Ameeta Wadhwa, Jammu ( J&K) vs Assessee

Smt. Ameeta Wadhwa, vs. Income Tax Officer, 36/VII, Lane-15, Tawi Vihar Ward-1(1), Sidhra, Jammu. Jammu. (Appellant) (Respondent)

Appellant by:S/Sh.R.K. Gupta & Virender K.Maini, CAs Respondent by:Sh.Tarsem Lal, DR

Date of hearing:12/03/2015 Date of pronouncement:26 /03/2015

ORDER

PER B.P.JAIN,AM:

This appeal of the assessee/ arises from the order of the CIT(A),

Jammu, dated 13.06.2014 for the assessment year 2009-10. The assessee

has raised the following grounds of appeal:

"1. The Ld. CIT(A) is not justified in upholding the addition of Rs.8,00,000/- on account of partial disallowance u/s 54F of the Income Tax Act, 1961 on the alleged ground that the appellant has invested the part of the capital gain amounting to Rs.8,00,000/- towards the construction of residential house of which the land is owned by her spouse.

2. That the appellant craves leave to alter, amend and add to substitute any grounds of appeals before or at the time of hearing."

2 ITA No. 514(Asr)/2014 2. The brief facts of the case as per AO's order are reproduced here under:

"The assessee is a practicing Advocate of the J& K High Court. During the year under consideration gross receipts from practice have been shown at Rs.3,00,500/-. Out of this, after debit of various expenses, the income has been shown at Rs.1,40,213/-. Further, the assessee also shown long terms capital gain of Rs. 30,11,137/- on account of sale of plot of land at Karore Punjab. The long term capital gain has been claimed exempt u/s 54 of the I.T. Act, 1961.

The assessee sold a plot of land at Karore Punjab for an amount of Rs.32,00,000/-. This plot was purchased by the assessee in the year 1996-97 for an amount of Rs.98,975/-. Thus, the indexed cost of acquisition of this plot was Rs.1,88,863/- which when reduced from the cost of consideration gave rise to long term capital gain of Rs.30,11,137/-.

To claim exemption from the payment of capital gains tax the assessment deposited an amount of Rs.24,00,000/- on 30.07.2009 in the Capital Gains account with State Bank of India, Hari Market, Jammu. Another amount of Rs.8,00,000/- was claimed to have been invested for acquiring a new residential house by the assessee and accordingly, the entire capital gains was claimed exempt u/s 54F of the I.T. Act, 1961.

In order verify the claim of the assessee, it was asked to furnished documentary evidence with regard to the claim of investment in view residential property. Vide letter dated 10.8.2011, the Ld. Counsel for the assessee filed the requisite documents on the basis of which the deduction had been claimed. On perusal of these documents, it was observed that the investment was claimed to have been made on construction of a house at Plot no.36/HIG, Phase VII, Tawi Vihar, Sidhere. The perpetual lease deed in respect of the plot showed that the said plot was allotted by J&K Housing Corporation Ltd., to the husband of the assessee Sh. G.D Wadhwa, Further, the permission accorded for construction of house on the said plot also revealed that the house was being constructed by the husband of the assessee Sh. G.D.Wadha as the said permission was in his name. There was no evidence which could suggest that the house under construction was actually owned by the assessee.

3 ITA No. 514(Asr)/2014 As per the provisions of section 54F of the I.T. Act, 1961, deduction is allowed only when the new residential property is being constructed by the assessee itself. Deduction is not allowed if the investment is made in the construction of house belonging to the spouse of the assessee. Accordingly, the assessee was requested to explain as to why the deduction claimed by her may not be disallowed in view of the fact that payment no construction of residential house was being made by the assessee."

3. The Ld. Counsel for the assessee confirmed the action of the AO.

4. The ld. Counsel for the assessee argued that there is no mention u/s 54

of the Act that new residential house should be purchased in the name of the

assessee only. It merely says that the assessee should purchase/construct a

residential house. The assessee has not purchased the new residential house

in the name of a stranger or somebody who is unconnected with. But the

assessee has purchased or constructed the house in the name of her

husband.. The Ld. CIT(A) has relied upon the decision in the case of Jai

Narayan vs ITO reported in 306 ITR 351 (P&H), which in fact has been

distinguished by the same court in the case of CIT vs.Gurnam Singh

reported in (2010) 227 ITR 278 (P&H). The Ld. CIT(A) also relied upon the

decision of Hon'ble Mumbai High Court, in the case of Prakash vs. Income

Tax Officer & Ors, reported in (2009) 312 ITR 40, which has been

distinguished by the Hon'ble Delhi High Court in the case of CIT vs.

Ravinder Kumar Arora, reported in (2012) 342 ITR 38 (Delhi). Accordingly, 4 ITA No. 514(Asr)/2014

the ld. Counsel for the assessee prayed to allow the appeal of the assessee

and reverse the order of the ld. CIT(A).

5. The Ld. DR relied upon the orders of both the authorities below.

6. We have heard the rival contentions and perused the facts of the case.

The undisputed facts of the present case are that the assessee has sold a plot

for Rs.32 lacs on which long term capital gain was calculated at

Rs.30,11,137/- and on 30.07.2009, the assessee deposited an amount of

Rs.24,00,000/- in the Capital Gains account with State Bank of India and

balance of the amount was spent for acquiring/construction a new

residential house amounting to Rs.8,00,000/- and accordingly exemption u/s

54F of the Act was claimed for the said Rs.8,00,000/-. The said construction

of the house for Rs.8,00,000/- was on a plot in the name of the husband of

the assessee, Sh. G.D.Wadhwa. The plot was not owned by the assessee and

the AO disallowed exemption u/s 54F of the Act and the ld. CIT(A)

confirmed the action of the AO by relying on the decisions of various

courts of law mentioned hereinabove.

6.1. As regards the decision relied upon by the ld. CIT(A) in the case of

Jain Narayan vs. ITO (P&H) (supra), the same pertain to section 54B of the

Act and is not with reference to section 54F of the Act, though the same has

been distinguished by the Hon'ble Punjab & Haryana High Court in the 5 ITA No. 514(Asr)/2014

case of CIT vs. Gurnam Singh (supra), where the facts of the case and

decision is reproduced hereinbelow:

"We have heard the counsel for the Revenue and gone through the aforesaid impugned order. In our opinion, from the impugned order, no substantial question of law is arising for consideration of this Court as the Tribunal while recording a pure finding of fact has dismissed the appeal of the Revenue. Undisputedly, in this case the assessee had sold the agricultural land which was being used by him for agricultural purpose. Out of sale proceeds of the said sale, the assessee has purchased other piece of land (land in question) in his name and in the name of his only son, who was bachelor and dependent upon him, for being used for agricultural purposes within the stipulated time. Further, it is not the case of the Revenue that from the sale proceeds of the agricultural land earlier owned by the assessee, the land in question was purchased for any other purpose than the agricultural purpose. Undisputedly, the purchased land is being used by the assessee only for agricultural purpose and merely because in the sale deed his only son was also shown as co-owner, the Tribunal has rightly come to the conclusion that it does not make any difference because the purchased land is being used by the assessee for agricultural purpose. It is not the case of the Revenue that the said land is being used exclusively by his son. In our view, a pure finding of fact has been recorded by the Tribunal which does not require any interference in this appeal."

6.2. The Ld. CIT(A) also relied upon the decision of the Hon'ble Mumbai

High Court in the case of Prakash vs. ITO (supra), which in fact has been

dealt with and distinguished by the Hon'ble Delhi High Court in the case of

Commissioner of Income Tax-Xii vs. Kamal Wahal, reported in 351 ITR 4,

mentioned hereinabove. The facts of the case and decision of the court at

page 3 & 4 of the order is reproduced hereinbelow:

6 ITA No. 514(Asr)/2014

"6. The revenue preferred an appeal before the Tribunal questioning the decision of the CIT (Appeals). The Tribunal, however, by the impugned order, agreed with the decision of the CIT(Appeals) and in doing so followed the judgment of the Madras and Andhra Pradesh High Courts cited supra and also another judgment of the Karnataka High Court in Director of Income tax, International Taxation, Bangalore : (2011) 203 Taxman 208. It is also noted the Judgment of the Bombay High Court in Parkash vs. ITO: (2008) 173 Taxman 311 in which a contrary view was taken but preferred the view taken by the Madras and Karnataka High Courts adopting the rule laid down by the Supreme Court in CIT Vs. Vegetable Products Ltd: 88 ITR 192 which says that if a statutory provision is capable of more than one view, then the view which favours the tax payer should be preferred. The Tribunal also observed that section 54F being a beneficial provision enacted for encouraging investment in residential houses should be liberally interpreted.

7. We have no hesitation in agreeing with the view taken by the Tribunal. Aprt from the fact that the judgments of the Madras and Karnataka High Courts(supra) are in favour of the assessee, the revenue fairly brought to our notice a similar view of this Court in CIT Vs. Ravinder Kumar Arora. 2012)342 ITR 38 (Del.). That was also a case which arose under Section 54F of the Act. The new residential property was acquired in the joint names of the assessee and his wife. The Income Tax Authorities restricted the deduction under Section 54F to 50 percent on the footing that the deduction was not available on the portion of the investment which stands in the name of the assessee's wife. This view was disapproved by this Court. It noted that the entire purchase consideration was paid only by the assessee and not a single penny was contributed by the assessee's wife. It also noted that a purposive construction is to be preferred as against a literal construction, more so when even applying the literal construction, there is nothing in the section to show that the house should be purchased in the name of the assessee only. As a matter of fact, Section 54F in terms does not require that the new residential property shall be purchased in the name of the assessee; it merely says that the assessee should have purchased "a residential house".

8. This Court in the decision cited alone also noticed the judgment of the Madras High Court (supra) and agreed with the same, observing that though the Madras case was decided in relation to 7 ITA No. 514(Asr)/2014 Section 54 of the Act, that Section was in pari material with Section 54F. The judgment of the Punjab and Haryana High Court in the case of CIT Vs. Gurnam Singh: (2014) 327 ITR 278 in which the same view was taken with reference to Section 54F was also noticed by this Court.

9. It thus appears to us that the predominant judicial view, including that of this Court, is that for the purposes of Section 54F, the new residential house need not be purchased by the assessee in his own name nor is it necessary that it should be purchased exclusively in his name. It is moreover to be noted that the assessee in the present case has not purchased the new house in the name of a stranger or somebody who is unconnected with him. He has purchased it only in the name of his wife. There is also no dispute that the entire investment has came out of the sale proceeds and that there was no contribution from the assessee's wife.

10. Having regard to the rule of purposive construction and the object which Section 54F seeks to achieve and respectfully agreeing with the judgment of this Court, we answer the substantial question of law framed by us in the affirmative, in favour of the assessee and against the revenue."

6.3. Further, reliance was made by the ld. Counsel for the assessee in the

case of Commissioner of Income Tax vs. Ravinder Kumar Arora, (Delhi)

(supra), which in fact has been dealt by the Hon'ble Delhi High Court in the

case of CIT vs. Kamal Wahal (supra).

6.4. In the facts and circumstances and in view of the judicial findings of

various courts of law referred to hereinabove, we are of the view that the

purpose of section 54F is that new residential house need not be purchased

by the assessee in her own name. In the present case, the assessee has

constructed a house on a plot owned by her husband and therefore, entire 8 ITA No. 514(Asr)/2014

investment having come out of sale proceeds of the plot sold by the assessee

and not from anywhere else. The assessee's case is covered by the decision

of the Hon'ble Delhi High Court, in the case of CIT vs. Kamal Wahal

(supra) and CIT vs. Ravinder Kumar Arora (supra), which has been dealt by

the Hon'ble Delhi High Court in the case of CIT vs. Kamal Wahal (supra)

and decision of the Hon'ble Punjab & Haryana High Court, in the case of

CIT vs.Gurnam Singh. In view of the above discussion, the ld. CIT(A) is not

justified in not allowing the claim of the assessee. Accordingly, the order of

the ld. CIT(A) is reversed and the AO is directed to allow the claim of the

assessee. Thus, the sole ground taken by the assessee is allowed.

7. In the result, the appeal of the assessee in ITA No.514(Asr)/201 is

allowed..

Order pronounced in the open court on March, 2015.

Sd/- Sd/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: March, 2015 /SKR/ Pronounced on 26.03.2015 Sd/- JM Copy of the order forwarded to: 1. The Assessee:Smt. Ameeta Wadhwa, Jammu. 2. The ITO Ward 1(1), Jammu 3. The CIT(A), Jammu. 4. The CIT, Jammu. 5. The SR DR, ITAT, Amritsar. True copy By order