No capital gain exemption denial if the sale deed is in joint name.
Here is one interesting case on the subject by Bngalore Tribunal as under:.
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH ‘A’
BEFORE SMT. P.MADHAVI DEVI, JUDICIAL MEMBER
SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
(Assessment year: 2007-08)
Mrs. Jennifer Bhide,
No.19, Miller Tank Bund Road,
Bangalore-52. … Appellant
Deputy Director of Income-tax
Bangalore. … Respondent
Appellant by: Shri Ramasubramanian.
Respondent by : Smt. Preeti Garg.
O R D E R
Per Smt. P.MADHAVI DEVI, JM :
This is assessee’s appeal against the order of the CIT(Appeals)-IV, Bangalore, dated 30-7-2010 for the assessment year 2007-08.
- The assessee has raised the following grounds of appeal:
“1. That the order of the learned Commissioner of Income-tax(Appeals) in so far it is prejudicial to the interests of the appellant is bad and erroneous in law and against the facts and circumstances of the case.
- That the order of the learned Commissioner of Income-tax(Appeals) erred in law and on facts in restricting the exemption u/s 54 to Rs.24,54,902/- being 50% of total investment just because the deed is registered in joint names ignoring the fact that the investment in the new property was made solely out of appellant’s own funds and disregarding the affidavit given by Mr.Vikram Bhide to the effect that he does not have ownership interest in the property.
- That the order of the learned Commissioner of Income-tax(Appeals) erred in law and on facts in restricting the exemption u/s 54EC to Rs.25,00,000/- being 50% of total investment just because the bonds are held in joint names ignoring the fact that the investment in the bonds were made solely out of appellant’s own funds and disregarding the affidavit given by Mr.Vikram Bhide to the effect that he does not have ownership interest in the bonds.
- That the finding of the learned Commissioner of Income-tax(Appeals) that the spouse of the appellant is joint owner of the property/bonds is perverse and in fact being contrary to evidence on record is liable to be quashed.
- That the learned Commissioner of Income-
tax(Appeals) ought to have granted deduction of Rs.28,00,000/- deposited by the appellant before the due date for filing the return in the Capital Gains Deposit Account.
Each of the above grounds is without prejudice to one another and the appellant craves leave of the Hon’ble Income-tax Appellate Tribunal, Bangalore, to add, delete, modify or otherwise amend either all or any of the above grounds either before or during the hearing.”
- Brief facts of the case are: The assessee is a non-
resident individual. She filed her return of income on 31-7-2007 for the year under consideration declaring taxable income of Rs.62,41,068/-. During the assessment proceedings ITA 1100(Bang)/2010u/s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], the AO noticed that the assessee has derived income from house property, income from long term capital gains on sale of property at Bangalore and income from other sources such as interest and dividend income. The AO observed that during the year, the assessee sold her residential property for Rs.2,21,00,000/- and had invested an amount of Rs.49,09,804/- on purchase of residential property and claimed exemption u/s 54 of the Act. On verification of the purchase deed of the said property dated 25-12-2006 registered in the office of the Sub-Registrar, Havelli, Pune, he found that the above property was not in the name of the assessee alone but was also in the name of her husband. He, therefore, held that if the ownership of the property is shared with someone else, then the property cannot be said to be purchased by the assessee alone and therefore only 50% of the investment is to be allowed as exempt in the hands of the assessee. He further observed that similar investment was made for Rs.50 lakhs in Rural Electrification Corporation Ltd., Bonds in the names of Mrs. Jennifer Bhide & Mr. Vikram Anil Vasant Bhide and exemption for the entire amount of Rs.50 lakhs u/s 54EC was claimed. For the reasons given by him for disallowing the exemption u/s 54 of the Act, he disallowed 50% of the investment in the Bonds also. Aggrieved by the same, the assessee preferred an appeal before the CIT(A) who confirmed ITA 1100(Bang)/2010 the order of the AO and the assessee is in second appeal before us.
- Shri Ramasubramanian, Learned counsel for the assessee, while reiterating the submissions made by the assessee before the authorities below submitted that the assessee is an old aged person and therefore, after the sale of residential property she has purchased a new property in the joint names of herself and her husband but the entire sale consideration has been paid by her and therefore applying the provisions of sec.45 of the Transfer of Property Act, the assessee has to be considered as the sole owner of the property and is entitled to the exemption u/s 54 of the Act. In support of his contention, he placed reliance upon the following decisions:
- Late Mir Gulam Ali Khan vs. CIT(165 ITR 228)(AP) ii. CIT vs. Gurnam Singh (327 ITR 278)(P&H) iii. CIT vs. V.Natarajan (287 ITR 271)(Mad) iv. JCIT vs. Smt. Armeda K. Bhaya (95 ITD 313) Smt. Preeti Garg, learned Departmental Representative, placed reliance upon the orders of the authorities below and submitted that since the assessee was not the sole owner of the property or the Bonds, she is not entitled to the exemption of the entire amount but is entitled to the exemption as per ratio of the ownership in the new property.
- Having heard both the parties and having considered the rival contentions, we find that the only dispute is whether ITA 1100(Bang)/2010 the assessee is entitled to exemption under sections 54and54ECon the amount invested by her in the purchase of new residential property and also Rural Electrification Corporation Ltd., Bonds. There is no dispute that the investment in the new residential property as well as in the Bonds has flown from the sale consideration received by the assessee on sale of residential property belonging to her. The only question is whether the husband of the assessee, by inclusion of his name as joint owner in the property, would become 50% owner of the said property and whether the assessee would not be eligible for exemption of the entire investment made by her. The assessee has placed reliance upon the provisions of section 45 of the Transfer of Property Act. For proper appreciation of the facts, the said provision is reproduced as under:
“45. Where immovable property is transferred for consideration to two or more persons, and such consideration is paid out of a fund belonging to them in common, they are, in the absence of a contract to the contrary, respectively entitled to interests in such property identical, as nearly as may be, with the interests to which they were respectively entitled in the fund; and, where such consideration is paid out of separate funds belonging to them respectively, they are, in the absence of a contract to the contrary, respectively entitled to interests in such property in proportion to the shares of the consideration which they respectively advanced.
In the absence of evidence as to the interests in the fund to which they were respectively entitled, or as to the shares which they respectively advanced, such persons shall be presumed to be equally interested in the property.”
ITA 1100(Bang)/2010 From a plain reading of the above provision, it is clear that where two or more persons purchase a property form out of their own common fund, they are entitled to interest in such property in the proportion of their interests in the common fund and only where there is no evidence as to their interests in the fund, they shall be presumed to have equal interest in the property. Thus, it could be seen that section 45 of the Transfer of Property Act provides for only the quantum of interest in the property and not the quality of interest of the joint transferees.
Applying this provision to the case before us, it is seen that the assessee has paid the whole sale consideration though she has joined her husband as the joint transferee and therefore the assessee has 100% interest in the said property. Section 54 of the I T Act only provides that long term capital gain arising out of transfer of long term capital asset is exempt if the consideration is used for purchase of the residential property or invested in specified bonds or deposits. There is no stipulation in the said provision that the assessee shall not purchase property along with another co-owner. As long as the assessee has invested the long term capital gains in the purchase of another residential property and her interest is proportionate to her investment, the exemption cannot be denied to her. Learned counsel for assessee has placed reliance upon various decisions. On going through the facts of those cases, we find that the facts in the case of Late Mir Gulam Ali Khan (supra) are not applicable to the facts of the case before us as in that case, ITA 1100(Bang)/2010 the property was agreed to be purchased by the assessee and after his demise, it was purchased by legal representative in his name and the Hon’ble Court held that the word ‘assessee’ includes the legal representatives also. In the case of V. Natarajan (supra) the Hon’ble Madras High Court was considering the case of an husband who sold the residential property and purchased residential property within stipulated period in his wife’s name. The Hon’ble Madras High Court held that though the property stood in the name of the wife the rental income from house property was assessed in the hands of the assessee and therefore exemption u/s 54 is available to the assessee. Similarly, in the case of Gurnam Singh (supra) we find that the Hon’ble Punjab & Haryana High Court was considering the case of an assessee who sold agricultural land and invested the same in the purchase of new land and the new land was registered in the name of the assessee and his son’s name as co-owners. The Hon’ble Punjab & Haryana High Court held that when the land in question was purchased out of sale proceeds of the agricultural land which was used only for agricultural purposes and merely because the assessee’s son was shown in the sale deed as co-owner, it did not make any difference and the assessee was entitled to deduction u/s 54B of the Act. Respectfully following the decisions of the Hon’ble High Courts of Madras and also Hon’ble Punjab & Haryana High Court, we hold that the assessee is entitled to exemption u/s 54 as well as u/s 54EC of the Act.
- In the result, the assessee’s appeal is allowed. Order pronounced in the open court on 22nd December, 2010 Sd/- sd/-
(A. Mohan Alankamony) (Smt.P.Madhavi Devi)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Place : Bangalore
Dated: 22nd December, 2010
Copy to :
- CIT(A) concerned
- DR, ITAT, Bangalore
- Guard file
Assistant Registrar, ITAT, Bangalore