THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 11.01.2013
+ ITA 4/2013
COMMISSIONER OF INCOME TAX-XII ..... Petitioner
versus
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 :
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE R.V.EASWAR
JUDGMENT
R.V.EASWAR, J (ORAL)
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-
2009.
2. The appeal is admitted and the following substantial question of
law is framed:-
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"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.
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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
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encouraging investment in residential houses should be liberally
interpreted.
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
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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
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sale proceeds and that there was no constribution from the assessee's
wife.
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
as
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