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2015 (5) TMI 888 - ITAT MUMBAI

2015 (5) TMI 888 - ITAT MUMBAI - TMI - Exemption u/s.54F - investment in second residential house - previous residential property gifted to her husband - Held that:- We find no provision in law for the assessee to continue to be regarded as the owner or even a part owner of the property (the Sion residential flat) gifted by her to her husband on 03.10.2008. Even if the same is for the purpose of enabling availing benefit under section 54F, we cannot by any score treat as not valid in the eyes of .....

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of the assessee’s other family members, including spouse, or even of the transferee/s. The same clearly provides for consideration of the ownership of residential house/s only of the assessee, and on a particular date.

Thus no warrant in law and, accordingly, no merit in the Revenue’s case for disregarding the gift of a house property by the assessee to her spouse prior to the transfer date (of the original asset) for the purpose of reckoning eligibility to exemption u/s.54F of the Ac .....

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, 1961 ( the Act hereinafter) for the assessment year (A.Y.) 2009-10 vide order dated 14.11.2011. 2. The facts of the case are simple and largely undisputed, so that it is only a question of the application or otherwise of the relevant provision of law to the facts of the case. The assessee, a co-owner (along with her spouse, Shri Ashok Vishindas Ajwani) of a residential property, being Flat No. 1401, Mount Everest, CHS, Bhakti Park, Wadala (E), Mumbai, transferred her capital asset in the form .....

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her residential house, i.e., apart from the Wadala Flat, being Flat No. 14, Gope Niwas Bldg., Bombay Middle Class Co-operative Hsg. Society Ltd., Sion (E), Mumbai, was thus on the date of transfer of the residential asset, the shop at Nand-Dham, Sion on 06.10.2008, did not satisfy the condition of section 54F, which per proviso thereto excluded an assessee owning more than one residential house, i.e., other than new asset (the Andheri house), with reference to the investment in which exemption u .....

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evise to evade tax in-as-much as the assessee had gifted her property to her husband three days prior to the relevant date only with the view to eschew the provision of section 54F. The same would be to no avail as section 27(i) clearly provides that the transfer of a house property to, among others, spouse, for other than adequate consideration, would stand to be ignored, so that the assessee-transferor would deemed to be the owner of the residential house and, thus, continue to be considered a .....

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ion, the Authorized Representative (AR) relied on the decision in ITO vs. Rasiklal N. Satra [2006] 98 ITD 335 (Mum). The owner of a residential house (i.e., the new asset) in section 54F implies a complete residential house and not a shared, even if undivided, interest in the residential house. When a property is owned by more than one person, it cannot be said that any of them is the owner of the property. No single person can, of his own, sell the entire property. Joint ownership is different .....

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regarded as ownership for the purpose of section 54F, so that she is holding only one residential house, the Gope Niwas building flat at Sion, i.e., even if the gift thereof by the assessee to her husband is to be disregarded. Further, section 27(i) of the Act, deeming gift to specified persons as of no consequence in-as-much as the income from that asset would continue to be assessed in the assessee-donor s hands, is for the limited purpose of assessment of the income from house property, and w .....

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. (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 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 .....

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bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: Provided that nothing contained in this sub- section shall apply where- (a) the assessee,- (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the origi .....

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the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. (2) Where the assessee purchases, ….. (3) Where the new asset is transferred within a period of …… (4) The amount of the net consideration which is not appropriated…: Provided that if the amount deposited under this sub-section is not utilised…. 4.2 As would be .....

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ance. This is as even if the joint ownership of the Mount Everest flat is not regarded as owning one residential house, the same cannot, without doubt, be said to be, or considered as, owning nothing. But only as owning a property jointly, i.e., part ownership. What the law bars is owning more than one residential house, and which need not necessarily be a complete house, so that full (or absolute) ownership, as against joint, would only be an ownership of a part, though undivided, of a house. W .....

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e transferor continues to be the owner or the transferee is not consider as one. That to our mind would be a contradiction in terms, making the law internally inconsistent. The apex court, as far back as in R. B. Jodha Mal Kuthiala vs. CIT [1971] 82 ITR 570 (SC), clarified that the owner is a person who can exercise the rights of an owner, i.e., not on behalf of another, but in his own right. The same, though rendered in the context of section 22, in our view, would continue to be a guide post w .....

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nder section 54F, we cannot by any score treat as not valid in the eyes of law. The law does not oblige a person to pay maximum taxes or authorize disregarding a lawful transaction if the same has the effect of reducing his tax liability. The transfer is by no means sham or bogus, notwithstanding that the assessee would continue to reside with her family, including her husband, in the said house, i.e., both before and after its gift to her husband. That is, true, the assessee, along with her fam .....

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ange in its ownership from the assessee to her husband, Shri Ashok Vishindas Ajwani. Pinning on some altruistic notion, as we observe the Revenue to, cannot entitle it to the read the law except in terms of its clear and unambiguous language, so that only what stands specifically provided is to be excluded. There is no stipulation in law with regard to the ownership pattern, or its quantification, i.e., of the assessee s other family members, including spouse, or even of the transferee/s. The sa .....

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