24 March 2012
An individual (Mrs.X) has sold a residential house to a developer who has constructed 4 flats and given one flat to Mrs.X and amount of Rs.1 crore.The amount received from the developer by cheque has been deposited in her bank account which she holds jointly with her husband. The cost of construction of 1 flat is Rs 20 lakhs. Thus total consideration is Rs 1.2 crore. She has earned a capital gain of Rs.90 lakhs. Prior to 6 months of completion of the new property, she has purchased a flat for Rs. 55 lakhs. Rs 25 lakhs has been paid to the vendor out of the same joint bank account. The sale deed of new flat is in joint name with her husband. She has taken a bank loan for Rs. 30 lakhs which is also in joint name with her husband and this amount is paid to the vendor directly by the bank at the time of registration of the property. Please advise: 1. Can she take the benefit of purchase price of the new house (Rs 55 lakhs) under sec 54 as she is the real buyer though sale agreement/ sale deed are in joint name with her husband and her husband has really not contributed any money towards the purchase? 2. Will the cost of 1 flat (Rs. 20 lakhs) given by the developer be also regarded as purchase of another residential house and can she claim benefit of same as well under sec 54? i.e can she claim benefit of investment in 2 residential houses? In CIT v. Smt. K. G. Rukminiamma (2011) 331 ITR 211 (Kar.) it was stated that "The context in which the expression ‘a residential house’ is used in Section 54 makes it clear that, it was not the intention of the legislation to convey the meaning that: it refers to a single residential house, if, that was the intention, they would have used the word “one.” As in the earlier part, the words used are buildings or lands which are plural in number and that: is referred to as “a residential house”, the original asset An asset newly acquired after the sale of the original asset also can be buildings or lands appurtenant thereto, which also should be “a residential house.” Therefore the letter ‘a’ in the context it is used should not be construed as meaning “singular.” But, being an indefinite article, the said expression should be read in consonance with the other words “buildings’ and lands’ and, therefore, the singular ‘a residential house’ also permits use of plural by virtue of Section 13(2) of the General Clauses Act. I shall be obliged to get the opinion of learned experts.
25 March 2012
In Deputy Director of Income Tax (International Taxation) v. Jennifer Bhide (2011) 42 (I) ITCL 8 (Karn-HC), It was held that in the entire section 54, the purchase to be made or the construction to be put up by the assessee, should be there in the name of the assessee, is not expressly stated. Similarly even in respect of section 54EC, there also it is not expressly stated that the investment should be in the name of the assessee. Therefore, to attract section 54 and section 54EC of the Act, what is material is the investment of the sale consideration in acquiring the residential premises or constructing a residential premises or investing the amounts in bonds set out in section 54EC. Once the sale consideration is invested in any of these manner the asessee would be entitled to the benefit conferred under this provision. In the absence of an express provision contained in these sections that the investment should be in the name of the assessee only any such interpretation were to be placed, it amounts no court introducing the said word in the provision which is not there. It amounts Court legislating when the parliament has deliberately not used those words in the said section. The assessee had purchased the property jointly with her husband. She had invested the money in rural bonds jointly with her husband. It is nobody’s case that her husband contributed any portion of the consideration for acquisition of the property as well as bonds. The source for acquisition of the property and the bonds was the sale consideration. It is not in dispute. Once the sale consideration is utilized for the purpose mentioned under section 54 and 54EC, the assessee is entitled to the benefit of those provision. As the entire consideration had flown from the assessee and no consideration had flown from her husband, merely because either in the sale deed or in the bond her husband’s name is also mentioned, in law he would not have any right. In Commissioner of Income Tax v. Ravinder Kumar Arora (2011) 42 (I) ITCL 498 (Del-HC), It was held that the conditions stipulated in section 54F stood fulfilled. It would be treated as the property purchased by the assessee in his name and merely because he had included the name of his wife and the property purchased in the joint names would not make any difference. Such a conduct had to be, rather, encouraged which gives empowernment to women. There are various schemes floated by the government itself permitting joint ownership with wife. If the view of the AO or the contention of the revenue is accepted, it would be a derogatory step. Moreover, section 54F mandates that the house should be purchased by the assessee and it does not stipulate that the house should be purchased in the name of the assessee only. Here was a case where the house was purchased by the assessee and that too in his name and wife’s name was also included additionally. Such inclusion of the name of the wife for the above-stated peculiar factual reason should not stand in the way of the deduction legitimately accruing to the assessee. I HOPE THESE CASES WILL RESOLVE UR FIRST QUERY. REGARDING PURCAHSE OF MORE THAN ONE HOUSE AND AVAILABILITY OF EX UNDER SECTION 54 ONLY THE CASE OF RUKMINIAMMA IS IN UR FAVOUR ALL OTHER JUDGMENTS ARE AGAINT YOU CA MANOJ GUPTA JODHPUR 09828510543
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