2020 (5) TMI 349 - AT - Income Tax

Disallowance of deduction claimed u/s 54B - Reinvestment in agricultural lands in the names of sons/wife - HELD THAT - Reinvestment was made by the assessee in the residential house in the name of his wife. The purposive construction of the provisions preferred as against the literal construction of the same. - Following the decision of High Courts with respect to Section 54F, the benefit extended to the assessee. Reinvestment in the names of sons - Revenue submitted that the investment in the hands of the wife and daughters cannot be compared with that of the investment in the hands of the sons. In the present case, the assessee s investment made in the names of Shri Rahul Sakaram Bhondve (son), Shri Tarachand Sakaram Bhondve (son). The above cited decisions are relevant for the case of spouse only not to the son s cases. Considering the same, discussion given by the CIT(A) and the Assessing Officer in their respective orders is fair and reasonable and it does not call for any interference. Reinvestment by way of Advances by assessee and the sons - HELD THAT - There is paucity of facts with regard to the ownership of ₹ 18,00,000/- paid to D.N. Chaudhary deceased. Notwithstanding the incompleteness of the transaction, the requirement for claim of deduction in the investment of capital gains, the assessee is entitled for deduction to that extent the contribution belongs to the assessee out of the said ₹ 18,00,000/-. The Assessing Officer is directed to examine the same and the claim of the assessee indicated above. Thus, this part of grounds is allowed for statistical purposes. Allowability of expenses out - HELD THAT - There is no legal impediment in transferring the property by the appellant without concurrence of the sisters of his father. The payment, if made by the appellant therefore appears to be gratis, and is not related to the transfer of the land in Sept 2006 and therefore such expenditure is not wholly or exclusively related to the transfer of the capital asset and therefore not deductible u/s 48. Recipients of cash are not the owners of the property at the time of property transferred. The above payments made are not required to be incurred wholly and exclusively for the transfer of property by the assessee. Above finding of the CIT(A) is fair and reasonable on this issue and it does not call for any interference. Accordingly, this part of grounds is dismissed.

Summary

Issues Involved:
1. Allowability of deduction under Section 54B of the Income Tax Act.
2. Allowability of deduction of ?11.50 lakhs on account of payments made to father's sisters and daughters.

Detailed Analysis:

1. Allowability of Deduction Under Section 54B of the Income Tax Act:
- Reinvestment in the Names of Sons/Wife:
The assessee claimed deductions under Section 54B for reinvestments in non-agricultural land/residential house/agricultural land in the names of his sons and wife. The CIT(A) and the Assessing Officer disallowed these claims, citing the Bombay High Court judgment in Prakash vs. ITO, which mandates that reinvestment must be in the name of the assessee alone. The Tribunal upheld this view for investments in the names of the sons but allowed the deduction for the investment in the name of the wife, relying on the Bombay High Court judgment in CIT vs. Kamal Wahal and the Delhi High Court judgment in CIT vs. Ravinder Kumar Arora, which support a purposive construction of the provisions.

- Reinvestment by Way of Advances:
The assessee also claimed a deduction for an advance payment of ?18,00,000/- for the purchase of agricultural land. The CIT(A) and the Assessing Officer disallowed this claim, stating that the transaction was incomplete and involved part payments by the sons. The Tribunal directed the Assessing Officer to examine the ownership of the ?18,00,000/- paid and allowed the claim to the extent the contribution belonged to the assessee.

2. Allowability of Deduction of ?11.50 Lakhs on Account of Payments Made to Father's Sisters and Daughters:
- Payments to Father's Sisters and Daughters:
The assessee claimed that ?11.50 lakhs paid to his father's sisters and daughters should be deducted from the sale consideration as these payments were necessary to avoid potential litigation. The CIT(A) disallowed this claim, noting that the sisters had released their rights in the property in 1997, and their names were not on the revenue records at the time of sale. The Tribunal upheld this view, stating that the payments were not required to be incurred wholly and exclusively for the transfer of the property.

Conclusion:
- Partly Allowed:
The Tribunal partly allowed the appeal, granting deductions for the investment in the name of the wife and directing further examination of the advance payment claim.

- Dismissed:
The Tribunal dismissed the claims related to investments in the names of the sons and the payments made to father's sisters and daughters.

Order:
The appeal of the assessee is partly allowed. The grounds related to the investment in the name of the wife and the advance payment are partly allowed, while the grounds related to investments in the names of the sons and payments to father's sisters and daughters are dismissed.