2020 (8) TMI 234 - AT - Income Tax

Disallowance u/s 54F - action disallowing the impugned deduction claim for the sole reason that the assessee had not reinvested the impugned long term capital gains in his own name but in the name of his wife - HELD THAT -CIT(A) s detailed discussion in view of PRAKASH (BY LEGAL HEIR OF ASSESSEE) VERSUS ITO CIT AND OTHERS 2008 (9) TMI 234 - BOMBAY HIGH COURT . Mr. Singh vehemently argues that the assessee s deduction claim has been rightly disallowed. Mr. Poddar quotes CIT vs. Kamal Wahal 2013 (1) TMI 401 - DELHI HIGH COURT deciding the issue in assessee s favour. Faced with this situation of non-jurisdictional high courts having different opinions on the issue and no guidance coming from hon ble jurisdictional high court, we invoke hon ble apex court judgment in CIT vs. Vegetable products Ltd 1973 (1) TMI 1 - SUPREME COURT that the view in assessee s favour has to be adopted. We order accordingly. Assessing Officer is directed to delete the impugned disallowance. Assessee s appeal is allowed.

Summary

Issues:
Appeal against CIT(A)-Jharkhand's order disallowing section 54F deduction claim.

Analysis:
The appellant's appeal was against the CIT(A)-Jharkhand's order disallowing the section 54F deduction claim of ?27,66,230 for the assessment year 2011-12. The dispute arose because the appellant had reinvested the long-term capital gain in the name of his wife, which was the reason for disallowance by the lower authorities. The CIT(A) upheld the disallowance stating that the benefit under section 54F is available only to the assessee who must own the residential house. The ownership and domain over the new asset by the assessee were deemed necessary. The CIT(A) referenced legal concepts of ownership and previous court judgments to support the disallowance. The appellant argued citing a Delhi High Court judgment in favor of the assessee, highlighting conflicting opinions from non-jurisdictional high courts on the issue. In the absence of guidance from the jurisdictional high court, the ITAT invoked the Supreme Court judgment in CIT vs. Vegetable products Ltd to rule in favor of the assessee and directed the Assessing Officer to delete the disallowance.

The ITAT's decision was based on the interpretation of ownership requirements under section 54F of the Income Tax Act. The tribunal considered the legal principles and previous court decisions related to ownership and entitlement to claim exemptions under section 54F. The ITAT emphasized the importance of ownership by the assessee and the need for strict compliance with the provisions of the Act to qualify for the deduction claim. The tribunal acknowledged the conflicting opinions from different high courts but relied on the Supreme Court judgment to resolve the issue in favor of the assessee. The ITAT's decision highlighted the significance of legal ownership and adherence to statutory conditions for claiming deductions under section 54F.

Overall, the ITAT's judgment clarified the ownership requirements for claiming deductions under section 54F of the Income Tax Act. The tribunal emphasized the need for the assessee to have legal ownership and control over the residential property to qualify for the deduction claim. By considering legal principles and previous court judgments, the ITAT resolved the dispute in favor of the assessee, directing the Assessing Officer to delete the disallowance. The decision underscored the importance of strict compliance with statutory provisions and highlighted the role of legal ownership in determining eligibility for tax deductions related to capital gains reinvestment.