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2007 (2) TMI 275 - AT - Income TaxComputation of Capital gain - Applicability of section 54F - deemed owner of the property - Owned a residential house on the date of the transfer of a plot or at the time of sale - assessee is liable to a penalty u/s 271(1)(c) of the Act on account of the addition made by way of disallowing the assessee's claim of deduction u/s 54F of the Act? - concept of ownership - flat allotted by MHADA a Govt. undertaking on hire-purchase and the hire-purchase agreement - HELD THAT - Applying the principle laid down by the Hon'ble Supreme Court in the case of Podar Cement (P.) Ltd. 1997 (5) TMI 2 - SUPREME COURT as well as in the case of Mysore Minerals Ltd. 1999 (9) TMI 1 - SUPREME COURT , and following the ratio of the Hon'ble Supreme Court in the case of Mysore Minerals Ltd. holding that the decision of Hon'ble Supreme Court in the case of Podar Cement (P.) Ltd. should be taken as a trend-setter in the concept of ownership, and in order to find out the meaning of the word 'own' or 'owned' or 'owner' in the Income-tax Act, assistance from the law laid down by the Hon'ble Supreme Court in the case of Podar Cement (P.) Ltd. can be taken, and having found that that the word 'own', 'owner' or 'owned' in section 54F i s used in similar context in which it is used in section 22 of the Act, we are of the considered view that, for the purpose of section 54F of the Act, read with proviso thereto, anyone in possession of 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 same and/or enjoy its usufruct in his own right and/or is entitled to receive income from the residential house in his own right, would be the owner of the residential house, 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. Therefore, it is clear that the assessee was in possession of the residential flat in his own title exercising dominion over the property by excluding others therefrom and has the right to use and occupy the property and/or to enjoy its usufruct in his own right, notwithstanding the fact a formal deed of title might not have been executed and registered by MHADA in favour of the co-operative society formed by the members. Before parting with this issue, it is also necessary to deal with the assessee's contention that in view of section 66 of the Maharashtra Housing and Area Development Act, 1976, he has acquired no right or title over the flat allotted to him but he is merely a tenant thereof. In this respect the ld. counsel for the assessee has given a strong emphasis on a certificate issued by the Estate Manager, Maharashtra Housing and Area Development Authority saying that as the flat holders has not paid arrears and has not complied with terms of the contract, the transfer of property in their favour has not taken place, and it is only after the payment and compliance of the terms of the contract that the sale deed with society and land revenue agreement will be executed, and till such transfer of property is taken place in favour of the society, the ownership of the building remains with the MHADA. Hence, we are of the considered view that merely by making a general reference to section 66, it cannot be said that the assessee has lost all his dominion or control or possession over the flat in question as on the relevant date. Since the flat was allotted to the assessee, vide allotment letter of MHADA, and possession was given to the assessee and the assessee has paid hire-purchase instalments, and has been in possession of the said flat since 1971 in his own right to the exclusion of others till the relevant date, the assessee shall be deemed to be the owner of that flat as on the relevant date, for the purpose of section 54F of the Act. Thus, we are inclined to uphold the order of the CIT(A), who has rightly confirmed the order of the Assessing Officer, holding that the assessee's case is hit by the proviso to section 54F of the Act, inasmuch as, on the date of the transfer of the plot at Bibvewadi, the assessee owned a residential house and, thus, the assessee is not entitled to any deduction u/s 54F of the Act. We hold and order accordingly. In the result, the appeal filed by the assessee is dismissed. Deduction u/s 54F of the Act as against penalty at the rate of 200 per cent of the tax - HELD THAT - It is also well-settled that when two views are possible, no penalty can be imposed. It is also settled position of law that merely because the assessee's claim has been disallowed without establishing anything more that the assessee has made a false claim and the assessee had failed to furnish relevant details and particulars thereof, it would not be justified for the authority concerned to levy a penalty u/s 271(1)(c) of the Act. The claim made by the assessee u/s 54F of the Act can at best be considered to be not maintainable and allowable in the light of the interpretation given by the Courts to the word 'owner', 'owned' or 'own' used in the Income-tax Act. Therefore, it is not a case of false claim but a case where a claim is not found to be maintainable in the eyes of law after making exhaustive deliberation on the dispute. Having regard to the totality of facts and circumstances of the case, we are, therefore, of the view that the assessee has been able to discharge his burden that lay upon him by Explanation 1 to section 271(1)(c) of the Act, inasmuch as all the particulars relating to the assessee's claim of deduction u/s 54F were duly furnished by the assessee and the assessee's claim is not found to be false. In the penalty order, the Assessing Officer has failed to give any finding to the effect that explanation offered by the assessee was false or was otherwise found to be not bona fide one. The CIT(A) has confirmed the Assessing Officer's order by saying that there was no bona fide belief on the part of the assessee that he was not owner of the residential house at the time of transfer of the land, but we fail to understand as to how the assessee's claim can be considered to be not bona fide one, when there exists two possible and reasonable meaning of a particular term used in the statute. We, therefore, do not agree with the CIT(A) that the assessee had no bona fide belief in making the claim of deduction u/s 54F of the Act. It is also not in dispute that if one has to take into account the general law contained in the Transfer of Property Act, Registration Act, etc., the assessee may not be found to be an owner of a house allotted to him by the housing society till final deed of sale is executed in favour of the assessee. From this point of view also, it is more than clear that the assessee's claim cannot be said to be false and non bona fide one. Thus, we, therefore, have no hesitation in holding that, in this case, no penalty u/s 271(1)(c) is leviable in respect of the assessee's claim of deduction u/s 54F of the Act. We, therefore, delete the penalty imposed u/s 271(1)(c) of the Act. Resultantly, the cross-objection filed by the assessee is allowed and the appeal filed by the revenue is dismissed. To sum up the appeal filed by the assessee involving the claim of deduction u/s 54F is dismissed, and the appeal filed by the revenue from the penalty order u/s 271(1)(c) is dismissed, and the cross-objection filed by the assessee arising from the penalty order imposed under section 271(1)(c) is allowed.
Issues Involved:
1. Claim of exemption under section 54F of the Income-tax Act, 1961. 2. Imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Claim of Exemption under Section 54F: The primary issue in ITA No. 1180/PN/02 pertains to the assessee's claim of exemption under section 54F of the Income-tax Act, 1961. The assessee sold a plot and deposited the sale consideration in a capital gain account scheme, claiming exemption under section 54F. The Assessing Officer (AO) denied the exemption, arguing the assessee owned another residential house on the date of transfer, which disqualified him under the proviso to section 54F. The AO's conclusion was based on the fact that the assessee was residing in a flat allotted by the Maharashtra Housing and Area Development Authority (MHADA) and had paid all hire-purchase installments, making him the deemed owner under section 27 of the Act. The CIT(A) upheld the AO's decision, stating that the ownership of the flat vested with the assessee by virtue of the allotment letter and continued possession since 1971. The CIT(A) referenced the Bombay High Court decision in Mrs. Hilla J.B. Wadia, which emphasized domain over the flat and substantial investment as key factors. The Tribunal also upheld the CIT(A)'s decision, emphasizing that for the purpose of section 54F, ownership should be interpreted broadly. It concluded that the assessee, having possession and control over the flat, was the deemed owner, thus disqualifying him from the exemption under section 54F. 2. Imposition of Penalty under Section 271(1)(c): The second issue, addressed in ITA No. 714/PN/03 and C.O. No. 13/PN/06, concerns the imposition of penalty under section 271(1)(c) for filing inaccurate particulars of income. The AO imposed a penalty, asserting the assessee claimed an exemption under section 54F despite owning another residential house. The CIT(A) confirmed the imposition of the penalty but reduced it from 200% to 100% of the tax sought to be evaded. The CIT(A) reasoned that the assessee's explanation was neither bona fide nor satisfactory, and the ownership of the flat was evident from the facts. However, the Tribunal disagreed with the CIT(A), noting that the issue was debatable and the assessee had furnished all relevant particulars. The Tribunal emphasized that the assessee's claim, although disallowed, was not false or non-bona fide. It highlighted that the assessee had deposited the sale consideration in a capital gain account scheme, indicating no intention to make a false claim. Consequently, the Tribunal deleted the penalty, concluding that the assessee had discharged the burden of proof under Explanation 1 to section 271(1)(c). Conclusion: - The appeal concerning the claim of exemption under section 54F was dismissed, affirming the denial of the exemption due to ownership of another residential house. - The appeal regarding the penalty under section 271(1)(c) was dismissed, and the cross-objection filed by the assessee was allowed, resulting in the deletion of the penalty.
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