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TMI Blog2008 (9) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... l within 8 Kms. Range of the Municipal corporation limit. He sold the said lands in two lots. The particulars of such sale are as follows:- (i) 2 acres of land were sold on 04.08.1982, for Rs. 40,000. (ii) 16.58 acres of land were sold on 31.08.1982, for Rs. 2,90,000 3. The Income-Tax Officer, First Survey Circle, issued a notice under section 139 (2) of the Income-Tax Act, 1961 (for short "the IT Act"), calling upon the assessee to file his return of income. In response to the same, he filed his return of income declaring nil income. It was contended by him that the land in question was used for agricultural purposes and, therefore, outside the purview of the definition of the terms "capital asset" within the meaning of the I.T. Act and, therefore, not liable to capital gain tax. It was observed that he had invested the sale proceeds in the following manner:- "(a) By purchase of a vacant plot at circle No. 4, Ward No. 11/20 Ganesh Nagar, Nagpur on 02.03.1983 in the name of Shri Prakash, his only adopted son. (b) By constructing the commercial and residential building of a value of Rs. 2,00,000 within the prescribed period. According to the valuation report, the constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the appeal filed before the ITAT on May 1, 1998, in the name of Timaji, who died on May 9, 1991, is competently filed? YES 2. Whether the sale proceeds of agricultural land were invested in purchasing plot and constructing residential house thereon, in the name of appellant does qualify for exemption under section 54F of the I.T. Act particularly when the deceased Timaji who has invested in the name of appellant was in fact in the law the real owner of the property and appellant was holding the same in trust for and on behalf of the deceased Timaji? NO 3. Whether for qualifying exemption under section 54 of the I.T. Act is it necessary and obligatory to have investment made in residential house in the name of assessee only or investment in residential house is enough to qualify and claim the said exemption? YES Investment is not sufficient." 8. The petitioner/assessee being only legal heir of the deceased assessee, also filed Writ Petition No. 2197 of 2002 on 18.06.2002 and has challenged the recovery proceedings initiated under section 156 of the I.T. Act read with penalty under section 271(1)(a) and basically denied the tax liability of Timaji (deceased). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of its purchase or, as the case may be, its consideration, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such new asset is transferred.' 10. The term "Assessee" is defined in Section 2(7) of the Income-Tax Act, which is as under:- "assessee" means a person by whom any tax or any other sum of money is payable under this Act, and includes- (a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or assessment of fringe benefits or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person; (b) every person who is deemed to be an assessee under any provision of this Act; (c) every person who is deemed to be an assessee in default under any provision of this Act;" 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The amount of capital gain arising from the transfer of the original asset which was not charged to taxes shall be allowed to be income chargeable under the head "capital gain" relating to long-term capital assets of the previous year in which such residential house is so purchased or constructed. Furthermore, if an assessee transfers newly acquired residential house within three years of its purchase or construction, then the amount of capital gain arising from the transfer of original asset, which was not charged to tax, shall be deemed to be the income of the year in which the new asset is transferred and the said income shall be charged to tax under the head of capital gains relating to the long-term capital assets. [(1982) 138 ITR (St.) 10] (Departmental Circular No. 346, dated June 30, 1982) 13. It is, therefore, clear that the purpose is to give this benefit on the ownership of one residential house only by the assessee and to encourage to have one residential house of the assessee. Therefore, right from the sale of original asset till the purchase and/or construction of the residential house i.e. the "new asset", the ownership and domain over the new asset is a must. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same scheme, the lapse of some time between the sale and purchase makes no difference. The word "assessee" must be given a wide and liberal interpretation so as to include his legal heirs also. There is no warrant for giving too strict an interpretation to the word "assessee" as that would frustrate the object of granting the exemption and what is more, in the instant case, the very same assessee immediately after the sale of the house, entered into an agreement for purchasing another house and paid a sum of Rs. 1,000 as earnest money and subsequently the legal representative completed the transaction within a period of one year from the date of the death of the deceased. The sale and purchase are two links in the same chain. We are fortified in this view by a decision of the Madras High Court in C. V. Ramanathan v. CIT [1980] 125 ITR 191." 16. We are not inclined to accept the liberal view to the word "assessee" in Late Mir Gulam Ali Khan [1987] 165 ITR 228 (AP) for the reason already recorded in the above paras. The Scheme of section 54F is clear. The facts are different here. 17. The deceased assessee admittedly sold and purchased the property from the realisat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he new asset by assessee in the name of his son is to constitute his son as the beneficial owner of the new asset. The assessee has, therefore, not made the investment in this name. Therefore, he has rendered himself liable to pay tax on capital gains arising out of the transfer of a capital asset. 9.... 10. In all the above case, it will be significant to note that the issue was never regarding purchase of the new asset in the name of other person. Death during the period within which the new asset had to be acquired was an intervening event in some cases. The distinction between a legal heir and an heir apparent in law is very significant. An heir apparent succeeding to the estate of a prepositus is dependent on the fact of his surviving the prepositus. Death is a certain event but who will die first is not a certain event. This is the reason why law regards transfer by a heir apparent of his chance of succession as non- transferable under section 6 of the Transfer of Property Act. 11. In the present case, the assessee has not made any such claim. In the affidavit filed before the Assessing Officer he had admitted that his son is the beneficial owner of the property and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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