2021 (10) TMI 169 - HC - Income Tax

Denying the exemption u/s 54F - whether the appellant has not acquired a property, and the transaction was mere paper transaction? - HELD THAT - From perusal of Section 54F of the Act, it is evident that if the assessee within a period of one year before or two years after the date on which transfer took place, purchases, or has within a period of three years after that date constructs a residential house, the assessee is entitled to the benefit of Section 54F of the Act. Section 54F of the Act is a beneficial provision, which has been enacted with an object to promote investment on housing and to enable the assessee to save tax on capital gains. In the instant case, admittedly, the assessee within one year before the date of transfer i.e., on 24.02.2007 has purchased along with other co-owners a property and had sold the capital asset on 24.10.2007. From close scrutiny of the order passed by the tribunal, it is evident that the tribunal while deciding the appeal preferred by the revenue has adjudicated only grounds 2 and 3 and has not adjudicated the ground with regard to the claim of assessee under Section 54F of the Act in the light of law laid down by Delhi High Court in 'CIT VS. GITA DUGGAL' 2013 (3) TMI 101 - DELHI HIGH COURT . The tribunal has failed to adjudicate the grounds raised by the assessee in her appeal. - Matter restored back to ITAT.

Summary

Issues:
1. Denial of exemption under section 54F by the Tribunal.
2. Justification of the Tribunal's decision regarding the acquisition of a property.
3. Whether the release deed constituted a transfer in favor of the appellant.
4. Tribunal's characterization of the release deed as a colorable device.

Analysis:

Issue 1: Denial of exemption under section 54F by the Tribunal
The appellant challenged the Tribunal's denial of exemption under Section 54F of the Income Tax Act. The appellant contended that the property was purchased before the transfer and argued that the Tribunal erred in not granting the exemption. The appellant cited relevant case laws to support their claim.

Issue 2: Justification of the Tribunal's decision regarding the acquisition of a property
The Tribunal held that the appellant failed to prove the acquisition of a new house using the sale proceeds of the original asset. The Commissioner of Income Tax (Appeals) allowed a deduction of 50% of the cost of acquisition of the new property. However, the Tribunal dismissed the appeal on the grounds that the appellant did not acquire any asset. The appellant argued that the Tribunal did not consider the grounds raised in her appeal and sought a remittance of the matter for proper adjudication.

Issue 3: Whether the release deed constituted a transfer in favor of the appellant
The Tribunal characterized the release deed between spouses as a colorable device and not a proper form of property acquisition. The appellant contended that the Tribunal's finding was perverse and that the release deed should be considered as a valid transfer in favor of the appellant.

Issue 4: Tribunal's characterization of the release deed as a colorable device
The revenue argued that the appellant was owning more than one house at the time of acquiring the new property, which led to the rejection of the claim. The revenue further contended that the property purchased jointly with the appellant's husband did not comply with Section 54F of the Act. The matter was remitted to the tribunal for a fresh decision, emphasizing the need for proper adjudication based on relevant legal precedents.

In conclusion, the High Court quashed the impugned order and remitted the matter to the tribunal for a fresh decision in accordance with the law laid down by the court in relevant cases. The court did not answer the substantial questions of law, disposing of the appeal accordingly.