TaxTMI 
TaxTMI 
2007 (2) TMI 275
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....ed 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 assessee was residing in a flat No. 14/112, Agarkar Nagar, Pune, which ....
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....e 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 been allotted membership of the Society. (4) Possession of the flat is with the assessee for the last many years and it is oc....
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....#39;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 para 10 of assessment order, the Authorised Representative has submitted that provisions of this section are intended only for sections 22 to 26 and they could not be extended to other provision....
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....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 I do not find any justification for relying on the letter dated 7-10-1998 of the Estate Manager, MHADA, by ignoring the allotment letter dated 13-11-1969 and the fact of continued possession enjoyed by the appellant since 1971. In this context, it ....
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....ate 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 appellant claimed exemption under section 54F of the Act. The learned Assessing Officer rejected the appellant's claim on the ground that appellant owns residential house at the time of sale. 2. The learned Assessing Officer record-ed reasoning in para 10 of his assessment....
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....uld 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 Estate Manager, Pune Housing and Development Board, Pune-1, the assessee cannot be considered to be an owner of the flat allotted to the assessee by the Housing Development Authority. He further contended that in order to apply the provisions of proviso to section 54F of the Act, the assessee should own one house other than the new one, in his own right. He further submitted that the words '....
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....he 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 be utilized for the purpose of constructing or purchasing a house before the due date of filing the return of income under section 139 of the Act. The dispute is only with regard to the applicability of the proviso to section 54F of the Act. On reading the proviso to section 54F(1), it is clear that nothing contained in sub-section (1) of section 54F shall apply if the conditions enumerated in the s....
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....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, 'where the assessee owns, on the date of transfer of the original asset,... any residential house, income from which is chargeable under the head 'Income from house property', other than the new asset." 9.6 The similar concept 'own' or 'owned' or 'ownership' is also used by the Legislature in sections 22 to 26 and 32 of the Income-tax Act. For the purpose of sections 22 to 26, 'owner of house property' ha....
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....elated 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 deed in the context of section 22 is not warranted. Therefore, in this case, in the context of section 22 of the Income-tax Act, 1961, the word 'owner' was meant to be a person who is entitled to receive income from the property in his own right, notwithstanding the fact that he might not have got valid title legally conveyed to him after complying with the requirements of law, such as Transfer of Property Act, Registration Act, etc. The case of Podar Cement (P.) Ltd. before the Hon'ble Supreme ....
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....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 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. 'Building owned by the assessee', the expression as occurring in section 32(1) of the Income-tax Act, means the person who having acquired possession over the building in his own right uses the same for the purposes of the business....
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....minion 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 to find out the meaning of the word 'own', 'owner' or 'owned' in the Income-tax Act, an assistance from the law laid down by the Hon'ble Supreme Court in the case of Podar Cement (P) Ltd. can be taken. It is also equally true that meaning of the word 'owner' or 'own' or 'owned' would also depend on the context in which these terms are used. 9.11 It is, therefore, essential to see as to whether the word 'own' has been used in section 54F of the Income-tax Act in the same c....
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.... 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 exclusively in connection with the transfer. 20.3 If the assessee transfers the newly acquired residential house within three years of its purchase or construction, then the amount of capital gain arising from the transfer of the original asset which was not charged to tax shall be deemed to be the income of the year in which the new asset is transferred and such income shall be charged to tax under the head 'Capital gains' relating to long-term capital assets. 20.4 This provision will become effective from 1-4-1983, and will accordingly apply in relation to the asse....
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....e 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 section certain exemption has to be allowed in respect of the capital gains to be calculated as set out therein. The department contends that the assessee did not purchase the residential house either one year prior to or two years after the sale of the capital asset which resulted in the long-term capital gains. According to the department, the agreement for purchase of the new flat was entered into more than one year prior to the sale. Hence, the petitioner is not entitled to the benefit under section 54F. In our view, the Tribunal has rightly negatived this contention and has held that the new residen....
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....ng 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 scheme on payment of the first instalment of the cost of construction, the allotment is final unless it is cancelled. The allottee, thereupon, gets title to the property on the issuance of the allotment letter and the payment of instalment is only a follow-up action and taking delivery of possession is only a formality. The Board has directed that such an allotment of a flat under this scheme should be treated as a case of construction for the purpose of capital gains." 9.17 Further, the Hon'ble Delhi High Court in the case of CIT v. Smt. Brinda Kumari [2001] 114 Taxman 266 wherein in respect of the positive....
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....ted 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 same section 54F of the Act. 9.19 We may also have a look to the controversy arising in this case from one more angle. On reading of the proviso to section 54F, it is seen that the expression 'assessee owns, on the date of transfer of the original asset, any residential house' is used in the proviso with reference to 'the residential house, the income of which is chargeable under the head 'Income from house property'. In other words, the expression 'own any residential house' is used with a reference to the income of which is chargeable under the head 'Income from house property'. The Legislature has in....
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....td. 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 of the Act, read with proviso thereto, anyone in possession of any residential house in his own title exercising such dominion over the residential house as would enable others being excluded therefrom and having the right to use and occupy the same and/or enjoy its usufruct in his own right and/or is entitled to receive income from the residential house in his own right, would be the owner of the residential house, 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. We further hold that the definition of 'owner of the house property' defi....
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....1.1 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 flat holders has not paid arrears and has not complied with terms of the contract, the transfer of property in their favour has not taken place, and it is only after the payment and compliance of the terms of the contract that the sale deed with society and land revenue agreement will be executed, and till such transfer of property is taken place in favour of the society, the ownership of the building remains with the MHADA. 11.2 In order to decide this issue, we find it useful to refer to section 66 of the Maharashtra Housing and Area Development Act, 1976, which reads as under: "66. (1) If the Competent Authority is satisfied- (a) that the person authorised to occupy any Authority premises....
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....tatement 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-section (1); and thereupon, the notice shall be deemed to have been duly given to all persons concerned. (3) If any person refuses or fails to comply with an order under sub-section (1), the Competent Authority may evict that person and any other persons who obstructs him and take possession of the premises, and may for that purposes use such forces as may be necessary. (4) The Competent Authority may, after giving ten clear days' notice to the person from whom possession of the Authority premises has been taken under sub-section (3) and after publishing such notice in the prescribed manner, remove or cause to be removed or disposed of by public auction, any property remaining on such premises. Such notice shall be served in the manner provided for the service of a notice under sub-section (1). (5) Whe....
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....ing 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 hours of the date of service of the notice; and at the same time allot them alternative accommodation in any building of the Authority at such place as it thinks fit. The accommodation may not be in the same locality or of the same floor area as the premises vacated by the occupiers. If any occupier fails to accept and occupy the alternative accommodation allotted to him within the time specified by the Board the responsibility of the Board to provide him with any alternative accommodation shall cease. Such occupier shall, however, have a right to re-occupy his premises in the building if a building is re-erected on the land on which the demolished building stood. (8) Where an occupier does not vacate his premises, the Board nay take or cause to be taken such steps and use or cause to be used such force as may be reasonably necessary for the purpose of getting the premis....
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....rashtra 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 notice as contemplated under section 66, had ever been issued or passed against the assessee. Therefore, in the light of the facts and circumstances of the case, and in the light of the provisions contained in section 66 of the Maharashtra Housing and Area Development Act, 1976, we are of the considered view that merely by making a general reference to section 66, it cannot be said that the assessee has lost all his dominion or control or possession over the flat in question as on the relevant date. Since the flat No. 112 in building No. 14 of Maharashtra Housing Board Colony, Agarkarnagar, Pune - 411001 was allotted to the assessee, vide allotment letter dated 13-11-1969 of MHADA, and possession was given to the assessee and the assessee has paid hire-purchase instalments, and has been in possession of the said flat since 1971 in his own right to the exclusion of others till the releva....
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....ct. 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 the course of penalty proceedings, the assessee submitted as under: "(1) Our client sold the plot of land during assessment year 1995-96 and deposited the sale consideration in Capital Gain A/c with Syndicate Bank. Assessee claimed exemption under section 54F of the Act. The learned Assessing Officer rejected the assessee's claim on the ground that assessee owns residential house at the time of sale. (2) Assessee could not invest the sale proceeds of the plot of land in acquiring residential property within stipulated period as per section 54F of the Act, as such assessee offered the long-term capital gain for the tax and paid taxes accordingly in the assessment year 1998-99. (3) The Commissioner of Income-tax (Appeals)-II, Pune has confirmed the Assessing Officer's view and taxed long-term Capital Gain in the assessment year 1995-96. (4) Assessee has never concealed any particulars....
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....ect. 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 per the certificate from MHADA obtained by the Assessing Officer. Thus, as contended by the Assessing Officer, appellant was the deemed owner of the flat at Agarkar Nagar in accordance with the provisions of section 27 of the Act. The judgments relied upon by the appellant do not help his case, as they are delivered on some different issues and not directly on the issue under consideration. Even the appellant's contention relying on various judgments that the onus was on the department to prove the mens rea is not tenable, in view of the judgment of the Supreme Court in the case of Addl. CIT v. Jeevan Lal Shah reported in 205 ITR 244, wherein it has been held that 'presumption of concealment remains unless assessee discharges burden of proof that failure to return correct income did not arise from fraud or gross or wilful neglect'. The other judgment relied upon by the appellant to contend that there was a bona fide belief in claiming the deduction und....
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....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 the explanation is unable to substantiate. A penalty can only be imposed in case the explanation is found to be false and not bona fide one. It is also well-settled that when two views are possible, no penalty can be imposed. It is also settled position of law that merely because the assessee's claim has been disallowed without establishing anything more that the assessee has made a false claim and the assessee had failed to furnish relevant details and particulars thereof, it would not be justified for the authority concerned to levy a penalty under section 271(1)(c) of the Act. In the light of this view we have taken, we shall proceed to decide as to whether the assessee is liable to a penalty under section 271(1)(c) of the Act on account of the addition made by way of disallowing the assessee's claim of deduction under section 54F of the Act. 14.3 The dispute as to whether, on the facts of the present case, the assessee is entitled to deduction under sectio....
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....t 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 assessee has been able to discharge his burden that lay upon him by Explanation 1 to section 271(1)(c) of the Act, inasmuch as all the particulars relating to the assessee's claim of deduction under section 54F were duly furnished by the assessee and the assessee's claim is not found to be false. In the penalty order, the Assessing Officer has failed to give any finding to the effect that explanation offered by the assessee was false or was otherwise found to be not bona fide one. The CIT(A) has confirmed the Assessing Officer's order by saying that there was no bona fide belief on the part of the assessee that he was not owner of the residential house at the time of transfer of the land, but we fail to understand as to how the assessee's claim can be considered to be not bona fide one, when there exists two possible and reasonable meaning of a particular term used in the statute. We, therefore, do not agree with the CIT(A) that the assessee had no bona fide be....