was allotted to the assessee in 1971 on hire-purchase basis. The assessee has paid the hire-purchase instalment and the said hire-purchase period is over in 1990. A Co-op. Housing Society of the members of the said building No. 14, has already been formed and registered with the Registrar of Co-op. Societies. 8. It is stated by the Estate Manager, MHADA that they have provided some services, viz., water, electricity to the members and there is a dispute between the Society and MHADA over payment of the same. Only for this reason the transfer of Building to the Registered Society is hold-up. 9. In allotment letter of the flat copy available on record, MHADA has clarified in para 4 that electricity is not available in the flat that time and when the same will be provided allottee has to pay the Bill. 10. From the facts narrated above the following points are noted: (1) The flat was allotted to the assessee in 1971 on hire-purchase basis. (2) The assessee paid all the instalments till 1990 and hire-purchase is complete. (3) The Co-op. Housing Society of the Members of Building No. 14 has been formed and Registered and assessee has ....
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.... has referred to a certificate dated 7-10-1998 issued by Estate Manager, MHADA, which as per the English translation furnished by the Authorised Representative states as under: 'Flat holder has not paid arrears and not complied with terms of the contract, transfer of property has not been taken place. After payment and compliance of the terms of sale deed with society and Land Revenue Agreement will be executed. At the same time till the transfer of property is taken place to the society ownership of the building remains with MHADA.' The Authorised Representative has also referred to section 66 of the MHADA Act, which provides that if any tenant does not pay the rent, compensation or amount lawfully due from him in respect of the house for a period of more than two months, MHADA has power to evict him from the house. The Authorised Representative has also placed reliance on the notice of Pune Municipal Corporation issued in regard to demand for property tax, in which property at 15/14, Bund Road, Pune-411 001 is stated to be owned by the Estate Manager, Maharashtra Housing Board. As regards the Assessing Officer's reference to section 27 of the Act in ....
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....nd paise fifty only.' It is not in dispute that the payment stipulated in the allotment letter dated 13-11-1969 have already been made by the appellant. Besides, it is to be presumed that on fulfilment of the conditions set out in the allotment letter only the appellant was allowed possession of the flat since 1971 and thereafter no proceedings either for eviction or any other purpose as stipulated under section 66 of MHADA Act, 1976 have been taken against the appellant. Accordingly, I do not find any merit in the submissions of the appellant, the Authorised Representative that the appellant was not the owner but a tenant as stated in the certificate dated 7-10-1998 of the Estate Manager, MHADA, since he had not paid certain arrears. In fact, the certificate dated 7-10-1998 issued by the Estate Manager, MHADA, is totally silent about the allotment letter dated 13-11-1969 and it does not specify the nature of the payment in arrears and the terms of the contract which the appellant has not fulfilled. Thus, merely on the basis of the letter dated 7-10-1998, it cannot be said that the appellant did not own flat No. 112 in building No. 14 at Agarkarnagar, Pune-411 001 and ....
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....adi he owned a residential house being flat No. 112, building No. 14, Maharashtra Housing Colony, Agarkarnagar, Pune-411 001 as per allotment letter dated 13-11-1969. Further, the fact that the entire sale consideration was deposited in capital gain account with Syndicate Bank with intention to purchase a residential house within the period stipulated under section 54, which ultimately did not happen and the appellant on his own offered capital gain in the assessment year 1998-99 on expiry of the period of three years can be of no avail, in view of the specific provisions of the proviso to section 54F. Therefore, the action of the Assessing Officer in taxing the capital gain of Rs. 9,12,400 on sale of plot of land during the assessment year 1995-96 is confirmed and appeal fails in the assessment year 1995-96." 6. Still aggrieved, the assessee has preferred this appeal before us. 7.1 In the course of hearing of this appeal, the assessee invited our attention to his written submission filed before the CIT(A), which runs as under: "1. The appellant has sold plot of land during the year and deposited the sale consideration in Capital Gain Account with Syndicate Bank. The....
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.... of the plot of land in acquiring residential property within stipulated period as per section 54F of the Act, appellant offered the long-terms Capital Gain for tax and paid taxes accordingly in the assessment year 1998-99. 9. Appellant had intention to buy the residential house in case this particular property which is still in dispute could not be transferred in his name. However, within stipulated time he could not buy the property, he offered long-terms Capital Gain for tax. In view of the above appellant prays that the exemption under section 54F be allowed to him. Thanking you, Yours faithfully, Sd/- Rajeev Kulkarni, Chartered Accountant. Ends: 1. Xerox copy of the certificate from Estate Manager. 2. Xerox copy of the extract of section 66 of MHADA Act. 3. Xerox copy of the PMC Bill." 7.2 By making a reference to section 66 of the Maharashtra Housing and Area Development Act, 1976, the ld. counsel for the assessee further contended that in the light of the provisions contained in section 66 of the Maharashtra Housing and Area Development Act, 1976, and in the light of a letter dated 7-10-1998 given by the Es....
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....by the CIT(A) for rejecting the assessee's claim of deduction under section 54F has been reiterated by the ld. DR in the course of hearing of this appeal. Since the Assessing Officer's contention as well as the CIT(A)'s contention has already been set out hereinabove, we do not deem it necessary to reproduce the same here again. 8. We have considered the rival contentions of both the parties. The orders of the authorities below have been gone through. Relevant provisions as well as decisions cited at the Bar has been deliberated upon. 9.1 Insofar as the fact that during the year under consideration the assessee has sold a plot situated at Bibvewadi for Rs. 23,11,000 and long-term capital gain amounting to Rs. 9,12,400 has arisen therefrom, no controversy has been raised by the parties. It is also an undisputed fact that total sale consideration has been deposited by the assessee in the capital gain account scheme for the purpose of claiming deduction under section 54F of the Act. In other words, the sale consideration arising from the sale of plot has been utilized by the assessee by way of depositing the same in capital gain account scheme as the same could not b....
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....hases, within the period of one year after such date, or constructs, within a period of three years after such date, any residential house, the income from which is chargeable under the head 'Income from house property', other than the new asset. 9.3 The department's case is that the benefit of section 54F is not available to the assessee, inasmuch as the assessee owns a house being a flat allotted by the housing society to him on the date of the transfer of the plot of land. This house or flat owned by the assessee is other than the new asset that was to be constructed or purchased by the assessee within a specified period. On the other hand, the assessee's case is that the flat allotted to the assessee by the housing society cannot be said to be owned by the assessee and, as such, the assessee did not own any residential house on the date of the transfer of the plot of land. 9.4 Now, the question that falls for our consideration is to determine as to whether the assessee owned any residential house other than the new asset, on the date of transfer of the plot in question. 9.5 In the proviso to section 54F(1), the word used by the Legislature is, 'wher....
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....onsideration before the Hon'ble Supreme Court in the case of CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625. In this case, it was held that the amendment made to section 27 of the Act by the Finance Act, 1987 was intended to supply an obvious omission or to clear up doubts as to the meaning of the word 'owner' in section 22 of the Act. The Hon'ble Supreme Court, therefore, held that the amendment introduced by the Finance Act, 1987 was declaratory or clarificatory in nature so far as it related to sections 27(iii), (iiia) and (iiib) and, consequently these provisions are retrospective in nature. In this case, it was further held that though under the common law, 'owner' means a person who has got valid title legally conveyed to him after complying with the requirements of law, such as Transfer of Property Act, Registration Act, etc., in the context of section 22 of the Income-tax Act, 1961 having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, to tax the income, 'owner' is a person who is entitled to receive income from the property in his own right. The requirement of registration of the sale d....
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....see to secure the benefit intended to be given by the Legislature to the assessee. It is also well-settled that where there are two possible interpretations of a taxing provision the one which is favourable to the assessee should be preferred. Section 32 of the Act allows certain deductions, one of them being depreciation of buildings etc., owned by the assessee and used for the purpose of the business or profession. The terms 'own', 'ownership' and 'owned' are generic and relative terms. They have a wide and also a narrow connotation. The meaning would depend on the context in which the terms are used. CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625 (SC), is a case under the Income-tax Act and has to be taken as a trend-setter in the concept of ownership. Assistance from the law laid down therein can be taken for finding out the meaning of the term 'owned' as occurring in section 32(1) of the Act. The term 'owned' as occurring in section 32(1) of the Income-tax Act must be assigned a wider meaning. Anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded ther....
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.... of the term 'owned' as occurring in section 32(1). Guided by the law laid down by the Hon'ble Supreme Court in the case of Podar Cement (P.) Ltd., the Hon'ble Supreme Court in the case of Mysore Minerals Ltd. assigned the term 'owned' occurring in section 32(1) of the Act a wider meaning. The Hon'ble Supreme Court further observed that the term 'owned' occurring in section 32(1) of the Act must be assigned a wider meaning, and anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the building though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. 9.10 In the light of the ratio laid down by the Hon'ble Supreme Court in the case of Mysore Minerals Ltd. one can hold, without any difficulty, that the decision of Hon'ble Supreme Court in the case of Podar Cement (P.) Ltd. is to be taken as a trend-setter in the concept of ownership, and in order....
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....al gain will be granted proportionately on the basis of investment of net consideration either for purchase or construction of the residential house. This concession will not be available in a case where the assessee owns on the date of the transfer of the original asset any residential house, or purchases within the period of one year after such date, or constructs, within the period of three years after such date, any other residential house. Where the assessee purchases or constructs any other residential house within the period aforesaid, the exemption under the proposed provision, if allowed, shall stand forfeited and the amount of capital gain arising from the transfer of the original asset, which was not charged to tax, shall be allowed to be the income chargeable under the head 'Capital gain' relating to long-term capital assets of the previous year in which such residential house is so purchased or constructed. 'Net consideration' in respect of the transfer of a capital asset means the full value of the consideration received or accruing as a result of the transfer of the capital asset after deduction of any expenditure incurred wholly and exclusiv....
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....he various situations under which the assessee can be said to have purchased within specified time, or constructs within the specified time, a residential house so as to make him entitled to avail the benefit of deduction under section 54 or 54F of the Act, have come for consideration in some cases before the Courts. In this connection, a reference may be made to the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Smt. Beena K. Jain [1996] 217 ITR 363, 364-365 (Bom.), where the view of the Tribunal that the relevant date in this connection is the date when the assessee paid the full consideration amount on the flat becoming ready for occupation and obtained possession of the flat, was upheld by the Hon'ble High Court by observing as under: "Under section 54F of the Income-tax Act, in the case of an assessee if any capital gain arises from the transfer of any long-term capital asset, if not being a residential house, and the assessee has, within a period of one year before or two years after the date on which the transfer took place, purchased a residential house, the capital gain shall be dealt with as provided in that section. As per the se....
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..... Wadia [1995] 216 ITR 376 (Bom.), where the Hon'ble High Court held as under: "Extracted from Head Note.- Section 54 of the Income-tax Act, 1961, has to be construed in the context of the manner in which residential properties are now being constructed in a city like Bombay where, looking to the cost of the land co-operative housing societies are being formed for constructing a building in which flats are allotted to members. This must also be viewed as a method of constructing residential tenements. What we have to see is whether the assessee has acquired a right to a specific flat in such a building which is being constructed by the society and whether he has made a substantial investment within the prescribed period which will entitle him to obtain possession of the flat so constructed and in which he intends to reside. The material test in this connection is domain over the flat and investment in it. Central Board of Direct Taxes Circular No. 471, dated 15-10-1986, deals with investment in flats under the self-financing scheme of the Delhi Development Authority. The Board has stated in the circular that when an allotment letter is issued to an allottee under this ....
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....of any residential house within the specified period, the requirement of Transfer of Property Act, the Registration Act etc., has not been held to be compulsory. Applying the rules of harmonious construction of a statute, a similar analogy should be held to be applicable for interpreting the word 'own' of any residential house, used in the other part of the same section. To put it differently, the ratio laid down by the Courts and the position explained by the Board in its circular in defining or interpreting the meaning of 'purchase or construction of any residential house by any assessee' for the purpose of benefit granted under section 54F of the Act, shall equally apply while interpreting the words 'own any residential house' used in the other part of the same section having the same intent and object thereof. Therefore, we hold that the reasoning given by the Courts and the Board's Circular in the purpose of giving the meaning to the expression 'purchases or constructs' occurring in same section 54F of the Act should be equally applied for the purpose of finding out the true and correct meaning of the expression 'own' occurring in sa....
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....ds 'owner of any residential house' occurring in section 54F of the Act. Therefore, for the purpose of section 54F of the Act, the meaning of 'own' or 'owner' is to be understood in the same sense in which it is understood for the purpose of sections 22 to 26 of the Act. 9.20 Therefore, applying the principle laid down by the Hon'ble Supreme Court in the case of Podar Cement (P.) Ltd. as well as in the case of Mysore Minerals Ltd., and following the ratio of the Hon'ble Supreme Court in the case of Mysore Minerals Ltd. holding that the decision of Hon'ble Supreme Court in the case of Podar Cement (P.) Ltd. should be taken as a trend-setter in the concept of ownership, and in order to find out the meaning of the word 'own' or 'owned' or 'owner' in the Income-tax Act, assistance from the law laid down by the Hon'ble Supreme Court in the case of Podar Cement (P.) Ltd. can be taken, and having found that that the word 'own', 'owner' or 'owned' in section 54F is used in similar context in which it is used in section 22 of the Act, we are of the considered view that, for the purpose of section 54F ....
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....g and Area Development Act, 1976 were ever initiated against the assessee to evict him from the said residential flat not any final order under section 66 evicting the assessee from the flat was ever passed against the assessee. 10.2 Having regard to the facts narrated above, it is thus clear that the assessee was in possession of the residential flat in his own title exercising dominion over the property by excluding others therefrom and has the right to use and occupy the property and/or to enjoy its usufruct in his own right, notwithstanding the fact a formal deed of title might not have been executed and registered by MHADA in favour of the co-operative society formed by the members. 11.1 Before parting with this issue, it is also necessary to deal with the assessee's contention that in view of section 66 of the Maharashtra Housing and Area Development Act, 1976, he has acquired no right or title over the flat allotted to him but he is merely a tenant thereof. In this respect the ld. counsel for the assessee has given a strong emphasis on a certificate dated 7-10-1988 issued by the Estate Manager, Maharashtra Housing and Area Development Authority saying that as the f....
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....iting calling upon all persons concerned to show cause within ten days why an order of eviction should not be made. The notice shall- (a) specify the grounds on which the order of eviction is proposed to be made; and (b) require all persons concerned, that is to say, all persons who are or may be in occupation of, or claim interest in the Authority premises, to show cause against the proposed order, on or before such date is specified in the notice. If such persons make an application to the Competent Authority for the extension of the period specified in the notice, such Authority may grant the same on deposit of one hundred rupees and on such terms as to payment and recovery of the amount claimed in the notice, as such Authority thinks fit. Any written statement put in by any person and documents produced in pursuance of the notice, shall be filed with the record of the case, and such person shall be entitled to appear before the Competent Authority by advocate, attorney or other legal practitioner. The notice to be served under this sub-section shall be served in the manner provided for the service of a notice under sub-secti....
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.... Explanation I.- For the purpose of this Chapter, the expression 'unauthorised occupation' in relation to any person authorised to occupy any Authority premises includes the continuance of occupation by him or by any person claiming through or under him of the premises after the authority under which he was allowed to occupy the premises has expired or has been duly determined. Explanation II.- For the purpose of this chapter, the term 'rent, compensation or amount' includes any payment to be made by a person in respect of any premises taken by him from the Authority under hire-purchase agreement and also any penalty [imposed such rate as may be prescribed] for the default in the payment of rent, compensation or amount. The amount of such penalty shall not exceed 10 per cent of such rent, compensation or amount. (7) Notwithstanding anything contained in this Chapter including this section, if any person fails to vacate the premises required by the Board for the purpose of demolition of building containing such premises which are unfit for human habitation then, the Board may require the occupants thereof to vacate the premises within 24 hour....
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....uch person shall continue to hold the premises on the same terms on which he held them immediately before such notice was served on him. Therefore, on reading the section 66 as a whole, it is clear that merely because the occupier has not paid any rents or compensation or any amount lawfully due from him within a specified time, it by itself would not make the occupier disentitled for ever to occupy the house in his own right unless the proceedings contemplated under section 66 are finally concluded or determined against the occupier. In the present case, no such action as contemplated under section 66 of the Maharashtra Housing and Area Development Act was ever taken against the present assessee. On the relevant date, i.e., 31-3-1995, the assessee was not ordered to be evicted from tl1e premises by the Competent Authority by way of passing any valid order under section 66 of the Maharashtra Housing and Area Development Act. In the course of hearing of this appeal, a query was raised to the ld. counsel for the assessee as to whether any action under section 66 had been taken against the assessee. In reply thereto, the ld. counsel for the assessee has stated that no such order or no....
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....m of deduction under section 54F of the Act. The ground raised in revenue's appeal as well as in the cross-objection filed by the assessee are with regard to the question as to whether penalty under section 271 (1)(c) is imposable on the assessee in respect of the addition made by the Assessing Officer by way of disallowing the assessee's claim of deduction under section 54F of the Act and, if it is found to be imposable, whether it is to be imposed at the rate of 100 per cent or 200 per cent of the tax sought to be evaded. 13.1 In the assessment made under section 147, read with section 143(3), the assessee's claim of deduction under section 54F was disallowed by the Assessing Officer on the ground that the assessee owned a residential house on the date of the transfer of a plot at Bibvewadi, and as such, the assessee's case was covered by the proviso to section 54F of the Act. Because of the disallowance of the assessee's claim of deduction under section 54F, the Assessing Officer initiated penalty proceedings under section 271(1)(c) for filing inaccurate particulars of income with regard to the claim of deduction under section 54F of the Act. 13.2 In th....
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....on 54F and thereby concealed the income. The fact of furnishing inaccurate particulars of income has come to the notice of the Department during reassessment proceedings only. I am, therefore, of the opinion that assessee is liable for penalty under section 271 (1)(c) of the Income-tax Act, 1961. I, therefore, impose a penalty at the rate of 200 per cent of tax on concealed income which comes to Rs. 3,65,000." 13.4 On appeal, the CIT(A) confirmed the Assessing Officer's order in imposing the penalty in principle by observing as under: "4. I have considered the submissions of the appellant and have also gone through the facts brought out in the assessment order as well as penalty order. At the outset, it may be mentioned that the denial of deduction under section 54F claimed by the appellant had been sustained in appeal by the CIT (Appeals), after considering the appellant's submissions and going through various evidences gathered in this respect. As is evident from the assessment order, the flat in question had been allowed to the appellant by MHADA under hire-purchase scheme in 1971 and the entire instalments had already been paid by the appellant in 1990 as pe....
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.... of 200 per cent appears to be not justified and is directed to be restricted to the minimum leviable at the rate of 100 per cent of the tax sought to be evaded. The appellant will get a relief of Rs. 1,82,500. The Assessing Officer shall accordingly modify the penalty order." 13.5 However, the CIT(A) has reduced the quantum of penalty from 200 per cent to 100 per cent of the tax sought to be evaded. Hence, the assessee is in further appeal before us. 14.1 We have considered the rival contentions of both the parties and have gone through the orders of the authorities below. 14.2 On reading the provisions contained in section 271(1)(c) read with Explanation 1 thereto, it is clear that in case the assessee has been able to prove and establish that all the facts material to the computation of assessee's income were fully and truly furnished before the Assessing Officer, and the explanation offered by the assessee is not found to be false, but is a bona fide one, the penalty under section 271(1)(c) would not be imposed. Section 271(1)(c), in its Explanation, refers to the explanation offered by the person being found to be false or not being one which the person offering t....
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.... the relevant particulars relating to assessee's claim of deduction under section 54F has not been withheld by the assessee, but rather have been fully placed before the authorities below in the course of proceedings before them. It is also pertinent to note that in order to claim a deduction under section 54F of the Act, the assessee has even deposited the sale consideration into capital gain account scheme with the specified bank, which goes to show that the assessee had no intention to make a false claim. It is not a case where a false claim as distinct from a wrong claim, under section 54F of the Act, was made by the assessee. The claim made by the assessee under section 54F of the Act can at best be considered to be not maintainable and allowable in the light of the interpretation given by the Courts to the word 'owner', 'owned' or 'own' used in the Income-tax Act. Therefore, it is not a case of false claim but a case where a claim is not found to be maintainable in the eyes of law after making exhaustive deliberation on the dispute. Having regard to the totality of facts and circumstances of the case, we are, therefore, of the view that the assesse....