TaxTMI 
TaxTMI 
2008 (9) TMI 234
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....for short "the IT Act"), calling upon the assessee to file his return of income. In response to the same, he filed his return of income declaring nil income. It was contended by him that the land in question was used for agricultural purposes and, therefore, outside the purview of the definition of the terms "capital asset" within the meaning of the I.T. Act and, therefore, not liable to capital gain tax. It was observed that he had invested the sale proceeds in the following manner:- "(a) By purchase of a vacant plot at circle No. 4, Ward No. 11/20 Ganesh Nagar, Nagpur on 02.03.1983 in the name of Shri Prakash, his only adopted son. (b) By constructing the commercial and residential building of a value of Rs. 2,00,000 within the prescribed period. According to the valuation report, the construction of the building was commenced in 1983 and completed in 1985. The assessee filed an affidavit wherein he has affirmed the fact that the land was purchased in his son's name and the construction was being done on the said land after due sanction. It was also stated in the said affidavit that the investment is being done in his son's name in view of his old age and counselling by oth....
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....s invested in the name of appellant was in fact in the law the real owner of the property and appellant was holding the same in trust for and on behalf of the deceased Timaji? NO 3. Whether for qualifying exemption under section 54 of the I.T. Act is it necessary and obligatory to have investment made in residential house in the name of assessee only or investment in residential house is enough to qualify and claim the said exemption? YES Investment is not sufficient." 8. The petitioner/assessee being only legal heir of the deceased assessee, also filed Writ Petition No. 2197 of 2002 on 18.06.2002 and has challenged the recovery proceedings initiated under section 156 of the I.T. Act read with penalty under section 271(1)(a) and basically denied the tax liability of Timaji (deceased). This court by order dated 07.10.2002, admitted the matter and granted relief in terms of prayer clause (c) which order is still in force. Prayer clause (c) reads as under:- "During the pendency of the present petition recovery proceedings, penalty proceedings be stayed and respondent no. 3 and 4 be restrained from taking any such steps in near future and attachment of Bank Account be....
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....-term capital assets of the previous year in which such new asset is transferred.' 10. The term "Assessee" is defined in Section 2(7) of the Income-Tax Act, which is as under:- "assessee" means a person by whom any tax or any other sum of money is payable under this Act, and includes- (a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or assessment of fringe benefits or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person; (b) every person who is deemed to be an assessee under any provision of this Act; (c) every person who is deemed to be an assessee in default under any provision of this Act;" 11. Section 54 refers to the assessee being an individual or a Hindu undivided family. Importantly, both are different legal entities. As per the scheme of these sections of the I.T. Act, the assessee, who is the owner of the original asset, need to, within a period of one year before or two years after the date on which the transfer took place, purchased or within a period o....
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....ears of its purchase or construction, then the amount of capital gain arising from the transfer of 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 the said income shall be charged to tax under the head of capital gains relating to the long-term capital assets. [(1982) 138 ITR (St.) 10] (Departmental Circular No. 346, dated June 30, 1982) 13. It is, therefore, clear that the purpose is to give this benefit on the ownership of one residential house only by the assessee and to encourage to have one residential house of the assessee. Therefore, right from the sale of original asset till the purchase and/or construction of the residential house i.e. the "new asset", the ownership and domain over the new asset is a must. The new property must be owned by the assessee and/or having legal title over the same. The others may use and occupy the same along with the assessee but the ownership should be of the assessee of the residential house so purchased from the net consideration/sale proceeds of the sale of original asset by the assessee. 14. Having observed above and in view of the undisputed positio....
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....me assessee immediately after the sale of the house, entered into an agreement for purchasing another house and paid a sum of Rs. 1,000 as earnest money and subsequently the legal representative completed the transaction within a period of one year from the date of the death of the deceased. The sale and purchase are two links in the same chain. We are fortified in this view by a decision of the Madras High Court in C. V. Ramanathan v. CIT [1980] 125 ITR 191." 16. We are not inclined to accept the liberal view to the word "assessee" in Late Mir Gulam Ali Khan [1987] 165 ITR 228 (AP) for the reason already recorded in the above paras. The Scheme of section 54F is clear. The facts are different here. 17. The deceased assessee admittedly sold and purchased the property from the realisation but in the name of the adopted son, who in the scheme of the Act and Section 54F is not an assessee, who after selling the old asset purchased and constructed the new property. He was not the owner of the new purchased property. Ponds India Ltd. v. Commissioner of Trade Tax [2008] 15 VST 256 ; JT 2008 (9) SC 94, the Apex Court's following declaration supports the view we have taken based upon ....
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....e of the new asset in the name of other person. Death during the period within which the new asset had to be acquired was an intervening event in some cases. The distinction between a legal heir and an heir apparent in law is very significant. An heir apparent succeeding to the estate of a prepositus is dependent on the fact of his surviving the prepositus. Death is a certain event but who will die first is not a certain event. This is the reason why law regards transfer by a heir apparent of his chance of succession as non- transferable under section 6 of the Transfer of Property Act. 11. In the present case, the assessee has not made any such claim. In the affidavit filed before the Assessing Officer he had admitted that his son is the beneficial owner of the property and the investment was made in his name in view of the fact that he is 86 years old and that he was counseled to do so. Thus, on facts and circumstances of this case, we are of the view that the decision of the Madras Tribunal is also distinguishable." 20. In view of the above reasons, we answer the substantial questions of law framed by this Court in the appeal as under:- Question No. 1 .....yes:- 21. W....