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TMI Blog2016 (8) TMI 1545X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner of Income Tax (Appeal) and the Income Tax Appellate Tribunal have rightly come to the conclusion that Section 27(i) of the Act is not applicable to the facts of the present case - we are not inclined to entertain the instant appeal and the substantial questions of law raised in this Tax Appeal, is answered against the Revenue. - Tax Case Appeal No. 497 of 2016 - - - Dated:- 30-8-2016 - Honourable Mr. Justice S. Manikumar And The Honourable Mr. Justice D. Krishnakumar For the Appellant : Mrs. Hema Murali Krishnan Junior Standing Counsel for I.T COMMON JUDGMENT (Judgment of the Court was made by D. KRISHNAKUMAR, J) This Appeal has been filed by the Revenue against the order of Madras 'B' Bench, Chennai dated 06.11.2015 in I.T.A. No.1453/Mds/2015 on the file of the Income Tax Appellate Tribunal. 2. The facts of the case are as follows :- The respondent herein/ Assessee, filed Return of Income for the assessment year 2012-2013 on 20.07.2012, admitting a total income of ₹ 78,57,110/-. The return was processed under Section 143(1) and the case was selected for scrutiny through CASS and notice under Section 143(2) dated 06.08.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deeming fiction cannot operate unless the same is built in Section 54F. 4. The assessing Officer should have found that the provisions of Section 27(i) are restricted for the limited purpose of assessing the income from the house property under Sections 22 to 26 of the Act and not for the purpose of other provisions of the Act and consequently, should be interpreted only in terms of ownership as envisaged under general law applicable to real property as held by the Supreme Court in the cases of Commissioner of Income Tax vs. Poder Cement Private Limited Others [226 ITR 625] and Mysore Minerals Limited vs. Commissioner of Income Tax [239 ITR 775]. 5. Without prejudice to the above contention, in any case, the Assessing Officer should have found that if the logic adopted with reference to Vijayaraghavachari Road property is applied to the vacant land (at Sholinganallur), the sale of which has given rise to capital gain in the present case and which again was settled on the appellant by his wife Mrs. Shanthi Thomas and falls within the scope of Section 64 (1)(iv) of the Act, the capital gain arising on the sale of the said property cannot be brought to tax in the han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee's wife Mrs. Shanthi Thomas, by execution of a settlement deed during the year 2003. Case of the Revenue is that the assessee is not entitled for exemption under proviso (b) of Section 54F (1) of the Income Tax Act, as it states that the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head Income from house property . The Tribunal has considered the provisions under Section 54F of the Act, by observing that the Assessing Officer had passed the impugned Assessment order, without taking into consideration the provisions under Section 27(i) of the Act, which is a deeming provision applicable for Sections 22 to 26 of the Act. Section 54F of the Act is a provision granting deduction to the assessee and so the other provisions of the Act, which are relied on by the Assessing Officer, cannot be construed that Section 27 (i) can also be read with Section 54F for the purpose of the ownership of the property. According to the Tribunal, it has to be construed that the assessee is not the owner of the residential house situated at No.24, Vijayaraghavachari Road, T.Nagar, Chen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to Section 54F of the Income Tax Act, which is extracted below :- 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 subsection (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 asset), and the assessee has, within a period of one year before or [two years] after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,- (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal asset. The assessee is otherwise eligible for grant of exemption, if he satisfies the condition specified as per the amendment to the proviso, with effect from 1st April 2001, to permit exemption under Section 54F, where the assessee has one residential house or constructed a house, after transfer. So, the language of the said provision under Section 54F, which is unambiguous and clear and if the assessee satisfies the conditions as per the provisions of the said Act, then the assessee is eligible for grant of exemption under Section 54F in Chapter IV of the Income Tax. Further, grant on transfer of certain capital assets not to be charged in case of investment on residential houses. 10. The contention of the learned Counsel representing the Revenue that the meaning of the owner has been defined under Section 27(i) of the Act, for the purpose of deemed to be the owner of the property, has to be interpreted. In support of the said contention, the learned counsel relies on the decision of the Hon'ble Supreme Court in the case of Mysore Minerals Limited vs. Commissioner of Income Tax [239 ITR 775], wherein the meaning of owner has been observed as follows : The Poda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property in his own right. So, in the afore cited decisions, the Hon'ble Supreme Court have considered the provisions under Section 22 and 27 of the Income Tax Act 1961, for the purpose of determining annual value of the property . Therefore, the decisions of the Hon'ble Supreme Court, cited supra by the Revenue, do not apply to the facts of this case. Whereas, in this case, as categorically held by the Commissioner of Income Tax (Appeal) and the Tribunal that Section 27(1) of the Act is a deeming provision applicable only for Sections 22 to 26, in computing the annual value of the property and as such deeming provision cannot be extended to deny the exemption under Section 54F of the Act. 12. Therefore, we are of the considered view that Section 54F of the Act, for granting exemption applies for the purpose of capital gain of transfer of certain capital assets not to be charged in the case of investment in residential house. To this context, Section 54F would apply as an independent provision, to the instant case. Therefore, the Commissioner of Income Tax (Appeal) and the Income Tax Appellate Tribunal have rightly come to the conclusion that Section 27(i) of the Act is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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