TaxTMI 
TaxTMI 
2026 (7) TMI 402
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.... Grounds on Merits 2. The Ld. NFAC has erred in confirming the disallowance of deduction claimed under section 54 of the Income-tax Act, 1961, amounting to Rs. 2,00,00,000/-. The appellant had duly invested the capital gains arising from the sale of a residential property in the purchase of another residential property within the prescribed time limit as stipulated under section 54 of the Act. The denial of the said claim is unjustified and liable to be deleted. 3. The Ld. NFAC has erred in confirming the action of the AO in restricting the deduction of legal and brokerage expenditure to Rs. 6,86,000/- as against the total expenditure of Rs. 14,00,000/- actually incurred by the appellant in connection with the sale of the residential property. The disallowance of 7,14,000/- is arbitrary and without proper basis. 4. The Ld. NFAC has erred in sustaining partial disallowance of consultancy fees incurred for sale of property. The NFAC allowed only Rs. 1,10,113/- out of the total expenditure of Rs. 2,24,720/-, thereby disallowing 1,14,607/-. The said disallowance is unjustified and deserves to be deleted in full. 5. The Ld. NFAC has erred in confirmi....
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....return of income. The Assessing Officer was of the view that the benefit of investment claimed under section 54 of the Act was merely a right in a "future property" and not investment in an identifiable residential house within the prescribed period. The Assessing Officer accordingly disallowed the deduction claimed under section 54 of the Act amounting to Rs. 2 crore. He further invoked section 64(1)(iv) and clubbed capital gains of Rs. 1,00,74,915 shown by the assessee's wife (in her return of income) in the hands of the assessee on the ground that the transfer of ownership interest to the spouse was without consideration and constituted a device to reduce tax liability. The Assessing Officer also restricted deduction of legal fees and brokerage expenditure to Rs. 6,86,000 proportionate to the assessee's 49% share in the property and disallowed the consultancy fees of Rs. 2,24,720 for want of satisfactory evidence. Consequently, the total income was assessed at Rs. 3,99,96,883 as against the income of Rs. 86,31,310, declared by the assessee. 3. Aggrieved by the assessment order, the assessee carried the matter in appeal before the CIT(Appeals) and challenged the denial of dedu....
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.... satisfy the requirements of section 53A of the Transfer of Property Act read with section 2(47)(v) of the Income-tax Act. The CIT(Appeals) further held that the consideration was not supported by adequate documentary evidence and the deed of transfer was finally executed only on 15.11.2016, well after the relevant period. Relying upon the decision of the Hon'ble Supreme Court in CIT v. Balbir Singh Maini [2017] 86 taxmann.com 94 (SC), the CIT(Appeals) held that the arrangement dated 15.01.2014 could neither be treated as a valid agreement for transfer nor as evidence of purchase of a residential property for the purposes of section 54 of the Act. 5. In relation to the addition of Rs. 1,00,74,915 made under section 64(1)(iv) of the Act, the CIT(Appeals) observed that the assessee had transferred 51% of his ownership rights in the property to family members, including his spouse, without consideration through a gift deed executed only a short time before the sale of the property. According to the CIT(Appeals), the timing and manner of the transfer clearly showed that there was an attempt to reduce tax liability by splitting the capital gains among family members. The CIT(Appeals)....
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....dential house. 10. Upon careful consideration of the facts and documents placed on record, we are unable to subscribe to the view adopted by the AO and ld. CIT(A). It is an undisputed fact that the original residential property was sold on 26.11.2013 and the assessee, together with the co-owners, invested an aggregate sum of Rs. 5,00,00,000 in a new residential property project. The chronology of events placed at page 64 of the Paper Book clearly demonstrates that immediately after the sale of the original residential property, an amount of Rs. 5,00,00,000 was paid towards acquisition of a new residential unit through Mrs. Bela Vipul Shah in the redevelopment project being undertaken by Parinee Realty Pvt. Ltd. Out of the said investment, the assessee's share was Rs. 2,00,00,000, being the amount claimed as deduction under section 54 of the Act. The said investment was made on 15.01.2014, which was within the period prescribed under section 54 of the Act. 11. We further find that the registered Deed of Transfer executed on 15.11.2016 itself supports the assessee's case that an identifiable residential property existed. Clause G of the registered Deed specifically records ....
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....y, in CIT vs. Podar Cement Pvt. Ltd. (1997) 226 ITR 625 (SC), the Hon'ble Supreme Court recognised that beneficial ownership and domain over property are relevant considerations and that strict legal title is not always decisive for Income-Tax purposes. The Hon'ble Delhi High Court in CIT vs. Kuldeep Singh (2014) 270 CTR 561 (Del.) held that allotment of a residential flat and payment of substantial consideration is sufficient compliance with section 54 of the Act and actual possession or execution of a conveyance deed within the stipulated period is not mandatory. Similar principles were laid down by the Hon'ble Karnataka High Court in CIT vs. Sambandam Udaykumar (2012) 345 ITR 389 (Kar.), wherein it was held that section 54 of the Act being a beneficial provision must be interpreted liberally and substantial investment in a residential house within the prescribed period is sufficient compliance. Reference may also be made to the decision of the Hon'ble Bombay High Court in CIT vs. Mrs. Hilla J.B. Wadia (1995) 216 ITR 376 (Bom.), wherein acquisition of rights in a flat under an agreement with a builder was held sufficient for claiming exemption under section 54 of ....
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....g a building in which flats are allotted to the 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 she has made a substantial investment within the prescribed period which will entitle her to obtain possession of the flat so constructed and in which she intends to reside. The material test in this connection is domain over the flat and investment in it. The assessee satisfies both these conditions. She has acquired such a domain and has invested almost the entire requisite amount in it within a period of two years prescribed under section 54. In this connection, our attention was drawn to a circular of the Central Board of Direct Taxes bearing No. 471 (see [1986] 162 ITR (St.) 41), dated October 15, 1986, which dealt with the 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, th....
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....min in her return of income. The primary contention of the assessee is that capital gains do not fall within the ambit of section 64(1)(iv) of the Act and therefore no clubbing could be made in the hands of the assessee. 17. We are unable to accept the aforesaid contention. Section 64(1)(iv) of the Act specifically provides that in computing the total income of an individual, there shall be included all such income as arises directly or indirectly to the spouse from assets transferred directly or indirectly to the spouse otherwise than for adequate consideration. The expression "income" employed in section 64 of the Act is of wide amplitude and derives its meaning from section 2(24) of the Act. Clause (vi) of section 2(24) specifically includes capital gains chargeable under section 45 of the Act within the ambit of income. Therefore, there is no statutory basis to exclude capital gains from the operation of section 64(1)(iv) of the Act. 18. The legal position stands concluded by the judgment of the Hon'ble Supreme Court in Sevantilal Maneklal Sheth vs. CIT (1968) 68 ITR 503 (SC), wherein the Court held that capital gains arising from assets transferred to the spouse with....
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....n of Rs. 1,00,74,915 sought to be clubbed by the Revenue was accompanied by an investment of Rs. 1,00,00,000 made by the spouse in the very same residential project for the purpose of claiming exemption under section 54 of the Act. 20. Once the Revenue seeks to invoke section 64 of the Act and bring the spouse's capital gains into the hands of the assessee, the entire computation mechanism attached to such income must necessarily follow. It is impermissible to club only the income component while ignoring the corresponding deductions and exemptions lawfully available in respect of such income. The Hon'ble Supreme Court in CIT vs. J.H. Gotla (1985) 156 ITR 323 (SC) held that statutory provisions must be interpreted in a manner that avoids unjust and absurd results. 21. In the present case, had the capital gain remained assessable in the hands of Smt. Anju Rajesh Amin, the corresponding deduction under section 54 of the Act arising from her investment of Rs. 1,00,00,000 in the new residential property would necessarily have been available. Therefore, once the capital gain of Rs. 1,00,74,915 is brought to tax in the hands of the assessee by virtue of section 64(1)(iv) of....