Amount invested in excess of share in property than section 54 deduction shall be available
Fact and Issue of the case
Adverting to the facts of the case during the relevant year the assessee had sold a residential property for a consideration of Rs.4,35,00,000/-on which Long Term Capital Gains (LTCG) was calculated at Rs 4,34,59,000/-. The assessee had invested the whole sale consideration in the purchase of another residential property jointly with her daughter and her son in law which was purchased for a consideration of Rs.5,35,50,000/-. The shares of three co-owners namely the assessee, her son in law and her daughter in the purchased property were 34%, 33% & 33% respectively. As the assessee’s share in said property was 34%, the AO held that the assessee would be entitled for claim of exemption to the extent of 34% of total LTCG invested by her. Accordingly, the AO restricted the benefit of exemption u/s 54 of the Act to Rs.1,47,76,073/- (34% of Rs.4,34,59,040/-) and added back the remaining amount of Rs.2,86,82,967/- to the returned income of assessee.
The Ld.CIT(A) allowed the assessee’s appeal holding as under:
The submissions and case laws relied upon by the assessee have been considered. During the relevant year assessee sold a residential property for a consideration of Rs. 4,35,00,0007- on which Long Term Capital Gains (LTCG) was calculated at Rs 4,34,59,0007-. The assessee invested the whole sale consideration of Rs. 4,35,00,000/- in purchase of another residential property jointly with her daughter and her son in law for a consideration of Rs. 5,35,50,000/-. The balance amount was contributed by her son in law. The proportionate share of assessee, her son in law & her daughter in the purchased property was 34%, 33%, 33% respectively.
The AO was of opinion that since the share of assessee in new property was 34%, therefore she would be entitled for claim of exemption u/s 54 of the Act to the extent of 34% (Rs. /,47,76,0737-) of total LTCG invested by her. During the appellate proceedings, the assessee submitted that she purchased the property conjointly with her daughter and her son in law to avoid any litigation subsequent to her death. In order to corroborate her contention that nothing contained in section 54 of the Act precludes assessee from investing Capital Gains in property conjointly, the assessee placed reliance on judicial pronouncements of various High Courts wherein the respective courts have invariably held that it is not mandatory that the investment should exclusively be-made by assessee in his own name to claim deduction u/s 54 of the Act. It is pertinent to mention that similar issue of claim of exemption u/s 54.B was before Hon’ble Punjab & Haryana High Court in case of Dinesh Verma Vs. CIT in ITA No. 381 of 2014. In the said case, the assessee sold his agricultural land for Rs.60 lakhs and subsequently purchased another agricultural land for Rs.6/.60 lakhs in which he invested a sum of Rs.44. 76 lakhs received on account of sale of his agricultural land. Remaining consideration of Rs. /6.84 lakhs was paid by his wife. The High Court in the said case dealt with two substantial questions of law, viz.
Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was right in law in upholding the order of Ld. CIT(A) in allowing and enhancing the exemption u/s 54.B to the extent of Rs. 60 lakhs where as the assessee ‘s own claim of his exemption was only to the extent of Rs.44. 76 lakhs as is evident from the return of income filed by him.
Whether the respondent-assesses was entitled to the benefit under Section 54.B of the Income Tax Act, /96/ in respect of the property purchased from the sale proceeds in the name of his wife?”
Observation of the court
The Court has considered the contentions made by both the parties before us. The tribunal has also gone through the order of the Ld.CIT(A). The only contention of the Revenue being that the decision of the Hon’ble Jurisdictional High Court in the case of Dinesh Verma (supra) has not been followed by the Ld.CIT(A),the tribunal found that the Ld.CIT(A) had taken note of the said decision. He had, the tribunal find, taken note of the decision and applied the same to the facts of the present case noting categorically that though the said decision pertained to claim of exemption u/s 54B of the Act, yet the ratio would be applicable in the instant case also. The Ld.CIT(A) , find, had thereafter proceeded to note the facts of the present case being that the assessee had invested the entire Long Term Capital Gains in the purchase of residential property within the stipulated time, while the AO had restricted the exemption to 34% of the Long Term Capital Gains without acknowledging the fact that the assessee had invested the entire Long Term Capital Gains in the purchase of residential property.
The tribunal have gone through the decision of the Hon’ble Jurisdictional High Court, reproduced in the impugned order, and find that it had allowed exemption of capital gains, to the extent of the sale consideration invested by the assessee in the new asset, denying the exemption to the extent invested by his wife, on noting the fact that the investments in the new property had been made both by the assessee and his wife. The Hon’ble High Court held that the assessee would be entitled to the benefit of exemption u/s 54B only on the amount invested by him after the sale of his original property. Drawing parity from the same, the Ld.CIT(A) , has in the present case, noted the fact that the assessee has invested her entire sale consideration in the new property and, therefore, is entitled to exemption of the entire amount of Long Term Capital Gains. The tribunal do not find any infirmity in the same. Moreover, the Ld. DR has neither been unable to controvert the facts of the present case as noted by the Ld.CIT(A) nor has pointed out how the decision of the Hon’ble Jurisdictional High Court was applicable against the assessee in the facts of the present case.
In view of the same, the tribunal do not find any reason to interfere in the order of the Ld.CIT(A). All the grounds of appeal raised by the Revenue are accordingly, dismissed.
The appeal of the Revenue is dismissed by the tribunal