Since, the legislature has consciously not amended the provisions of section 54F, it has to be held that the word “own” in Section 54-F would include only the case where a residential house is fully and wholly owned by the assessee and consequently would not include a residential house owned by more than one person.
IN THE ITAT MUMBAI BENCH ‘A’
Ashok G. Chauhan
Assistant Commissioner of Income-tax, Mumbai
AND SANDEEP GOSAIN, JUDICIAL MEMBER
IT APPEAL NO. 1309 (MUM.) OF 2016
[ASSESSMENT YEAR 2010-11]
APRIL 12, 2019
Ms. Vasanti Patel, AR for the Appellant. Ashim Kumar, Modi, DR for the Respondent.
Sandeep Gosain, Judicial Member. – The Present Appeal has been filed by the assessee against the order of Commissioner of Income Tax (Appeals)-32, Mumbai dated 20.01.16 for AY 2010-11 on the grounds of appeal mentioned herein below:
|1.||On the facts and circumstances the case The Learned Commissioner of income Tax (Appeals)-32 ought not to have considered Long Term Capital Gain Of Rs.8,50,00,000/- on Surrender of Tenancy Right in the Assessment year 2010-11.|
|2.||The Learned Commissioner of income Tax (Appeals) 32 ought to have allowed exemption Under Section 54 F of The Income Tax Act 1961.|
|3.||The Learned Commissioner of Income Tax (Appeals ) 32 failed to appreciate the fact that the Flat in Goa was gifted to his daughter in absolute ownership and possession he ought not to have considered the appellant as deemed owner by invoking Section 27 ( i ) of the Income Tax Act 1961 which decides deemed income under House Property.|
|4.||The Learned Commissioner of income Tax (Appeals) 32 ought not to have accepted the additional evidence produce before him as it was relevant to decide date of transfer as in case of tenancy holding of property in possession is the most crucial evidence of tenancy right.|
|5.||The Appellant Craves leave to add, to alter or to amend any one or more of Grounds as mentioned herein above, as and when necessary.|
2. The brief facts of the case are that the assessee filed its return of income on 27.09.10 declaring total income at Rs. 1,26,99,467/- Subsequently the case was selected for scrutiny and after serving notice, the order of assessment was passed by AO u/s 143(3) r.w.s 147 of the I.T. Act thereby making additions by invoking the provisions of section 147 of the I.T. Act.
3. Aggrieved by the order of the AO, assessee filed the appeal before Ld. CIT(A) and the Ld. CIT(A) after considering the case, partly allowed the appeal of the assessee.
4. Aggrieved by the order of CIT(A), assessee filed the present appeal before us on the grounds mentioned herein above.
Ground No. 2 & 3.
5. Since these grounds raised by the assessee are inter-connected and inter related and relates to challenging the order of Ld. CIT(A) in denying the exemption u/s 54F of the I.T. Act on the ground that assessee was owner of more than one residential house, therefore we thought it fit to dispose of the same by this common order. Since these grounds goes to the roots of the case and have impact on the other grounds, therefore we dispose of the same firstly.
6. At the outset, Ld. AR appearing on behalf of the assessee reiterated the same arguments as were raised by him before Ld. CIT(A) and submitted that AO disallowed the claim of the assessee u/s 54F of the Act on the ground that the assessee was owner of two flats on the date of transfer of capital assets. AO took the view that assessee was owing two residential houses i.e. one at Holy Park CHS Ltd, Goa purchased in Dec 2003 and another at Panch Tantara-1, Versova, Andheri (west), Mumbai purchased in July, 1998. Therefore, in view of the above facts, the assessee was denied exemption u/s 54F of the Act.
6.1 It was submitted that in fact the residential flat situated at Goa was actually purchases jointly in the name of assessee as well as his wife. In this respect, Ld. AR drawn our attention to page no. 37 to 60 of the paper book, which is an agreement of Goa flat jointly purchased in the name of assessee and his wife, which prima facie reflects that the said flat was not fully and wholly owned by one person.
6.2 It was submitted that after the purchase of the said property, the share of the assessee was transferred /gifted to his daughter Ms Alisha Ashok Chauhan by way of gift deed dated 15.04.04, which is at page no. 61 to 66 of the paper book. By virtue of the above gift deed, the assessee had already relinquished his 50% share out of love and affection to his daughter Ms. Alisha Ashok Chauhan i.e. Donee and in this way, the assessee was not left with any right of ownership in t he said property, which was already transferred in the name of his daughter by way of gift deed.
6.3 Ld. AR relied upon this time to the decision of the coordinate Bench of ITAT in the case of ITO v. Rasiklal N. Satra  98 ITD 335 (Mum), wherein it was held that Section 54F of the Income-tax Act, 1961 – Capital Gains – Exemption of, in case of investment in residential house – Assessment year 1998-99 – Whether word ‘own’ appearing in section 54F includes only such residential house which is fully and wholly owned by one person and not a residential house owned by more than one person – Held, yes -Assessee claimed exemption under section 54F by investing capital gains in purchase of residential flat – Assessing Officer denied assessee’s claim on ground that assessee was already a co-owner of another flat – Whether assessee not being absolute owner of another residential flat, exemption under section 54F could be denied – Held, no. Words and Phrases – ‘Own’ as occurring in section 54F of the Income-tax Act, 1961 and also the decision of Hon’ble Chennai Tribunal in the case of Mrs. V. R. Usha v. ITO  159 ITD 402, wherein it was held that Where ownership of assessee over property was subject to life interest retained by her mother in said property, it could not be said that assessee owned said property fully and it could not be a reason to deny exemption under section 54F claimed by assessee on sale of her another property.
6.4 Thus referring to the aforementioned judgments, Ld. AR argued that the assessee was not the owner of flat and hence assessee was entitled for exemption u/s 54F of the Act.
7. On the other hand, Ld. DR relied upon the orders passed by the revenue authorities and submitted that from the copy of gift deed, it is seen that the daughter of the assessee is minor and the gift has been accepted by her on behalf of her mother i.e. wife of the assessee. According to section 27(i) of the Act, which defines the ‘owner of house property’ and according to this section, ‘if an individual who transfers any house property to a minor child, not being a minor daughter, shall be deemed to be the owner of the house property so transferred.’
7.1 It was thus submitted that the daughter of the assessee was minor at the time of transfer, hence assessee shall be deemed to be owner of the house property so transferred. Therefore, although the assessee had transferred his share, but still the assessee would be considered as deemed owner of the Goa Flat. Therefore, in such as situation, the deduction u/s 54F is not available to the assessee.
8. We have heard the counsels for both the parties and we have also perused the material placed on record, judgment cited by the parties as well as the orders passed by the revenue authorities. We find that it is an undisputed fact that assessee was actually co-owner of the property i.e. flat at Goa along with his wife and had transferred his share to his daughter Ms Alisha Ashok Chauhan by virtue of gift deed dated 15.04.04.
8.1 According to the above decision of Coordinate Bench of ITAT in the case of Mrs. V. R. Usha (supra), wherein it was held that Where ownership of assessee over property was subject to life interest retained by her mother in said property, it could not be said that assessee owned said property fully and it could not be a reason to deny exemption under section 54F claimed by assessee on sale of her another property.
8.2 Therefore, as per the principles laid down above, the assessee cannot be said to be the full owner of the property and thus cannot be denied exemption u/s 54 of the Act as claimed by him. Even otherwise as per the decision of Coordinate Bench of ITAT in the case of Rasiklal N. Satra (supra), it has been categorically held that the word ‘own’ appearing in section 54F of the Act includes only such residential house which is fully and wholly owned by one person and not a residential house owned by more than one person. The above decision of Rasiklal N. Satra (supra), also referred and relied upon other decisions i.e. i) CIT v. T.N. Aravinda Reddy  120 ITR 46 (SC), ii) Shiv Narayan Chaudhariv. CWT  108 ITR 104 (All.), iii) Smt. Kulwanti D. Alreja v. ITO (Bom) and iv) Abdul Rehman v. CIT  12 ITR 302 (Lahore) , wherein it was held that shared interest in the property does not amount to ownership of the property.
8.3 Now the only question remains as to whether assessee can be said to be the owner of residential house/flat at Goa. The legislature has used the word “a” before the words “residential house”. In our opinion, it must mean a complete residential house and would not include shared interest in a residential house. Where the property owned by more than one person, it cannot be said that any one of them is the owner of the property. In such a case, no individual person of his own can sell the entire property. No doubt, he can sell his share of interest in the property but as far as the property is considered, it would continue to be owned by co-owners. Joint ownership is different from absolute ownership. In the case of residential unit, none of the co-owners can claim that he is the owner of residential house. Ownership of a residential house, in our opinion, means ownership to the exclusion of all others. Therefore, where a house is jointly owned by two or more persons, none of them can be said to be the owner of that house. This view of ours is also fortified by the judgment of the Hon’ble Supreme Court in the case of Seth Banarsi Dass Gupta v. CIT  166 ITR 783, wherein it was held that a fractional ownership was not sufficient for claiming even fraction depreciation Under Section 32 of the Act. Because of this judgment, the legislature had to amend the provisions of Section 32 with effect from 1.4.1997 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 Hon’ble Supreme Court in the case of Seth Banarsi Dass Gupta (supra), the legislature could also amend the provisions of Section 54F so as to include part ownership. Since, the legislature has consciously not amended the provisions of section 54F, it has to be held that the word “own” in Section 54-F would include only the case where a residential house is fully and wholly owned by the assessee and consequently would not include a residential house owned by more than one person.
8.4 In this way, in the present case, admittedly the flat at Goa was not fully and wholly owned by the assessee as the same was initially owned co-jointly in the name of assessee and his wife. Admittedly, it is nobody’s case that wife was benami of the assessee. Therefore, the said house was jointly owned by assessee and his wife. However, by virtue of gift deed dated 15.04.04, which is at page no. 37 to 60 of the paper book, the share of the assessee has already been transferred in the name of his daughter. Thus even if, as per the provision of section 27(1) of the Act, the assessee is considered to be a deemed owner of the Goa flat, but even then, assessee would still being a co-owner cannot be termed that Goa flat is fully and wholly owned by him, thus cannot be denied exemption.
8.5 Therefore, in such circumstances, assessee could not be treated as ‘absolute owner’ of the residential flat situated at Goa and the exemption u/s 54F of the Act cannot be denied to the assessee. On the other hand, Ld. DR had not placed on record any contrary judgments to rebut the contentions of the assessee.
8.6 Therefore respectfully following the decision of the Coordinate Bench of ITAT in the aforementioned cases which are mutatis mutandi in the present case, we direct the AO to allow the exemption u/s 54 of the Act. With these directions, these grounds raised by the assessee are allowed.
Ground No. 1 & 4
9. Since we have already allow the exemption u/s 54 of the Act, therefore these grounds raised by the assessee become infructuous.
10. This ground is general in nature and needs no specific adjudication.
11. In the net result, the appeal filed by the assessee stands partly allowed.