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TMI Blog2020 (8) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... s also supported by the fact that assessee paid the capital gains tax on sale consideration of impugned property which have been accepted by the A.O. Similarly, the part of the share of wife of the assessee was also transferred and according to Learned Counsel for the Assessee in the case of wife of assessee the return have been accepted on identical facts under section 143(1) of the I.T. Act, 1961 and no reassessment proceedings have been initiated till date. The A.O, therefore, bound to follow the rule of consistency in the matter as well. In view of the above facts it is clear that assessee transferred the capital asset to his son with all rights, title, interest and enjoyment in the impugned immovable property through Agreement to Sell and Registered Transfer Deed, subject to consideration, therefore, assessee would not be having more than one residential house at the time of claiming exemption from capital gains and as such, A.O. was not justified in rejecting the claim of exemption under section 54F of the I.T. Act. For alternate contention assessee was having only 50% share in the impugned residential property which was sold to the son of the assessee. Therefore, A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, to the extent of ₹ 4.40 crores. 4. Briefly the facts of the case are that the A.O. disallowed a sum of ₹ 4,40,35,219.50 on account of long term capital gains earned by assessee in respect of sale of land at Harsaru, District Gurgaon, (Haryana), by denying the exemption under section 54F of the I.T. Act, 1961, claimed by assessee in respect of the said sale consideration on the ground that assessee allegedly did not fulfil the conditions of Section 54F of the I.T. Act, 1961. The A.O. has denied the exemption of long term capital gains under section 54F of the I.T. Act on the reason that assessee on the date of transfer of original asset had more than one residential house i.e., at Defence Colony, Gurgaon and Malibu Town, Gurgaon, although, both the assets were jointly owned by assessee with his wife Smt. Savita Bhasin. 4.1. The assessee challenged the said disallowance under section 54F before the Ld. CIT(A). The detailed written submissions of the assessee is reproduced in the appellate order which reads as under : 4.3.1. On this issue the appellant has made the following submissions: (1) During the period under consideration, the Appellant had sold l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gaon. 20,00,000/- 01.11.2013 5. As per the proviso to Section 54F of the Act in order to claim exemption in respect of Capital Gains arising from the transfer of a Long-Term Capital Asset, other than a house property, an assessee should not own on the date of transfer of the original asset more than one residential house (other than the new house). 6. Accordingly, as on the date of sale of land it was claimed that, in respect of which the Long Term Capital Gains arose the Appellant was holding (and that also jointly with his wife) only one property viz. 910/17 Defence Colony, Gurgaon and hence was in compliance of all the procedural and enabling conditions for the grant of exemption u/s 54F of the Act, in particular requiring an assessee to not own more than one residential house as on the date of the transfer of the original asset. 7. The Assessing Officer has, for the reasons and on the basis of the arguments listed above, proceeded to negate the existence of the said Agreement to Sell and thereby denied the deduction by holding the same to be a colorable device to avoid tax. 8. A review of the sale deed dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as the judicial decisions referred above, it is held that the only reason the AO denied the exemption from long term capital gains u/s 54F was that the appellant on the date of transfer of the original asset had more than one residential house i.e. at Defense Colony Gurgaon and Malibu Town Gurgaon, although both were jointly owned with his wife Smt. Savita Bhasin. The reliance placed on the above judicial rulings brings out co-jointly owing a residential property cannot be treated as absolute ownership and thus, the deduction u/s 54F cannot be denied. Infact it has also been observed that the harshness of the proviso of section 54F cannot be applied unless and until there are materials to show that the assessee is the exclusive owner of the residential property. Similarly, the jurisdictional Delhi High Court has held that the assessee was a mere co-owner in one of the residential properties, the claim of deduction u/s 54F could not be rejected. The above Citation lead to the understanding that being a co-owner in one or more residential property does not disqualify and assessee from claiming the benefit of exemption u/s 54F of the Act. 4.2. The Ld. CIT(A) consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly distinguished by the AO in his, order. 8. The A.O. also made confirmations u/s 133(6) from the tenant M/s Best Advertising. It was confirmed by the tenant that the entire rent had been paid to the appellant and his wife Smt. Savita Bhasin, in advance. On being confronted by the AO, the appellant gave the argument that part of the rent was retained and the balance amount was returned. Further, that the remaining amount was reflected in the income tax return of his son (the new owner of the property). It was further verified by the AO whether the rent was returned to the tenant as claimed by the appellant. It was informed that neither was there any cancellation of the rent agreement nor any amount was returned to the tenant. Thus the appellant s claim has been demolished one after the other and it is amply demonstrated that the entire exercise of transfer of property to his son was a feeble attempt to show that the appellant was not holding two properties at the time of transfer of original asset, which would have disqualified him for seeking exemption u/s 54F. Thus it is clear that the apparent is not real and given the surrounding circumstances, one is compelled to remove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the I.T. Act, 1961, is not in dispute. He has submitted that assessee has entered into genuine transaction with his son and property in transfer is supported by execution of valid Agreement which is supported by the ultimate Sale Deed executed which is registered vide Transfer Deed Dated 27.06.2018, copy of which is filed and placed on record. He has, therefore, submitted that property in reference shall be deemed to have been transferred on the date of Agreement Dated 01.11.2013, reference of which is also made in the registered Transfer Deed. He has submitted that assessee declared capital gain on account of the transfer of the property in reference and tax paid on the same as long term capital gains which have been accepted by the A.O. Wife of the assessee also sold her share in the property in reference which have been accepted by the Department under section 143(1) of the I.T. Act, 1961 and till date no action under section 147/148 have been taken. He has submitted that in the similar circumstances when claim of wife of assessee have been accepted, no different view should be taken by the Revenue Department. He has submitted that assessee was joint owner of the property with 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 lakhs in eligible bonds so as to claim exemption under section 54EC of the I.T. Act. It is also not in dispute that the impugned amount was deposited in the Capital Gains Accounts Scheme for claiming deduction under section 54F of the I.T. Act and subsequently assessee made investment in residential property for claiming deduction under section 54F of the I.T. Act. The only dispute in appeal is Whether the transfer of property by assessee to his son vide Agreement to Sell Dated 01.11.2013 in respect of property of 1/601, Malibu Town, Gurgaon is valid transfer or not ? And Whether Joint ownership of property is also considered as residential house in the context of proviso to Section 54F of the I.T. Act, 1961. ? Section 54F of the I.T. Act, 1961 reads as under : Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house. 54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head Capital gains relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head Capital gains relating to long-term capital assets of the previous year in which such new asset is transferred. (4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning as in clause (d) of section 269 UA.] [Explanation 2.-For the removal of doubts, it is hereby clarified that transfer includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, direct)} or indirectly, absolutely or conditionally, voluntarily or involuntarily by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India;] . 8.2. Section 269UA of the I.T. Act, 1961, which are referred to agreement for transfer would mean An agreement whether registered under the Registration Act or not, for the transfer of any immovable property . Section 47 of the Registration Act, 1908 provides as under : Time from which registered document operates. A registered document shall operate from the time which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions of Section 2(47)(vi) read with Section 269UA of the I.T. Act, 1961 are satisfied in the present case. The assessee, thus, complied with the conditions of Section 54F of the I.T. Act that he does not own more than one residential property at the time of claiming exemption under section 54F of the I.T. Act. The ITAT, Mumbai Bench in the case of Ashwin C. Jariwala vs., ITO (supra) held as under : Admittedly, the conveyance deed was executed on 31-3-2008 and the same was registered under the Registration Act on 1-7-2008. On a perusal of the conveyance deed, it is noticed that the possession of the property was also given to the buyers on 31-3-2008 and the assessee along with other co-owners have received the entire consideration before 31-3-2008. Hence, the contentions of the assessee that the impugned property has been transferred during the year relevant to the assessment year 2008-09 is correct and hence the Assessing Officer was not justified in assessing the same in assessment year 2009-10. The revenue submitted that the registration of deed on 1/7/2008 was only a formality and upon the registration of the deed, the conveyance would date back to the date of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e definition being an inclusive definition it had to be given an expensive meaning. [Para 16]. In the present case, there is no applicability of section 2(47)(v). Sub-section (v) applies to the transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of the contract. The possession having not been transferred by the agreement dated 7-9-1991, there is no applicability of section 2(47)(v). The assessees were full owner of the property. By agreement dated 7-9-1991, the assessees transferred their right of owner-ship in favour of purchasers. The Tribunal has noted that no further transaction after agreement dated 7/9/1991 took between the assessees and purchasers and that was the only transaction, on the basis of which purchasers sold two shops in the year 1995 and obtained possession in the year, 1998 and carried out all developments. The agreement dated 7-9-1991 was thus, clearly covered by the definition under section 2(47)(vi). [Para 21] Further, there is no illegality in the Tribunal's proceeding to examine the case in the light of section 2(47)(vi). All the facts being on record whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our finding to be recorded on issue No.(iii) in subsequent part of this order, we are of the view that on execution of agreement dated 2.3.2009, when the possession was also handed over, the transfer within the meaning of section 2(47)(v) and (vi) was complete. The parties to the agreement are not challenging the genuineness of the agreements. (iv) Judgment of Hon ble Delhi High Court in the case of CIT-XVI vs. Ram Gopal (2015) 372 ITR 498 (Del.). in which it was held as under : This Court, in the decision as Gulshan Malik v. CIT [2014] 223 Taxman 243/43 taxmann.com 200 (Delhi) had the occasion to, consider what amounted to acquisition of a capital asset - though in the context of a claim that capital gains had accrued due to the sale of the property. The Court was of the opinion that 'capital asset' has been defined in extremely wide terms. A reference to section 2(47), which defines 'transfer', and particularly its second Explanation to clauses (v) and (vi) made it clear that possession, enjoyment of property as well any interest in any of transferable capital asset was included within the ambit of 'capital asset'. The Court held importantly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. [Explanation 1].-For the purposes of sub-clauses (v) and (vi) immovable property shall have the same meaning as in clause (d) c section 269UA.] [Explanation 2.-For the removal of doubts, it is hereby clarified that transfer includes and shall be deemed to have always include disposing of or parting with an asset or any interest therein, creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovable property in favour of the purchaser. The assessee had entered into an Agreement to Sell and handed-over possession of the impugned property to the purchaser would amount to disposed-of or parted with the asset with all interest therein in favour of the purchaser. According to definition of Section 269UA it is not necessary that Agreement to Sell should be registered. Therefore, provisions of Section 2(47)(vi) of the I.T. Act are satisfied in the case of the assessee. It is well settled law that entries in the books of account are not determinative criteria to deny the relief to the assessee if the assessee entitled to relief as per law. The Hon ble Supreme Court in the case of Sutlej Cotton Mills Ltd., vs. CIT , West Bengal (1979) 116 ITR 1 (SC) has held as under : It is now well settled that the way in which entries are made by an assessee in his books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. The assessee may, by making entries which are not in conformity with the proper principles of accountancy, conceal profit or show loss and the entries made by him cannot, therefore, be regarded as conclusive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the Assessee squarely apply to the facts and circumstances of the case, particularly decision of Hon ble jurisdictional High Court in the case of Shri Chandra Prakash Jain vs. ACIT (supra) to prove that the transfer of impugned property was completed on 30.01.2009 on the day of execution of Agreement to Sell and handing-over possession to the purchaser. Therefore, the transfer in relation to capital asset have completed on 30.01.2009 which pertain to preceding A.Y. 2009-2010, therefore, no capital gain could be assessed in assessment year under appeal i.e., 2010-2011. Considering the totality of the facts and circumstances of the case noted above, we set aside the Orders of the authorities below and delete the entire addition. Ground No.1 of appeal of Assessee is accordingly allowed. 8.6. The Hon ble Karnataka High Court in the case of CIT vs., A. Suresh Rao (supra) held as under : A number of judgments show that even in the absence of a registered deed of transfer, if the transaction in question demonstrates the intention of the parties that after paying the entire consideration agreed upon, the purchaser enjoys the property, the fact that the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l gains tax on sale consideration of impugned property which have been accepted by the A.O. Similarly, the part of the share of wife of the assessee was also transferred and according to Learned Counsel for the Assessee in the case of wife of assessee the return have been accepted on identical facts under section 143(1) of the I.T. Act, 1961 and no reassessment proceedings have been initiated till date. The A.O, therefore, bound to follow the rule of consistency in the matter as well. In view of the above facts it is clear that assessee transferred the capital asset to his son with all rights, title, interest and enjoyment in the impugned immovable property through Agreement to Sell and Registered Transfer Deed, subject to consideration, therefore, assessee would not be having more than one residential house at the time of claiming exemption from capital gains and as such, A.O. was not justified in rejecting the claim of exemption under section 54F of the I.T. Act. 8.8. Learned Counsel for the Assessee further contended alternatively that even if it is assumed that assessee continued to be owner of the property at Malibu Town, Gurgaon, assessee was joint owner of the property wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the considered view that as the assessee on the date of making of an investment in a residential house with Oberoi Construction Pvt. Ltd., viz. Oberoi Splendour, Building No.l, C Wing, Mumbai, was vested with only a fractional ownership in the aforementioned properties, i.e. 25% in Tara Manzil and 20% in Noor Manzil, therefore, it can safely be concluded that the assessee was not the owner of more than one residential house on the aforesaid relevant date. We may herein observe that the term owns more than one residential house used in the proviso of Sec. 54F(1) has to be strictly construed and accorded its literal meaning, which thus would not bring within its sweep a partial and fractional ownership of a property. We are of the considered view that if the legislature in all its wisdom would had sought to even bring a partial or fractional ownership of a residential house also within the gamut of the disqualification contemplated under the aforesaid statutory provision, viz. Sec. 54F(1), then, it would had specifically provided for the same. However, as the partial or fractional ownership of a residential house does not find a place in the set of circumstances where an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part ownership. Since the legislature has not amended the provisions of s. 54F, it has to be held that the word own in s. 54F would include only the case where a residential house is fully and wholly owned by assessee and consequently would not include a residential house owned by more than one person. In the present case, admittedly the house at Sion, Mumbai, was purchased jointly by assessee and his wife. It is nobody s case that wife is benami of assessee. Therefore, the said house was jointly owned by assessee and his spouse. In view of the discussions made above, it has to be held that assessee was not the owner of a residential house on the date of transfer of original asset. Consequently, the exemption under s. 54F could not be denied to assessee. The order of the learned CIT(A) is, therefore, upheld. 8. We have given a thoughtful consideration to the facts of the case and are of the considered view that the case of the assessee before us does not fall within the sweep of the disqualification contemplated in the proviso of Sec. 54F(1) for two reasons, viz. (i) the properties, i.e. Tara Manzil and Noor Manzil were not residential properties but commercial pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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