TaxTMI 
TaxTMI 
2020 (8) TMI 358
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....tion of the Legal Representative on behalf of Revenue. Accordingly, the Legal Representative of the assessee is substituted on record in place of the assessee. 4. Learned Counsel for the Assessee did not press Ground No.3, the same is dismissed as not pressed. Learned Counsel for the Assessee also submitted that Ground No.2 is consequential in nature and depends upon findings on Ground No.1. 5. On Ground No.1, assessee challenged the Orders of the authorities below in disallowing deduction, under section 54F of the I.T. Act, 1961, to the extent of Rs. 4.40 crores. 4. Briefly the facts of the case are that the A.O. disallowed a sum of Rs. 4,40,35,219.50 on account of long term capital gains earned by assessee in respect of sale of land at Harsaru, District Gurgaon, (Haryana), by denying the exemption under section 54F of the I.T. Act, 1961, claimed by assessee in respect of the said sale consideration on the ground that assessee allegedly did not fulfil the conditions of Section 54F of the I.T. Act, 1961. The A.O. has denied the exemption of long term capital gains under section 54F of the I.T. Act on the reason that assessee on the date of transfer of original asset had....
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....tural land on 09.12.2013 to his son, Shri Shwet Ketu Bhasin, living in USA, by virtue of an Agreement to Sell, executed on the same date, for a consideration of Rs. 20,25,000/- discharged in the following manner: - Cash/Cheque No. Drawn on Amount (Rs.) Date Cash N.A. 25,000/- 25.10.2013 Ch.No.32015781 Union of Bank of India, SME Branch, Gurgaon. 20,00,000/- 01.11.2013 5. As per the proviso to Section 54F of the Act in order to claim exemption in respect of Capital Gains arising from the transfer of a Long-Term Capital Asset, other than a house property, "an assessee should not own on the date of transfer of the original asset more than one residential house (other than the new house). 6. Accordingly, as on the date of sale of land it was claimed that, in respect of which the Long Term Capital Gains arose the Appellant was holding (and that also jointly with his wife) only one property viz. 910/17 Defence Colony, Gurgaon and hence was in compliance of all the procedural and enabling conditions for the grant of exemption u/s 54F of the Act, in particular requiring an assessee to not own more than one residential house as on the da....
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....case laws :- (a) Dr P.K. Vasanthi Rangarajan v. DCIT [(2012) 23 taxmann.com 299 Taxman 628 (Mad)] (b) Commissioner of Income Tax-V vs., Kapil Nagpal [(2015) 63 taxmann. com 366 (Delhi)] (c) Ashok G Chauhan v. Assistant Commissioner of Income Tax, Mumbai [(2019) 105 taxmann.com 204 (Mumbai-Trib)]. In the light of the facts of the case as well as the judicial decisions referred above, it is held that the only reason the AO denied the exemption from long term capital gains u/s 54F was that the appellant on the date of transfer of the original asset had more than one residential house i.e. at Defense Colony Gurgaon and Malibu Town Gurgaon, although both were jointly owned with his wife Smt. Savita Bhasin. The reliance placed on the above judicial rulings brings out co-jointly owing a residential property cannot be treated as absolute ownership and thus, the deduction u/s 54F cannot be denied. Infact it has also been observed that the harshness of the proviso of section 54F cannot be applied "unless and until there are materials to show that the assessee is the exclusive owner of the residential property. Similarly, the jurisdictional Delhi H....
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.... 5. The AO's enquiry u/s 133(6) confirmed, that the ownership as per records remained with the appellant and his wife and not his son as was claimed. 6. Even the maintenance bills of the property at Malibu Town were being raised and also paid by the appellant and not his son. 7. On being confronted with the findings, the appellant argued that he was covered by various case laws which were duly distinguished by the AO in his, order. 8. The A.O. also made confirmations u/s 133(6) from the tenant M/s Best Advertising. It was confirmed by the tenant that the entire rent had been paid to the appellant and his wife Smt. Savita Bhasin, in advance. On being confronted by the AO, the appellant gave the argument that part of the rent was retained and the balance amount was returned. Further, that the remaining amount was reflected in the income tax return of his son (the new owner of the property). It was further verified by the AO whether the rent was returned to the tenant as claimed by the appellant. It was informed that neither was there any cancellation of the rent agreement nor any amount was returned to the tenant. Thus the appellant's claim has been de....
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....ribunal is "Whether transfer of property by assessee to his son vide Agreement to Sell Dated 01.11.2013 is valid transfer or not ? and Whether joint ownership of property is also considered as residential house in the context of proviso to Section 54 of the I.T. Act ?" He has submitted that the sale of land at Gurgaon and deposit of money in Capital Gain Scheme Account is in accordance with provisions of Section 54F of the I.T. Act, 1961, is not in dispute. He has submitted that assessee has entered into genuine transaction with his son and property in transfer is supported by execution of valid Agreement which is supported by the ultimate Sale Deed executed which is registered vide Transfer Deed Dated 27.06.2018, copy of which is filed and placed on record. He has, therefore, submitted that property in reference shall be deemed to have been transferred on the date of Agreement Dated 01.11.2013, reference of which is also made in the registered Transfer Deed. He has submitted that assessee declared capital gain on account of the transfer of the property in reference and tax paid on the same as long term capital gains which have been accepted by the A.O. Wife of the assessee also so....
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.... under section 54F of the I.T. Act which are reproduced above. The Ld. D.R, therefore, submitted that claim of assessee have been rightly rejected by the authorities below. 7. We have heard the Learned Representatives of both the parties and perused the material available on record. 8. It is not in dispute that the assessee sold the land at District Gurgaon and earned long term capital gains. It is also not in dispute that assessee invested an amount of Rs. 50 lakhs in eligible bonds so as to claim exemption under section 54EC of the I.T. Act. It is also not in dispute that the impugned amount was deposited in the Capital Gains Accounts Scheme for claiming deduction under section 54F of the I.T. Act and subsequently assessee made investment in residential property for claiming deduction under section 54F of the I.T. Act. The only dispute in appeal is - "Whether the transfer of property by assessee to his son vide Agreement to Sell Dated 01.11.2013 in respect of property of 1/601, Malibu Town, Gurgaon is valid transfer or not ? And Whether Joint ownership of property is also considered as residential house in the context of proviso to Section 54F of the I.T. Act, 1961. ? Secti....
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....olly and exclusively in connection with such transfer. (2) Where the assessee purchases, within the period of two years after the date of the transfer of the original asset, or constructs, within the 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, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be i....
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....o a capital asset, includes, (i) --- (ii) --- (iii) --- (iv) --- (iva) --- (v) --- (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co- operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. [Explanation 1] - For the purposes of sub-clauses (v) and (vi), immovable property shall have the same meaning as in clause (d) of section 269 UA.] [Explanation 2.-For the removal of doubts, it is hereby clarified that "transfer" includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, direct)} or indirectly, absolutely or conditionally, voluntarily or involuntarily by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer o....
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....eement to Sell and later on fortified by the Registered Purchase Deed in which all the facts of the Agreement to Sell and the transaction between the parties along with transfer of share consideration have been mentioned. According to Section 49 of the Registration Act, 1908 - "A registered document shall operate from the time which it would have commenced to operate, if no registration thereof had been require or made and not from the time of its registration". Therefore, the Registered Purchase Deed shall operate legally from the date of agreement i.e., 01.11.2013. Thus, the conditions of Section 2(47)(vi) read with Section 269UA of the I.T. Act, 1961 are satisfied in the present case. The assessee, thus, complied with the conditions of Section 54F of the I.T. Act that he does not own more than one residential property at the time of claiming exemption under section 54F of the I.T. Act. The ITAT, Mumbai Bench in the case of Ashwin C. Jariwala vs., ITO (supra) held as under : "Admittedly, the conveyance deed was executed on 31-3-2008 and the same was registered under the Registration Act on 1-7-2008. On a perusal of the conveyance deed, it is noticed that the possessio....
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.... (i) Judgment of Hon'ble Jurisdictional Allahabad High Court in the case of Chandra Prakash Jain vs. ACIT (2014) 270 CTR 192 (Alld.), in which it was held as under : • "Section 2(47) is definition clause pertaining to transfer in relation to capital asset. The Act being a special Act which consists of specific definition clause in context of capital assets the general principles of transfer as contained in the Transfer of Property Act, 1882 shall not be applicable. It is well settled that Legislature can for the purposes of a special Act provide an artificial definition. Further more than the definition being an inclusive definition it had to be given an expensive meaning. [Para 16]. • In the present case, there is no applicability of section 2(47)(v). Sub-section (v) applies to the transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of the contract. The possession having not been transferred by the agreement dated 7-9-1991, there is no applicability of section 2(47)(v). • The assessees were full owner of the property. By agreement dated 7-9-1991, the asses....
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....eated as such under general law. Under section 2(47)(v) of the Act any transaction involving allowing of possession referred to section 53A of the Transfer of Property Act would come within the ambit of transfer. Even arrangement conferring privileges of ownerships without transfer of title would come within the ambit of section 2(47)(v) of the Act. The whole scheme for introduction of clauses (v) and (vi) in section 2(47) of the Act was that the capital gain is taxable in the year in which such transactions are entered into even if the transfer of immovable property is not effective or complete under the general law. 21. Thus, in the present cases, without prejudice to our finding to be recorded on issue No.(iii) in subsequent part of this order, we are of the view that on execution of agreement dated 2.3.2009, when the possession was also handed over, the transfer within the meaning of section 2(47)(v) and (vi) was complete. The parties to the agreement are not challenging the genuineness of the agreements." (iv) Judgment of Hon'ble Delhi High Court in the case of CIT-XVI vs. Ram Gopal (2015) 372 ITR 498 (Del.). in which it was held as under : • Thi....
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....sessment year under appeal i.e. 2010-2011. Section 2(47) of the I.T. Act provides the definition of 'Transfer' in relation to capital asset which reads as under : (47) "transfer" in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stockin-trade of a business carried on by him, such conversion or treatment;] [or] (iva) the maturity or redemption of a zero coupon bond; or] (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of tran....
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....ical and peaceful possession of the impugned property has been delivered by the assessee to M/s. Archit Steel (P) Ltd., Copy of the possession letter dated 30.01.2009 is also filed which confirmed that assessee has handed-over physical possession of the impugned property to the purchaser at the time of execution of the Agreement to Sell. The assessee later on executed two sale deeds registered on 01.06.2009 in favour of purchaser and in the sale deed it is mentioned that advance of Rs. 2.75 crores was already given by the purchaser to the assessee. These facts are not in dispute. It would, therefore, prove that there was an Agreement to Sell between assessee and the purchaser which is having the effect of transferring the right and enjoyment in the immovable property in favour of the purchaser. The assessee had entered into an Agreement to Sell and handed-over possession of the impugned property to the purchaser would amount to disposed-of or parted with the asset with all interest therein in favour of the purchaser. According to definition of Section 269UA it is not necessary that Agreement to Sell should be registered. Therefore, provisions of Section 2(47)(vi) of the I.T. Act ar....
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.... fact that substantial payment was made at the time of execution of the Agreement to Sell by way of cheque, otherwise, the purchaser would not make substantial payment without taking possession of the impugned property. Assessee has also filed copies of the invoice and ledger account at page Nos. 22 and 23 of the paper book to show that expenditure were incurred by the purchaser for improvements after taking possession which also support explanation of assessee that possession of the impugned property was handed-over by way of an Agreement to Sell (supra). The Agreement to Sell is not required to be registered as per Section 2(47)(vi) of the I.T. Act because the conditions of this provision are satisfied in the present case. The decisions relied upon by the Learned Counsel for the Assessee squarely apply to the facts and circumstances of the case, particularly decision of Hon'ble jurisdictional High Court in the case of Shri Chandra Prakash Jain vs. ACIT (supra) to prove that the transfer of impugned property was completed on 30.01.2009 on the day of execution of Agreement to Sell and handing-over possession to the purchaser. Therefore, the transfer in relation to....
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....the cheque received by assessee as sale consideration on account of sale of the impugned property is credited to his account later on, is of no consequence because ultimately the property is transferred through Registered Deed and the sale consideration have passed on to the assessee. If the ownership was recorded for maintenance purpose in the name of assessee, it is not relevant for satisfying the conditions of Section 2(47)(vi) of the I.T. Act, 1961. Thus, whatever objections have been raised by the authorities below, were no relevant to discard the explanation of assessee which is supported by the documentary evidences on record, genuineness of which, have not been doubted by the authorities below. The claim of assessee is also supported by the fact that assessee paid the capital gains tax on sale consideration of impugned property which have been accepted by the A.O. Similarly, the part of the share of wife of the assessee was also transferred and according to Learned Counsel for the Assessee in the case of wife of assessee the return have been accepted on identical facts under section 143(1) of the I.T. Act, 1961 and no reassessment proceedings have been initiated till date. ....
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....fe and he could not be treated as 'absolute owner' of said property, deduction under section 54F could not be denied to him." 8.8.3. The Order of ITAT, Mumbai F-Bench, Mumbai in the case of DCIT vs., Shri Dawood Abdulhussain Gandhi, Mumbai (supra), in which in paras 7, 8 and 9 held as under : "7. We have further deliberated on the claim of the assessee that as ne was not the absolute owner of the aforesaid properties, i.e. Tara Manzil and Noor Manzil, but was only a co-owner having fractional ownership in the said respective properties, therefore, the precondition of being the owner of more than one residential house, other than the new asset, on the date of transfer of the original asset was not satisfied. We find substantial force in the contention of the Ld. A.R and are of the considered view that as the assessee on the date of making of an investment in a residential house with Oberoi Construction Pvt. Ltd., viz. Oberoi Splendour, Building No.l, 'C' Wing, Mumbai, was vested with only a fractional ownership in the aforementioned properties, i.e. 25% in Tara Manzil and 20% in Noor Manzil, therefore, it can safely be concluded that the assessee was not....
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....persons, none of them can be said to be the owner of that house. This view of ours is fortified by the judgment of the Hon'ble Supreme Court in the case of Seth Banarsi Dass Gupta vs. CIT (1987) 64 CTR (SC) 142 : (1987) 166 ITR 783 (SC), wherein, it was held that a fractional ownership was not sufficient for claiming even fractional depreciation under s. 32 of the Act. Because of this judgment, the legislature had to amend the provisions of s. 32 w.ef. 1st April, 1997 by using the expression "owned wholly or partly". So, the word "own" would not include a case where a residential house is partly owned by one person or partly owned by other person(s). After the judgment of Supreme Court in the case of Seth Banarsi Dass Gupta (supra), the legislature could also amend the provisions of s. 54F so as to include part ownership. Since the legislature has not amended the provisions of s. 54F, it has to be held that the word "own" in s. 54F would include only the case where a residential house is fully and wholly owned by assessee and consequently would not include a residential house owned by more than one person. In the present case, admittedly the house at Sion, Mumbai, was purchased joi....