TaxTMI 
TaxTMI 
2026 (5) TMI 447
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....e device to evade tax, On the facts and circumstances of the case and in law, exemption u/s 54F of the Act of Rs. 41,50,24,136/- ought to be allowed to the appellant. 2. The Hon'ble CIT(A) has erred in confirming the action of the Ld. AO of denying the exemption u/s 54F of the Act: a. Without appreciating the detailed submissions, including various documents such as the payment of purchase consideration, payment of stamp duty, transfer of share certificate by India Bulls, transfer of electricity meter in the name of appellant, maintenance bill in the name of appellant, payment of property tax subsequently raised by BMC in her name, made by the appellant during the course of the appellate proceedings b. Incorrectly observing that the aforesaid purchase of property was not a genuine purchase on the basis that the appellant failed to produce any evidence that the sellers ceased to reside in the same premise after sale and further concluding that they didn't pay any rent c. Incorrectly observing that the address of the appellant as well as all the family members as per the departmental database remained same before and after the purchase of t....
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....,531/- from sale of shares. The assessee was asked to furnish information to substantiate her claim u/s 54F. In response, assessee filed written submissions and also requested for virtual hearing which was provided by the Ld. AO. Assessee submitted that she has acquired the subjected house property from Shri Ramesh Kejriwal and Smt. Anjali Devi Kejriwal for her genuine requirement to have her own house, where the assessee and her family can reside permanently and peacefully without any interference from any other family member of Shri Ramesh Kejriwal and not merely to obtain any tax benefit, which was claimed being incidental. 4. Such submissions of assessee are considered by the AO but not found acceptable, stating the reason that the assessee had designed artificial arrangements with family members to claim deduction u/s 54F in the guise of purchase of flat. Ld. AO extracted the related party details, details of transactions taken place within the family, extract of sale deed dated 20.10.2022 and had observed that the document of sale of property between the assessee (purchaser) and Shri Ramesh Badriprasad Kejriwal and Smt. Anjali Kejriwal (sellers) shows a clear nexus and und....
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....ence with respect to Long Term Capital Gains exemption claimed. 7. Ld. AO further perused the return of sellers and have noted that seller no.1 Shri Ramesh Kejriwal has effectively paid Nil taxes as seen from the capital gain working. There was a loss of Rs. 82,27,798/- in the working extracted in the assessment order after the effect of transaction with the assessee that is the daughter-in-law. Regarding seller no.2, Anjali Kejriwal, she also has not paid any tax having negative income of Rs. (55,78,422/-), effectively computed after the impugned transaction with assessee (daughter-in-law). Regarding power of attorney extended by the assessee to her father-in-law, it is submitted that assessee was travelling abroad, hence given power of attorney to the seller which according to AO was quite odd and unnatural for a transaction value of about Rs. 49 crores. AO observed that the transactions in such a case all the mores shows that the arrangement made amongst the family members was to camouflage the transaction as genuine purchase to avail the benefits of section 54F, thereby avoid legitimate taxes arising from the transfer of shares. Ld. AO further described the doctrine of subst....
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....bmission of the appellant and other materials available on record. During the year under consideration, the assessee had sold 4,34,529 unlisted shares of M/s Parksons Packaging Limited @ Rs. 1,467.74/- per share for a total sale consideration of Rs. 63,77,75,594/- and earned a Long Term Capital Gains of Rs. 49,60,9,667/-. Subsequently, the assessee purchased a residential property situated at Flat No.B-4001, Indiabulls Blu, Lower Parel Mumbai 400013 for a total consideration of Rs. 51,15,87,450/- (inclusive of Stamp Duty and other expenses) and claimed an exemption of Rs. 41,50,24.136 u/s 54F of the Act. After claiming the deduction, the assessee admitted Long Term Capital Gains of Rs. 8,10,75,531/- from sale of Shares. The appellant had purchased the new property from her father in-law and mother in-law Shri Ramesh Kejriwal and Smt. Anjali Devi Kejriwal respectively. The A.O., during the course of assessment proceedings, raised question that the new property was transferred to the appellant merely on paper to obtain a tax benefit and not for any genuine requirement. In response, the appellant claimed before the A.O. that the above house property was acquired for her genui....
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....nuine need of the appellant which may satisfy the legislative intent of section 54F or the Act which is to promote housing for individuals so that a suitable residential dwelling can be owned by them or the said transfer was a colourable device to evade taxes only. The appellant could not bring on record any evidences to support her claim that the said transfer was a genuine one to satisfy her genuine need as the seller of the property continued to reside in the said house even after execution of transfer deed that too, without paying any rent thereon. The appellant could also not bring on record any evidences to confirm that the seller of the house i.e. her father-in-law and mother-in-law ceased to reside at the sold property (As the appellant has stated that she was not peaceful with her father-in-law and his family members that is why she purchased the new house property) and shifted their residence to any other property. In contention of the allegation of the A.O. that the agreement of purchase/sale of the said residential house was a sham one as Sri Ramesh Kejriwal (father-in-law) himself had signed the agreement as the purchaser as well as the seller, the appellant h....
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....of Rs. 41,50,24,136/- claimed by the appellant u/s 54F of the Act. Accordingly, the addition of Rs. 41,50,24,136/- is confirmed and Ground No. 1, 2 & 3 are dismissed." 9. Since, the appeal has been dismissed by the Ld. CIT(A) and the issue raised by the AO regarding addition as discussed hereinabove was decided against the assessee, the assessee preferred an appeal before the Tribunal which is under consideration in the present matter. 10. At the outset, Ld. AR of the assessee submitted that all the transactions undertaken by the assessee and the family members/relatives are within legal parameters, as permissible under the provisions of law. The allegations made by the AO are just on the basis of presumption, whereas no specific defect in the transactions or working of taxable income of the assessee could not have been pointed out by the AO, therefore the addition made by the AO is liable to be deleted. As directed during the hearing, Ld. AR has submitted a written note of their submissions and clarifications on various issues raised by the AO while making the addition. The submissions made by the assessee qua each and every aspect examined by the AO are extracted hereunder:....
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....no.4101 by Shaili Kejriwal signed on the same date by Ramesh Kejriwal on behalf of one of the sellers. Siddharth Kejriwal has been accepted by the AO. C. The transfer was to get undue benefit of see.54F. Submission It is submitted that the purchase of the said flat was pursuant to a mutual decision amongst the members of the 3 families to live independently in order to avoid any differences. Since the Appellant was residing in the said flat with her family comprising of husband and 3 children, it was considered appropriate to purchase the same flat from her in laws. The purchase of the said flat was intended to preserve unity and peace within the family by avoiding differences that arise when living jointly in the same premises. This is also evident from the fact that Shaili Kejriwal purchased flat no.4101 from her husband and brother in law, Sidharth Kejriwal. The deduction available under see.54F was incidental. D. Seller has paid nil tax. Submission It is submitted that the flat 4001 was sold at the fair market value and the sellers Ramesh and Anjali Kejriwal made capital gain but were not required to pay tax on account of in....
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....the name of his adopted son out of capital gain on sale of his agricultural land. On identical facts, the purchase of flat no.4101 by Shaili Kejriwal from her husband Chaitanya and brother in law Siddharth Kejriwal out of long term capital gains from sale of shares of Parksons Packaging has been held to be a genuine transaction and deduction under sec.54F has been allowed (pg. 237 paperbook) In view of the above, it is prayed that the transaction was a genuine transaction and cannot be treated as sham or colourable merely because deduction has been claimed under sec.54F. We request you to kindly place the same on record." 11. Based on the aforesaid submissions, it was the prayer that the addition made by the Ld. AO was not as per intent of the statutes, the same was arbitrary in treating the transaction of purchase of immovable property from related party as a colourable device to evade taxes. 12. Per contra, Ld. CIT DR representing the revenue reiterated the facts from the assessment order and the order of CIT(A), supported such orders stating that the assessee has arranged the impugned transactions within the family as a colourable device to evade taxes by....
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....nd peace within the family by avoiding differences that arise when living jointly in the same premises. The allegation of AO that the seller has not paid any tax cannot be the reason for denial of deduction u/s 54F, as the sellers, in their computation of income are not required to pay tax computed under the scheme of law. 15. Regarding the finding of AO that purchase of flat by assessee was not a colourable device, it is squarely covered by the settled principles of law that tax planning may be legitimate, provided it is within the framework of law. Ld. AR placed reliance on various decisions, wherein the findings supporting the contentions of assessee are as under: In the ITAT Hyderabad Bench 'B', Girish Dharod v. Assistant Commissioner of Income-tax, Circle 1(2), Hyderabad[2013] 40 taxmann.com 282 (Hyderabad - Trib.) "Liberal interpretation of statutory provisions taken by Courts to extend exemption available under section 54 to assessee, even in cases of investments in names of spouse and minor children of assessee cannot be extended beyond a point so to cover investments made in names of other blood relations or other relations" In the case of Kav....
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....agreement to sell dated 18/03/2021 wherein the title in the property has been transferred by him in the name of the assessee." In the case of ITO Ward 6 (3), Pune vs. Kalawati Vijaykumar Agarwal, ITA No.979/Pun/2023 (AY 2021-22) "11. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A)/NFAC and the paper book filed by both the sides. We find the assessee claimed deduction u/s 54F of the Act towards investment in the residential property purchased from her husband Shri Vijaykumar Satyanarayan Agarwal Shri Vijaykumar Satyanarayan Agarwal had acquired the said property from his HUF Vijaykumar Satyanarayan Agarwal in which the assessee is also a member. All the members of HUF including the assessee gave consent for transfer of the property between Shri Vijaykumar Satyanarayan Agarwal and Vijaykumar Satyanarayan Agarwal, HUF. We find the Assessing Officer disallowed the deduction claimed by the assessee on the ground that the purchase of the property by the assessee is a circular transaction and therefore, the assessee is not entitled to the claim of deduction u/s 54F of the Act. We find the CIT(A)/NFA....