TMI Blog2007 (3) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 1995-96 4. We shall first take I.T.A. No 1180/PN/02 filed by the assessee arising from the Commissioner of Income-tax (Appeals) s order passed in the matter of an assessment made under section 143(3) of the Act by the Assessing Officer. The solitary issue raised by the assessee in this appeal is as under : "1. The learned Commissioner of Income-tax (Appeals) has erred in not appreciating the facts and submissions placed before him in relation to the claim of exemption under section 54F of the Income-tax Act, 1961." 5. The relevant facts giving rise to the issue in dispute may be summarized as under : 6. The assessee filed his return of income on 21-8-1995, declaring total income at Rs. 50,261. During the relevant year, the assessee had sold a plot in Bibvewadi. The capital gains arising from the sale of the plot at Bibvewadi was claimed as exempted for the reason that the entire consideration amount received on sale of a plot was deposited in Capital Gains Account Scheme in Syndicate Bank. The return of income filed by the assessee was initially processed under section 143(1) as per the return filed by the assessee. 7. It is further stated by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ership. 7. As stated by the estate manager, in his certificate dated 7-10-1998, available on record, the flat in Agarkarnagar was allotted to the assessee in 1971 on hire purchase basis. The assessee has paid the hire purchase instalment and the said hire purchase period is over in 1990. A Co-op. Housing Society of the members of the said building No. 14, has already been formed and registered with the Registrar of Co-op. Societies. 8. It is stated by the estate manager, MHADA that they have provided some services, viz., water, electricity to the members and there is a dispute between the Society and MHADA over payment of the same. Only for this reason the transfer of Building to the Registered Society is held up. 9. In allotment letter of the flat copy available on record, MHADA has clarified in paragraph 4 that electricity is not available in the flat that time and when the same will be provided allottee has to pay the bill. 10. From the facts narrated above the following points are noted: (1)The flat was allotted to the assessee in 1971 on hire purchase basis. (2)The assessee paid all the instalments till 1990 and the hire purchase is complete. (3)The Co-op. Hous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by Maharashtra Housing and Area Development Authority (MHADA). In this context, the authorised representative has referred to a certificate dated 7-10-1998, issued by estate manager, MHADA, which as per the English translation furnished by the authorised representative states as under : Flat holder has not paid arrears and not complied with terms of the contract, transfer of property has not been taken place. After payment and compliance of the terms sale deed with society and land revenue agreement will be executed. At the same time till the transfer of property is taken place to the society ownership of the building , remains with MHADA. The authorised representative has also referred to section 66 of the MHADA Act, which provides that any tenant does not pay the rent, compensation or amount lawfully due from him in respect of the house for a period of more than two months, MHADA has power to evict him from the house. The authorised representative has also placed reliance on the notice of Pune Municipal Corporation issued in regard to demand for property tax, in which property at 15/14, Bund Road, Pune-411 001 is stated to be owned by the Estate Manager, Maharashtra Hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Towards provisional stamp duty on the hire purchase agreement. ( e ) Rs. 864.00 To be executed by you in respect of the above tenement. Total Rs. 8886.50 Rupees Eight thousand eight hundred eighty six and paise fifty only. It is not in dispute that the payment stipulated in the allotment letter dated 13-11-1969, have already been made by the appellant. Besides, it is to be presumed that on fulfilment of the conditions set out in the allotment letter only the appellant was allowed possession of the flat since 1971 and thereafter no proceedings either for eviction or any other purpose as stipulated under section 66 of the Maharashtra Housing and Area Development Act, 1976 have been taken against the appellant. Accordingly, 1 do not find any merit in the submissions of the appellant/the authorised representative that the appellant was not the owner but a tenant as stated in the certificate dated 7-10-1998, of the Estate Manager, MHADA, since he had not paid certain arrears. In fact, the certificate dated 7-10-1998, issued by the Estate Manager, MHADA, is totally silent about the allotment letter dated 13-11-1969 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated 13-11-1969, and merely because agreement has not been registered, it cannot be said that the appellant was not the owner of flat No. 112 of building No. 14 at Agarkarnagar, Pune-411 001 as on 15-9-1964. Accordingly, 1 agree with the Assessing Officer that the case of the appellant fell within the proviso to section 54F since on the date of transfer of the plot at Bibvewadi he owned a residential house being flat No. 112, building No. 14, Maharashtra Housing Colony, Agarkarnagar, Pune-411 001 as per allotment letter dated 13-11-1969. Further, the fact that the entire sale consideration was deposited in capital gains account with Syndicate Bank with intention to purchase a residential house within the period stipulated under section 54, which ultimately did not happen and the appellant on his own offered capital gain in the assessment year 1998-99 on expiry of the period of three years can be of no avail, in view of the specific provisions of the proviso to section 54F. Therefore, the action of the Assessing Officer in taxing the capital gain of Rs. 9,12,400 on sale of plot of land during the assessment year 1995-96 is confirmed and appeal fails in the assessment year 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property. The scope of this section could not he extended to other sections of the Act. 7. In view of the foregoing discussion, we respectfully submit that the appellant was tenant in residential property possessed by him. As such exemption under section 54F was rightly claimed by the appellant. 8. Moreover when the appellant could not invest the sale proceeds of the plot of land in acquiring residential property within stipulated period as per section 54F of the Act, the appellant offered the long- term capital gain for tax and paid taxes accordingly in the assessment year 1998-99. 9. The appellant had intention to buy the residential house in case this particular property which is still in dispute could not be transferred in his name. However within stipulated time he could not buy the property, he offered long-term capital gains for tax. In view of the above the appellant prays that the exemption under section 54F be allowed to him. Thanking you, Yours faithfully, (Sd.)........ Rajeev Kulkarni Chartered Accountant. Encl. : 1 Xerox copy of the certificate from Estate Manager 2. Xerox copy of the extract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al representative, on the other hand, supported the orders of the authorities below. He further submitted that since the flat in question was being occupied by the assessee in his own right having been allotted by the Housing Authority to him on hire purchase system and all the payment thereof was also fully paid by the assessee, the assessee should be deemed to be the owner of that flat. Whatever reason has been given by the Assessing Officer and by the Commissioner of Income-tax (Appeals) for rejecting the assessee s claim of deduction under section 54F has been reiterated by the learned Departmental representative in the course of hearing of this appeal. Since the Assessing Officer s contention as well as the Commissioner of Income-tax (Appeals) s contention has already been set out hereinabove, we do not deem it necessary to reproduce the same here again. 15. We have considered the rival contentions of both the parties. The orders of the authorities below have been gone through. Relevant provisions as well as decisions cited at the bar has been deliberated upon. 16. In so far as the fact that during the year under consideration the assessee has sold a plot situated at B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, within the period of one year after such date, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head Income from house property , other than the new asset. Explanation. ......" 17. As clarified in the said proviso to section 54F(1), the benefit of section 54F(1) shall not be granted, where the assessee owns, on the date of transfer of the original asset, ( i.e., here a plot of land sold by the assessee) or purchases, within the period of one year after such date, or constructs, within a period of three years after such date, any residential house, the income from which is chargeable under the head "Income from house property", other than the new asset. 18. The Department s case is that the benefit of section 54F is not available to the assessee, inasmuch as the assessee owns a house being a flat allotted by the housing society to him on the date of the transfer of the plot of land. This house or flat owned by the assessee is other than the new asset that was to be constructed or purchased by the assessee within a specified period. On the other hand, the assessee s case is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iv )[....] ( v )[....] ( vi )taxes levied by a local authority in respect of any property shall be deemed to include service taxes levied by the local authority in respect of the property". 22. Clauses ( iii ), ( iiia ) and ( iiib ) to section 27 has been inserted by the Finance Act, 1987 with effect from April 1-4-1988. 23. The word and phrase "owner" in the context of section 22 of the Income-tax Act had come for consideration before the hon ble Supreme Court in the case of CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625. In this case, it was held that the amendment made to section 27 of the Act by the Finance Act, 1987 was intended to supply an obvious omission or to clear up doubts as to the meaning of the word "owner" in section 22 of the Act. The hon ble Supreme Court, therefore, held that the amendment introduced by the Finance Act, 1987, was declaratory or clarificatory in nature so far as it related to section 27( iii ), ( iiia ) and ( iiib ) and, consequently these provisions are retrospective in nature. In this case, it was further held that though under the common law, "owner" means a person who has got valid title legally conveyed to him after comply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of "owner" had come for consideration before the hon ble SuprerKe Court in the case of Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775. In this case, the hon ble Supreme Court held thus as under: " Extracted from the headnote : Section 32 of the Income-tax Act, 1961, confers a benefit on the assessee. The provision should be so interpreted and the words used therein should be assigned such meaning as would enable the assessee to secure the benefit intended to be given by the Legislature to the assessee. It is also well-settled that where there are two possible interpretations of a taxing provision the one which is favourable to the assessee should be preferred. Section 32 of the Act allows certain deductions, one of them being depreciation of buildings, etc., owned by the assessee and used for the purposes of the business or profession. The terms own , ownership and owned are generic and relative terms. They have a wide and also a narrow connotation. The meaning would depend on the context in which the terms are used. CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625 (SC), is a case under the Income-tax Act and has to be taken as a trend-setter in the concept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther observed by the court that the decision of the hon ble Supreme Court in the case of Podar Cement (P.) Ltd. ( supra ) is a case under the Income-tax Act and has to be taken as a trend-setter in the concept of ownership. It was further observed herein that assistance from the law laid down in Podar Cement (P.) Ltd. s case ( supra ) can be taken for finding out the meaning of the term "owned" as occurring in section 32(1). Guided by the law laid down by the hon ble Supreme Court in the case of Podar Cement (P.) Ltd. (supra) the hon ble Supreme Court in the case of Mysore Minerals Ltd. ( supra ) assigned the term "owned" occurring in section 32(1) of the Act a wider meaning. The hon ble Supreme Court further observed that the term "owned" occurring in section 32(1) of the Act must be assigned a wider meaning, and anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the building though a formal deed of title may not have been executed and registered as contemplated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r constructed is not less than the consideration in respect of the capital asset transferred, the entire capital gain arising from the transfer will be exempt from tax. ( ii )If the cost of the newly acquired house is less than the net consideration in respect of the capital asset transferred, the exemption from long-term capital gain will be granted proportionately on the basis of investment of net consideration either for purchase or construction of the residential house. This concession will not be available in a case where the assessee owns on the date of the transfer of the original asset any residential house, or purchases within the period of one year after such date, or constructs, within the period of three years after such date, any other residential house. Where the assessee purchases or constructs any other residential house within the period aforesaid, the exemption under the proposed provision, if allowed, shall stand forfeited and the amount of capital gain arising from the transfer of the original asset, which was not charged to tax, shall be allowed to be the income chargeable under the head capital gains relating to long-term capital assets of the previous y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the owner of a residential house for the purpose of section 54F of the Act. 30. In order to avail of the benefit of section 54F, one of the essential conditions is that the assessee should purchase within the specified period, or constructs within the specified period, a residential house. The various situations under which the assessee can be said to have purchased within specified time, or constructs within the specified time, a residential house so as to make him entitled to avail of the benefit of deduction under section 54 or 54F of the Act, have come for consideration in some cases before the courts. In this connection, a reference may be made to the decision of the hon ble jurisdictional High Court in the case of CIT v. Smt. Beena K. Jain [1996] 217 ITR 363, 364-365 (Bom.), where the view of the Tribunal that the relevant date in this connection is the date when the assessee paid the full consideration amount on the flat becoming ready for occupation and obtained possession of the flat, was upheld by the hon ble High Court by observing as under : "Under section 54F of the Income-tax Act, in the case of an assessee if any capital gain arises from the transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e s claim for deduction under section 54F by holding that condition of constructing a house has been satisfied on payment of the first instalment for the purchase of a flat to the Delhi Development Authority. 32. A useful reference may also be made to the decision of the hon ble jurisdictional High Court in the case of CIT v. Mrs. Hilla J. B. Wadia [1995] 216 ITR 376 (Bom.), where the hon ble High Court held as under : "Extracted from the headnote : Section 54 of the Income-tax Act, 1961, has to be construed in the context of the manner in which residential properties are now being constructed in a city like Bombay where, looking to the cost of the land, co-operative housing societies are being formed for constructing a building in which flats are allotted to members. This must also be viewed as a method of constructing residential tenements. What we have to see is whether the assessee has acquired a right to a specific flat in such a building which is being constructed by the society and whether he has made a substantial investment within the prescribed period which will entitle him to obtain possession of the flat so constructed and in which he intends to reside. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in respect of capital gain under section 54F of the Act, though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. It is, thus, clear that for the purpose of granting the benefit of deduction under section 54F of the Act on account of purchase or construction of any residential house within the specified period, the requirement of the Transfer of Property Act, the Registration Act etc. has not been held to be compulsory. Applying the rules of harmonious construction of a statute, a similar analogy should be held to be applicable for interpreting the word "own" of any residential house, used in the other part of the same section. To put it differently, the ratio laid down by the courts and the position explained by the Board in its circular in defining or interpreting the meaning of "purchase or construction of any residential house by any assessee" for the purpose of benefit granted under section 54F of the Act, shall equally apply while interpreting the words own any residential house" used in the other part of the same section having the same intent and object thereof. Therefore, we hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng given to the words "owner of house property" for the purpose of charging income of which under the head "Income from house property" by the Hon ble Supreme Court in the case of Podar Cement (P.) Ltd. ( supra ) is to be imported for the purpose of defining the words "own of any residential house" occurring in section 54F of the Act. Therefore, for the purpose of section 54F of the Act, the meaning of "own" or "owner" is to be understood in the same sense in which it is understood for the purpose of sections 22 to 26 of the Act. 36. Therefore, applying the principle laid down by the Hon ble Supreme Court in the case of Podar Cement (P.) Ltd. ( supra ) as well as in the case of Mysore Minerals Ltd. ( supra ), and following the ratio of the hon ble Supreme Court in the case of Mysore Minerals Ltd. ( supra ) holding that the decision of the hon ble Supreme Court in the case of Podar Cement (P.) Ltd. ( supra ) should be taken as a trend-setter in the concept of ownership, and in order to find out the meaning of the word "own" or "owned" or "owner" in the Income-tax Act, assistance from the law laid down by the hon ble Supreme Court in the case of Podar Cement (P.) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required under the Transfer of Property Act, the Registration Act, etc. was not made by the MHADA in favour of the Society. 7.No proceedings under section 66 of the Maharashtra Housing and Area Development Act, 1976 wherever initiated against the assessee to evict him from the said residential flat nor any final order under section 66 evicting the assessee from the flat was ever passed against the assessee. 38. Having regard to the facts narrated above, it is thus clear that the assessee was in possession of the residential flat in his own title exercising dominion over the property by excluding others therefrom and has the right to use and occupy the property and/or to enjoy its usufruct in his own right, notwithstanding the fact a formal deed of title might not have been executed and registered by the MHADA in favour of the co-operative society formed by the members. 39. Before parting with this issue, it is also necessary to deal with the assessee s contention that in view of section 66 of the Maharashtra Housing and Area Development Act, 1976, he has acquired no right or title over the flat allotted to him but he is merely a tenant thereof. In this respect, learned co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sub-section (1) is made against any per son, the Competent Authority shall issue, in the manner hereinafter provided a notice in writing calling upon all persons concerned to show cause within ten days why an order of eviction should not be made. The notice shall ( a )specify the grounds on which the order of eviction is proposed to be made ; and ( b )require all persons concerned, that is to say, all persons who are or may be in occupation of or claim interest in the Authority premises, to show cause against the proposed order, on or before such date is specified in the notice. If such persons makes an application to the Competent Authority for the extension of the period specified in the notice such Authority may grant the same on deposit of one hundred rupees and on such terms as to payment and recovery of the amount claimed in the notice, as such Authority thinks fit. Any written statement put in by any person and documents produced in pursuance of the notice, shall be filed with the record of the case, and such person shall be entitled to appear before the Competent Authority by advocate, attorney or other legal practitioner. The notice to be served under this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be liable to be evicted under the provisions of this section. Explanation I. For the purpose of this Chapter, the expression unauthorised occupation in relation to any person authorised to occupy any Authority premises includes the continuance of occupation by him or by any person claiming through or under him of the premises after the authority under which he was allowed to occupy the premises has expired or has been duly determined. Explanation II. For the purpose of this Chapter, the term rent, compensation or amount includes any payment to be made by a person in respect of any premises taken by him from the Authority under hire purchase agreement and also any penalty imposed such rate as may be prescribed for the default in the payment of rent, compensation or amount. The amount of such penalty shall not exceed 10 per cent. of such rent, compensation or amount. (7) Notwithstanding anything contained in this Chapter including this section, if any person fails to vacate the premises required by the Board for the purpose of demolition of building containing such premises which are unfit for human habitation then, the Board may require the occupants thereof to vaca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and thereupon, such person shall continue to hold the premises on the same terms on which he held them immediately before such notice was served on him. Therefore, on reading section 66 as a whole, it is clear that merely because the occupier has not paid any rents or compensation or any amount lawfully due from him within a specified time, it by itself would not make the occupier disentitled for ever to occupy the house in his own right unless the proceedings contemplated under section 66 are finally concluded or determined against the occupier. In the present case, no such action as contemplated under section 66 of the Maharashtra Housing and Area Development Act was ever taken against the present assessee. On the relevant date, i.e., 31-3-1995, the assessee was not ordered to be evicted from, the premises by the competent authority by way of passing any valid order under section 66 of the Maharashtra Housing and Area Development Act. In the course of hearing of this appeal, a query was raised to learned counsel for the assessee as to whether any action under section 66 had been taken against the assessee. In reply thereto, learned counsel for the assessee has stated that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to be evaded on the addition made by the Assessing Officer by way of disallowing the assessee s claim of deduction under section 54F of the Act. The ground raised in the Revenue s appeal as well as in the cross-objection filed by the assessee are with regard to the question as to whether penalty under section 271(1)( c ) is imposable on the assessee in respect of the addition made by the Assessing Officer by way of disallowing the assessee s claim of deduction under section 54F of the Act and, if it is found to be imposable, whether it is to be imposed at the rate of 100 per cent. or 200 per cent. of the tax sought to be evaded. 45. In the assessment made under section 147 read with section 143(3), the A assessee s claim of deduction under section 54F was disallowed by the Assessing Officer on the ground that the assessee owned a residential house on the date of the transfer of a plot at Bibvewadi, and as such, the assessee s case was covered by the proviso to section 54F of the Act. Because of the disallowance of the assessee s claim of deduction under section 54F, the Assessing Officer initiated penalty proceedings under section 271(1)( c ) for filing inaccurate particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of claiming wrongly the exemption under section 54F and thereby concealed the income. The fact of furnishing inaccurate particulars of income has come to the notice of the Department during reassessment proceedings only. I am therefore of the opinion that the assessee is liable for penalty under section 271(1)( c ) of the Income-tax Act, 1961. I, therefore impose a penalty at 200 per cent. of tax on concealed income which comes to Rs. 3,65,000." 48. On appeal, the Commissioner of Income-tax (Appeals) confirmed the Assessing Officer s order in imposing the penalty in principle by observing as under : "4. I have considered the submissions of the appellant and have also gone through the facts brought out in the assessment order as well as penalty order. At the outset, it may be mentioned that the denial of deduction under section 54F claimed by the appellant had been sustained in appeal by the Commissioner of Income-tax (Appeals), after considering the appellant s submissions and going through various evidences gathered in this respect. As is evident from the assessment order, the flat in question had been allowed to the appellant by MHADA under hire purchase scheme in 1971 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the penalty under section 271(1)( c ), as the explanation given by the appellant was neither bona fide, nor satisfactory. However, looking to the facts of the case, the penalty imposed at 200 per cent. appears to be not justified and is directed to be restricted to the minimum leviable at 100 per cent. of the tax sought to be evaded. The appellant will get a relief of Rs. 1,82,500. The Assessing Officer shall accordingly modify the penalty order." 49. However, the Commissioner of Income-tax (Appeals) has reduced the quantum of penalty from 200 per cent to 100 per cent of the tax sought to be evaded. Hence, the assessee is in further appeal before us. 50. We have considered the rival contentions of both the parties and have gone through the orders of the authorities below. 51. On reading the provisions contained in section 271(1)( c ) read with Explanation 1 thereto, it is clear that in case the assessee has been able to prove and establish that all the facts material to the computation of the assessee s income were fully and truly furnished before the Assessing Officer, and the explanation offered by, the assessee is not found to be false, but is a bona fide one, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of section 54F of the Act. But that by itself would not lead to a conclusion that the assessee s claim of deduction under section 54F was a false one. All the relevant particulars relating to the assessee s claim of deduction under section 54F has not been withheld by the assessee, but rather have been fully placed before the authorities below in the course of proceedings before them. It is also pertinent to note that in order to claim a deduction under section 54F of the Act, the assessee has even deposited the sale consideration into Capital Gains Account Scheme with the specified bank, which goes to show that the assessee had no intention to make a false claim. It is not a case where a false claim as distinct from a wrong claim, under section 54F of the Act, was made by the assessee. The claim made by the assessee under section 54F of the Act can at best be considered to be not maintainable and allowable in the light of the interpretation given by the courts to the words "owner", "owned" or "own" used in the Income-tax Act. Therefore, it is not a case of false claim, but a case where a claim is not found to be maintainable in the eye of law after making exhaustive ..... X X X X Extracts X X X X X X X X Extracts X X X X
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