2019 (7) TMI 436 - AT - Income Tax

Deduction u/s 54F - property has been purchased by the assessee in the name of his wife - claim made for the first time before the CIT(A) - HELD THAT - The Hon ble Bombay High Court in the case of CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd. 2012 (7) TMI 158 - BOMBAY HIGH COURT has held that the appellate authorities have power to consider a claim not made in the return of income. There was no prohibition on the powers of the Tribunal to entertain an additional ground which is according to the Tribunal arose in the matter and for the just decision of the case. Finding of the CIT(A) that the appellate authority has no power to consider a claim not made in the return is incorrect and not in accordance with law. Agree with the assessee that the appellate authority has power to consider a claim not made in the return. Allowability of deduction u/s 54F on account of purchase of the residential property by the assessee in the name of his wife is concerned, it has been held in various decisions that assessee cannot be denied the benefit of deduction u/s 54F when the property has been purchased in the name of the wife of the assessee instead of purchasing the same in the name of the assessee himself. Case of CIT vs. Shri Kamal Wahal 2013 (1) TMI 401 - DELHI HIGH COURT has held that the new residential house need not be purchased by the assessee in his name nor is it necessary that it should be purchased exclusively in his name for claiming deduction u/s 54. Accordingly, the deduction u/s 54F was allowed where the property was purchased in the name of the wife of the assessee. Assessee should not be denied the benefit of deduction u/s 54F merely because the property has been purchased in the name of the wife of the assessee when the money has been flown from the bank account of the assessee, wherein the sale proceeds were deposited. However, this fact needs verification. Restore this issue to the file of the AO with a direction to verify the bank account of the assessee that the sale proceeds of the land sold was deposited in the bank account and has been utilized for the purchase of the residential property in the name of the wife of the assessee. If the AO finds the same to be correct then he is directed to allow the claim of deduction u/s 54 - Assessee are accordingly allowed for statistical purposes.

Summary

Issues involved:
1. Determination of land as a capital asset for capital gain tax.
2. Allowability of exemption under section 54F for purchase of residential property.
3. Power of appellate authority to consider claims not made in the return.

Analysis:

Issue 1: Determination of land as a capital asset for capital gain tax:
The assessee sold a land in Amarpur Kondala, Aligarh, and claimed it as agricultural land to exempt capital gain. However, the Assessing Officer (AO) rejected the claim, determining the capital gain at ?16,37,826. The CIT(A) upheld this decision, leading to the appeal before the Tribunal.

Issue 2: Allowability of exemption under section 54F for purchase of residential property:
The assessee raised an additional ground before the CIT(A) claiming exemption under section 54F for investing capital gain in a residential property. The CIT(A) rejected the claim, citing the property was in the wife's name. The Tribunal considered various decisions, including those by the Hon’ble Delhi High Court, and allowed the deduction under section 54F. However, the Tribunal directed the AO to verify if the sale proceeds were deposited in the bank account and utilized for the property purchase in the wife's name.

Issue 3: Power of appellate authority to consider claims not made in the return:
The Tribunal held that the appellate authority has the power to consider claims not made in the return, contrary to the CIT(A)'s view. Citing various decisions, the Tribunal emphasized that the power of the Tribunal to entertain additional grounds is not limited by claims made in the return.

In conclusion, the Tribunal allowed the appeal for statistical purposes, directing the AO to verify the utilization of sale proceeds for the property purchase in the wife's name. The decision highlighted the importance of considering claims not originally made in the return and upheld the assessee's right to deduction under section 54F based on the source of funds used for the purchase.