2024 (9) TMI 282 - AT - Income Tax

LTCG - deduction u/s 54F - deduction claim for investment in residential property not solely owned by the assessee - only objection of the AO is that the plot of land on which capital gain is utilized for construction is not in the name of the assessee rather it is in exclusive name of her husband - HELD THAT - Purposive construction is to be preferred as against the literal construction more so when even literal construction also does not say that the house should be purchased in the name of the assessee only. Section 54F is the beneficial provision which should be interpreted liberally in favour of the exemption/deduction to the tax-payer and deduction should not be denied on hyper-technical ground. The word assessee must be given wide and liberal interpretation so as to include his legal heirs also. As in Chandrakant S. Choksi Vs ACIT 2015 (2) TMI 313 - ITAT MUMBAI also held that for the purpose of provision of Section 54 it was not necessary that the assessee should become owner of property through registration as Section speaks of purchase and registration of document was not imperative. The Hon ble Supreme Court in the case of Mysore Minerals Limited Vs CIT 1999 (9) TMI 1 - SUPREME COURT held that the term own ownership owned are generic and relative terms. They have a wide and also a narrow connotation. The meaning would depend upon the context in which the terms are used. The term owned as occurring in Section 32(1) must be assigned a wider meaning. Anyone in possession of a property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having right to use and occupy the property and/or to enjoy its usufructs in his own right would be owner of the building though a formal deed of title may not have been executed and registered as contemplated under Transfer of property Act. Thus in there is no impediment in claiming deduction u/s 54F on investment of capital gain in the residential house which is in the name of assessee s husband. Hence we direct the AO to allow deduction u/s 54F of the Act claimed by the assessee. In the result grounds of appeal raised by the assessee are allowed.

Summary

Issues:
Interpretation of Section 54F of the Income Tax Act regarding deduction claim for investment in residential property not solely owned by the assessee.

Detailed Analysis:

Issue 1: Claim of Deduction under Section 54F
The appeal was against the disallowance of a deduction of Rs. 9,61,49,283 under Section 54F of the Income Tax Act for the Assessment Year 2020-21. The assessee, an individual, had sold ancestral property and invested in constructing a residential property with her husband. The Assessing Officer disallowed the deduction as the property was solely in the husband's name.

Issue 2: Assessment and Appeal
The Assessing Officer issued a show cause notice questioning the deduction claim under Section 54F. The assessee's reply cited legal precedents and argued that the investment met the conditions of the Act. The CIT(A) upheld the disallowance, finding the facts of cited cases not applicable. The assessee then appealed to the Tribunal.

Issue 3: Tribunal's Analysis
The Tribunal heard arguments from both sides. The assessee's representative highlighted the Karnataka High Court's decision in a similar case and argued for a liberal interpretation of Section 54F. The Tribunal noted that the source of capital gain was not disputed, focusing on the property ownership issue. It cited legal precedents to support the assessee's claim for deduction despite the property being in the husband's name.

Issue 4: Legal Precedents and Interpretation
The Tribunal referenced various court decisions, including the Karnataka High Court and Delhi High Court rulings, emphasizing a purposive and liberal interpretation of Section 54F. It highlighted that the objective was to promote house construction and that technicalities should not hinder legitimate deductions. The Supreme Court's stance on ownership and the broader meaning of the term "owned" were also considered.

Conclusion
The Tribunal ruled in favor of the assessee, allowing the appeal and directing the Assessing Officer to permit the deduction under Section 54F. The judgment emphasized the broader interpretation of ownership and the legislative intent behind the provision. The decision was announced on 30th August 2024.