G.D. Shetty v. ITO - Taxpublishers.in

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The Tax Publishers2008 TaxPub(DT) 0553 (Pune-Trib) : (2008) 112 ITD 0103 : (2008) 117 TTJ 0061 : (2008) 005 DTR 0297 G. D. Shetty v. ITO INCOME TAX ACT, 1961 Caoital gains- Deduction under section 54F-Whether assessee already owned a residental flat on date of transfer-Flat received on completition of hire purchase instalment Assessee had sold a plot during the assessment year and claimed exemption of the capital gains arising from said sale under section 54F for the reason that the entire consideration amount received on sale of plot was deposited in capital gains account scheme in the bank. AO observed that the assessee was residing in a flat which was allotted to him by the State Housing Authority. Therefore, AO was of view that as the assessee was already an owner of a residential house property, he was not eligible for deduction under section 54F in view of the provisions contained in proviso to section 54F. The assessee failed to satisfy AO that he was not the owner of the concerned flat allotted by the State Housing Authority, but was still a tenant of the said flat as the ownership of the flat was not transferred to him by the Authority. AO observed that the flat was allotted to the assessee in 1971 on hire-purchase basis and the assessee had paid all the instalments till 1990 and the hire-purchase was complete. The possession of the flat was with the assessee for the last many years and it was occupied by him as residence and that there was some dispute over payment of service charges, viz., electricity, water, hence, the ownership was not transferred to the assessee. AO held that the assessee was deemed owner of the property, hence, not eligible for exemption under section 54. AO initiated penalty proceedings under section 271(1)(c) against the assessee for filing inaccurate particulars of income with regard to the claim of deduction under section 54F. CIT(A) upheld the impugned disallowance but reduced the quantum of penalty. *Held:* As per the proviso to section 54F(1), it is clear that nothing contained in sub-section (1) of section 54F shall apply if the conditions enumerated in the said proviso are satisfied. As per the proviso to section 54F(1), the benefit of section 54F(1) shall not be granted, where the assessee owns on the date of transfer of the original asset, or purchases within the period of one year after such date, or constructs within a period of three years after such date any residential house, the income from which is chargeable under the head Income from house property, other than the new asset. The exemption under section 54F is granted to the assessee with a view to encourage construction of one residential house. The construction or purchase of a house other than one residential house is not covered by section 54F. The concession provided under section 54F would not be available in a case where the assessee already owns, on the date of the transfer of the original asset, any residential house. Therefore, emphasis has been given on owning of only one residential house by any assessee. The assessee, who already owns on the date of the transfer of the original asset, any residential house, is not eligible for the concession provided under section 54F, even if any other residential house is either purchased or constructed by him. Therefore, concession has been given only to encourage that an assessee should have his own one residential house. In short, any assessee, who possesses or occupies any residential house in his own title exercising such dominion over the residential house as would enable others being excluded therefrom and having the right to use and occupy the said house and/or to enjoy its usufruct in his own right, should be deemed to be the owner of a residential house for the purpose of section 54F. From the CBDT Circular No. 471, dated 15-10-1986, it becomes clear that the cases of allotment of flats under self-financing scheme of any development authority, where capital gain is invested in purchase of flats of development authority in the form of payment of first instalment have to be treated to be the cases of construction or purchase of a house for the purpose of allowing the deduction in respect of capital gains under section 54F, though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. For the purpose of granting the benefit of deduction under section 54F on account of purchase or construction of any residential house within the specified period, the requirements of the Transfer of Property Act, the Registration Act, etc., have not been held to be compulsory. Further,as per the proviso to section 54F, it is found that the expression assessee owns, on the date of transfer of the original asset, any residential house is used in the proviso with reference to the residential house, the income of which is chargeable under the head Income from house property. In the present case, the facts, as found by the authorities below on the basis of the various documents and papers collected during the assessment proceedings, which had remained unrebutted or uncontroverted might be summarized as under:(1) That residential flat was allotted to the assessee in 1971 on hire purchase basis, (2) The assessee had paid all the instalments by 1990 and the hire purchase was completed, (3) The assessee was allowed to possess the flat in his own right. No other person other than the assessee had any right or interest to occupy or possess the property, (4) The co-op. housing society of the members, where the flat was situated, was duly formed and registered and the assessee was allotted membership of the society, (5) Possession of the flat was with the assessee for the last many years, and it was occupied by him as residence. The property was in the nature of a residential property, (6)The dispute between the Co-op. Housing Society formed by the members of the building and the MHADA was only with regard to payment of certain electricity and water charges for which reason the execution and registration of any deed required under the Transfer of Property Act; the Registration Act, etc., were not made by the MHADA in favour of the Society and (7) No proceedings under section 66 of the Maharashtra Housing and Area Development Act, 1976 where ever initiated against the assessee to evict him from the said residential flat nor any final order under section 66 evicting the assessee from the flat was ever passed against him. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2008 TaxPub(DT) 0553 (Pune-Trib) : (2008) 112 ITD 0103 : (2008) 117 TTJ 0061 : (2008) 005 DTR 0297

G. D. Shetty v. ITO

INCOME TAX ACT, 1961

Caoital gains- Deduction under section 54F-Whether assessee already owned a residental flat on date of transfer-Flat received on completition of hire purchase instalment

Assessee had sold a plot during the assessment year and claimed exemption of the capital gains arising from said sale under section 54F for the reason that the entire consideration amount received on sale of plot was deposited in capital gains account scheme in the bank. AO observed that the assessee was residing in a flat which was allotted to him by the State Housing Authority. Therefore, AO was of view that as the assessee was already an owner of a residential house property, he was not eligible for deduction under section 54F in view of the provisions contained in proviso to section 54F. The assessee failed to satisfy AO that he was not the owner of the concerned flat allotted by the State Housing Authority, but was still a tenant of the said flat as the ownership of the flat was not transferred to him by the Authority. AO observed that the flat was allotted to the assessee in 1971 on hire-purchase basis and the assessee had paid all the instalments till 1990 and the hire-purchase was complete. The possession of the flat was with the assessee for the last many years and it was occupied by him as residence and that there was some dispute over payment of service charges, viz., electricity, water, hence, the ownership was not transferred to the assessee. AO held that the assessee was deemed owner of the property, hence, not eligible for exemption under section 54. AO initiated penalty proceedings under section 271(1)(c) against the assessee for filing inaccurate particulars of income with regard to the claim of deduction under section 54F. CIT(A) upheld the impugned disallowance but reduced the quantum of penalty. Held: As per the proviso to section 54F(1), it is clear that nothing contained in sub-section (1) of section 54F shall apply if the conditions enumerated in the said proviso are satisfied.

As per the proviso to section 54F(1), the benefit of section 54F(1) shall not be granted, where the assessee owns on the date of transfer of the original asset, or purchases within the period of one year after such date, or constructs within a period of three years after such date any residential house, the income from which is chargeable under the head Income from house property, other than the new asset. The exemption under section 54F is granted to the assessee with a view to encourage construction of one residential house. The construction or purchase of a house other than one residential house is not covered by section 54F. The concession provided under section 54F would not be available in a case where the assessee already owns, on the date of the transfer of the original asset, any residential house. Therefore, emphasis has been given on owning of only one residential house by any assessee. The assessee, who already owns on the date of the transfer of the original asset, any residential house, is not eligible for the concession provided under section 54F, even if any other residential house is either purchased or constructed by him. Therefore, concession has been given only to encourage that an assessee should have his own one residential house. In short, any assessee, who possesses or occupies any residential house in his own title exercising such dominion over the residential house as would enable others being excluded therefrom and having the right to use and occupy the said house and/or to enjoy its usufruct in his own right, should be deemed to be the owner of a residential house for the purpose of section 54F.

From the CBDT Circular No. 471, dated 15-10-1986, it becomes clear that the cases of allotment of flats under self-financing scheme of any development authority, where capital gain is invested in purchase of flats of development authority in the form of payment of first instalment have to be treated to be the cases of construction or purchase of a house for the purpose of allowing the deduction in respect of capital gains under section 54F, though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. For the purpose of granting the benefit of deduction under section 54F on account of purchase or construction of any residential house within the specified period, the requirements of the Transfer of Property Act, the Registration Act, etc., have not been held to be compulsory. Further,as per the proviso to section 54F, it is found that the expression assessee owns, on the date of transfer of the original asset, any residential house is used in the proviso with reference to the residential house, the income of which is chargeable under the head Income from house property. In the present case, the facts, as found by the authorities below on the basis of the various documents and papers collected during the assessment proceedings, which had remained unrebutted or uncontroverted might be summarized as under:(1) That residential flat was allotted to the assessee in 1971 on hire purchase basis, (2) The assessee had paid all the instalments by 1990 and the hire purchase was completed, (3) The assessee was allowed to possess the flat in his own right. No other person other than the assessee had any right or interest to occupy or possess the property, (4) The co-op. housing society of the members, where the flat was situated, was duly formed and registered and the assessee was allotted membership of the society, (5) Possession of the flat was with the assessee for the last many years, and it was occupied by him as residence. The property was in the nature of a residential property, (6)The dispute between the Co-op. Housing Society formed by the members of the building and the MHADA was only with regard to payment of certain electricity and water charges for which reason the execution and registration of any deed required under the Transfer of Property Act; the Registration Act, etc., were not made by the MHADA in favour of the Society and (7) No proceedings under section 66 of the Maharashtra Housing and Area Development Act, 1976 where ever initiated against the assessee to evict him from the said residential flat nor any final order under section 66 evicting the assessee from the flat was ever passed against him.