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January, 16th 2013
%                                      Judgment delivered on: 11.01.2013

+                            ITA 4/2013

COMMISSIONER OF INCOME TAX-XII                              .....   Petitioner


SHRI KAMAL WAHAL                                                    ... Respondent
Advocates who appeared in this case:
        For the Petitioner             : Mr. N.P.Sahni, St.Counsel with Mr. Ruchesh
                                       Sinha, Adv.
        For the Respondent             :




1.      This is an appeal filed by the Commissioner of Income Tax-XII,

New Delhi under Section 260A of the Income Tax Act, 1961 and it is

directed against the order of the Income Tax Appellate Tribunal dated

20.07.2012 in ITA No.5064/Del/2011, for the assessment year 2008-


2.      The appeal is admitted and the following substantial question of

law is framed:-

ITA 4/2013                                                                Page 1 of 6
        "Whether on the facts and in the circumstances of the case and
        on a proper interpretation of Section 54F of the Income Tax Act
        1961, the Tribunal was right in law in allowing the deduction of
        `51,25,100/- claimed by the assessee under that Section?"

3.      The assessee is an individual. He retired from IOCL. His income

consists of income by way of salary, from house property and other

sources. He inherited 50% share in a residential house in E-2/13, Vasant

Vihar, Delhi in 2003 from his father. This was in July 1968. The other

half share was inherited by his brother. In the year which ended on

31.03.2008, both the brothers jointly sold the property which gave rise to

proportionate capital gains in the assessee's hands. In computing the

capital gains, the assessee claimed deduction under Section 54F on the

ground that the sale proceeds were invested in the acquisition of a vacant

plot for `31,25,100/- and the purchase of a residential house for

`34,35,700/- in the name of his wife.

4.      The assessing officer while completing the assessment, took the

view that under Section 54F, the investment in the residential house

should be made in the assessee's name and in as much as the residential

house was purchased by the assessee in the name of his wife, the

deduction was not allowable. He reduced the deduction and computed

the capital gains accordingly.

ITA 4/2013                                                       Page 2 of 6
5.      On appeal, the CIT (Appeal) accepted the assessee's contention

based on the judgment of the Madras High Court in Commissioner of

Income Tax Vs. V. Natarajan : (2006) 287 ITR 271 and that of the

Andhra Pradesh High Court in Late Gulam Ali Khan Vs. Commissioner

of Income Tax : (1987) 165 ITR 228.

6.      The revenue preferred an appeal before the Tribunal questioning

the decision of the CIT(Appeals).      The Tribunal, however, by the

impugned order, agreed with the decision of the CIT (Appeals) and in

doing so followed the judgment of the Madras and Andhra Pradesh High

Courts cited supra and also another judgment of the Karnataka High

Court in Director of Income-tax, International Taxation, Bangalore :

(2011) 203 Taxman 208. It also noted the judgment of the Bombay High

Court in Prakash Vs. ITO : (2008) 173 Taxman 311 in which a contrary

view was taken but preferred the view taken by the Madras and

Karnataka High Courts adopting the rule laid down by the Supreme Court

in CIT Vs. Vegetable Products Ltd : 88 ITR 192 which says that if a

statutory provision is capable of more than one view, then the view

which favours the tax payer should be preferred.     The Tribunal also

observed that Section 54F being a beneficial provision     enacted for

ITA 4/2013                                                   Page 3 of 6
encouraging     investment in residential houses should be liberally


7.      We have no hesitation in agreeing with the view taken by the

Tribunal. Apart from the fact that the judgments of the Madras and

Karnataka High Courts (supra) are in favour of the assessee, the revenue

fairly brought to our notice a similar view of this Court in CIT Vs.

Ravinder Kumar Arora : (2012) 342 ITR 38 (Del.). That was also a case

which arose under Section 54F of the Act. The new residential property

was acquired in the joint names of the assessee and his wife. The income

tax authorities restricted the deduction under Section 54F to 50% on the

footing that the deduction was not available on the portion of the

investment which stands in the name of the assessee's wife. This view

was disapproved by this Court.        It noted that the entire purchase

consideration was paid only by the assessee and not a single penny was

contributed by the assessee's wife.       It also noted that a purposive

construction is to be preferred as against a literal construction, more so

when even applying the literal construction, there is nothing in the section

to show that the house should be purchased in the name of the assessee

only. As a matter of fact, Section 54F in terms does not require that the

ITA 4/2013                                                       Page 4 of 6
new residential property shall be purchased in the name of the assessee; it

merely says that the assessee should have purchased/constructed "a

residential house".

8.      This Court in the decision cited alone also noticed the judgment of

the Madras High Court (supra) and agreed with the same, observing that

though the Madras case was decided in relation to Section 54 of the Act,

that Section was in pari materia with Section 54F. The judgment of the

Punjab and Haryana High Court in the case of CIT Vs. Gurnam Singh :

(2014) 327 ITR 278 in which the same view was taken with reference to

Section 54F was also noticed by this Court.

9.      It thus appears to us that the predominant judicial view, including

that of this Court, is that for the purposes of Section 54F, the new

residential house need not be purchased by the assessee in his own name

nor is it necessary that it should be purchased exclusively in his name. It

is moreover to be noted that the assessee in the present case has not

purchased the new house in the name of a stranger or somebody who is

unconnected with him. He has purchased it only in the name of his wife.

There is also no dispute that the entire investment has come out of the

ITA 4/2013                                                       Page 5 of 6
sale proceeds and that there was no constribution from the assessee's


10.     Having regard to the rule of purposive construction and the object

which Section 54F seeks to achieve and respectfully agreeing with the

judgment of this Court, we answer the substantial question of law framed

by us in the affirmative, in favour of the assessee and against the revenue.

        The appeal is accordingly dismissed with no order as to costs.

                                           BADAR DURREZ AHMED, J

                                                         R.V.EASWAR, J
JANUARY 11, 2013

ITA 4/2013                                                        Page 6 of 6
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