2019 (8) TMI 290 - AT - Income Tax

Exemption u/sec. 54F - assessee invested in the plot belonging to her husband - Investment made by spouse - assessee has sold certain property and sale proceeds received, has invested in construction of the plot belonging to her husband - AO denied the claim of the assessee on the ground that she has not constructed the house within the stipulated period of 03 years and investment made by her is not in her name and is in the name of her husband - denied the claim of the assessee only on the ground that sale proceeds ought to have been invested in her name instead of her husband name - HELD THAT - In this case, we find that the assessee has sold certain land and received sale proceeds and invested in construction of a house in plot belonging to the husband. It is a fact that the assessee and her husband are living together and also a fact that sale proceeds received by the assessee are used for construction of the house. AO denied the claim of the assessee only on the ground that sale proceeds ought to have been invested in her name instead of her husband name. By considering the facts and circumstances of the case, the benefit u/sec. 54F cannot be denied to the assessee simply because sale proceeds invested in a plot belonging to her husband. Section 54F is being a beneficial provision. As per the judgments of various High Courts and the tribunals where investment is made by the spouse, benefit has been allowed by construing the definition of assessee liberally. In the present case, the sale proceeds has been invested in the plot belonging to the assessee s husband, therefore, the case law relied on by the ld. CIT(A) has no application to the facts of the present case. Keeping in view of the facts and circumstances of the case and also by following the judgments of M/S. B. SURENDRA CHOWDARY, 2017 (8) TMI 1563 - ANDHRA PRADESH HIGH COURT , SHRI KAMAL WAHAL 2013 (1) TMI 401 - DELHI HIGH COURT and V. NATARAJAN. 2006 (2) TMI 136 - MADRAS HIGH COURT and also N. RAM KUMAR 2012 (10) TMI 145 - ITAT HYDERABAD we are of the opinion that the assessee is entitled for deduction u/sec. 54F of the Act. Thus, these appeals filed by the assessee are allowed.

Summary

Issues Involved:
1. Validity of the denial of deduction claimed by the assessee under Section 54F of the Income Tax Act.
2. Interpretation of the term "assessee" in the context of Section 54F and whether it includes the spouse.

Issue-wise Detailed Analysis:

1. Validity of the Denial of Deduction Claimed by the Assessee under Section 54F of the Income Tax Act:

The primary issue in this case revolves around the denial of the deduction claimed by the assessee under Section 54F of the Income Tax Act. The Assessing Officer (AO) disallowed the claim on the grounds that the investment in the house property was not made in the assessee's name but in her husband's name. Additionally, the AO noted that the assessee failed to produce construction bills/vouchers, plan approval, and property tax assessment during the assessment proceedings, leading to the disallowance of the deduction under Section 54F.

Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] examined the GVMC tax assessment receipt and concluded that the construction was completed within the stipulated period. However, the CIT(A) upheld the AO's decision on the basis that the house was constructed on a plot owned by the assessee's husband, thereby denying the deduction under Section 54F.

2. Interpretation of the Term "Assessee" in the Context of Section 54F and Whether It Includes the Spouse:

The assessee argued that Section 54F is a beneficial provision and should be interpreted liberally to include the spouse. The assessee's representative cited various judgments to support this interpretation, including the case of Late Mir Gulam Ali Khan Vs. CIT [(1987) 165 ITR 228], Pr.CIT Vs. M/s. B. Surendra Chowdary in ITTA No. 519/2017, CIT Vs. Kamal Wahal [(2013) 351 ITR 04], and CIT Vs. V. Natarajan [(2008) 287 ITR 271].

The Tribunal considered these arguments and noted that the predominant judicial view supports a liberal interpretation of the term "assessee" to include the spouse. The Tribunal referred to several High Court judgments that allowed the benefit of Section 54F even when the investment was made in the name of the spouse. Specifically, in the case of Pr.CIT Vs. M/s. B. Surendra Chowdary, the High Court of Telangana & Andhra Pradesh upheld the deduction under Section 54F for a property purchased in the name of the assessee's wife.

The Tribunal also cited the Delhi High Court's decision in CIT Vs. Kamal Wahal, which emphasized that Section 54F does not mandate that the house must be purchased in the assessee's name alone. The Madras High Court in CIT Vs. V. Natarajan similarly held that the assessee was entitled to exemption under Section 54 even when the property was purchased in the name of the spouse.

Conclusion:

The Tribunal concluded that the benefit under Section 54F cannot be denied merely because the sale proceeds were invested in a plot belonging to the assessee's husband. The Tribunal emphasized that Section 54F is a beneficial provision and should be interpreted liberally. Consequently, the Tribunal allowed the appeals filed by the assessee, granting the deduction under Section 54F.

Final Judgment:

The appeals filed by the assessee were partly allowed, with the Tribunal ruling in favor of the assessee regarding the interpretation of Section 54F and the inclusion of the spouse in the definition of "assessee." The order was pronounced in open Court on July 31, 2019.