THE issues before the Bench are - Whether ther term 'assessee'
used in Ss 54B and 54F can also be extended to major married daughters; Whether
the assessee, the mother, can claim deduction under Ss 54B and 54F in case
investments are made in the name of assessee's married daughters; Whether
transfer of title can be completed only by executing a valid transfer deed and
Whether for the purpose of allowing deduction u/s 54B, assessee includes legal
representatives also. And the verdict goes against the assessee.
Facts of the
case
Assessee is an individual. During
the year, she sold 2 acres and 50 cents of wet agricultural land for a
consideration of Rs.1,41,12,000/-. There was no dispute that the capital gain
arising on sale of the above said agricultural land was assessable to income
tax. Thereafter she had purchased one agricultural land and one flat in the name
of her daughters. While computing LTCG on sale of agricultural land, assessee
had claimed deduction u/s 54B in respect of the agricultural land purchased in
the name of her younger daughter and also claimed deduction u/s 54F in respect
of the flat purchased in the name of her eldest daughter. It was argued that the
considerations for purchase of both the properties were given by her out of sale
proceeds realized on sale of agricultural land. It was further submitted that
she had entered into “possession purchase agreements with her two daughters to
comply with the provisions of sec. 54B and 54F. It was further contended by the
assessee that her daughters should be considered as her benamis. During
assessment, AO held that the deduction claimed u/s 54B and 54F were not
allowable as the properties were not registered in the name of the assessee. The
claim of “Benami" was also rejected by the AO on the ground that the Benami
Transactions Prohibition Act provides exemption to property purchased in the
name of unmarried daughters only. The AO also refused to recognize both the
Possession purchase agreement as they were unregistered document and they did
not actually transfer the properties. Accordingly, the AO rejected the
deductions claimed by the assessee u/s 54B and 54F.
On
appeal before CIT(A), it was argued that the “Possession purchase agreement"
gave right to the possession of the properties in terms of sec. 2(47)(v). It was
further submitted that the consideration for purchase of properties in the name
of her daughters had flown from her. Accordingly, the assessee contended that
she had complied with the spirit of provisions of sec. 54B and 54F and hence her
claim should be allowed. The CIT(A), however, held that the “possession purchase
agreement" entered into between the assessee and her daughters did not convey
any title to the assessee. In this regard, the CIT(A) placed reliance on the
decision of SC in the case of Suraj Lamp & Industries Pvt. Ltd Vs. State of
Haryana & Another (2011-TIOL-101-SC-MISC), wherein it was
observed that immovable property can be legally and lawfully transferred /
conveyed only by a registered deed of conveyance. Transactions of the nature of
“GPA Sales" or “SA/GAP/Will Transfers" did not convey title and do not amount to
transfer, nor can they be recognized or valid mode of transfer of immovable
property. The courts will not treat such transactions as completed or concluded
transfers or as conveyances as they neither convey title nor create any interest
in an immovable property. CIT(A) had affirmed the order passed by the
AO.
Before Tribunal, AR had placed
reliance on the decision of jurisdictional AP HC in the case of Late Mir Gulam
Ali Khan Vs. CIT and submitted that the jurisdictional High Court in the above
said case has held that the word “assessee" should be given a wide and liberal
interpretation so as to include legal representatives also. Explaining the facts
prevailing in the case of Late Mir Gulam Ali Khan, A.R submitted that the
assessee, in the above said case, sold a residential house and thereafter
entered into an agreement to purchase another house. Before completing the
purchase transaction, the assessee died and subsequently his legal heirs
completed the said transaction. The legal heirs claimed deduction u/s 54 of the
Act, which was rejected by the ITO. The jurisdictional High Court allowed the
claim of the assessee. On the other hand, DR had submitted that the reliance
placed upon by the assessee in the case of Late Mir Gulam Ali Khan was
misplaced. It was submitted that the said decision was rendered under peculiar
facts prevailing in that case. It was further submitted that the assessee
therein had sold a house property and he himself entered into an agreement to
purchase another residential house. He also paid earnest money. However, before
completion of the purchase transaction, he expired and hence his legal
representative completed the transaction of purchase. Hence the legal
representative claimed deduction u/s 54 against the capital gain arising on the
property sold by the late assessee. Since the transaction of purchase was
initiated by the assessee himself and further since the legal representative of
the assessee completed the very same transaction, the HC had held that the legal
representative was entitled to claim deduction u/s 54. He submitted that it is
the legal representative, who is assessable as representative of the deceased
assessee. Accordingly he submitted that the assessee could not place reliance on
the said decision.
Having heard the matter,
Tribunal held that,
++ we
fully agree with the contention of the D.R that the decision rendered by the
jurisdictional High Court in the case of Late Mir Gulam Ali Khan is based upon
peculiar facts prevailing in that case. The vital point, in our view, is that
the assessee (in the case of Late Mir Gulam Ali Khan) had entered into an
agreement for purchasing a residential house and also paid earnest money in
furtherance of the same. Unfortunately he passed away before completion of the
purchase transaction. Hence, the legal representative of that assessee completed
the process of purchase of property. Thus, in effect, the new house property was
not purchased in the name of the assessee, who sold the old property. Since the
said legal representative of the assessee is liable to be assessed in respect of
the capital gain on the property sold by his father, he claimed the cost of new
property as deduction u/s 54 of the Act. Thus, the facts prevailing in Late Mir
Gulam Ali Khan case is peculiar and further, under section 159 of the Act, the
legal representative is treated as assessee in respect of liability of the
deceased person. Hence, under peculiar facts of the case, the jurisdictional
High Court held that the term “assessee" shall include legal representative
also. In our view, the liberal view taken by the High Court cannot be stretched
in each and every case, where the property was not purchased in the name of the
assessee, who sold the property. Accordingly, in our view, the assessee herein
cannot derive support from the said case law;
++ in
our view, the Courts have considered the investments made in the name of wife or
minor daughter as an investment made by the assessee himself for the reason that
there was no real intention to provide consideration for the benefit of
wife/minor daughter alone. In the instant case, undisputedly, the investments
have been made in the name of married daughters and apparently both of them are
also majors. Thus, it is not a case of joint ownership along with the assessee.
Both the daughters of the assessee shall have every right over the property
purchased in their respective names. Thus, it cannot be said that the intention
of purchasing the properties was not to give benefit to them. The assessee
claims that she has entered into a purchase possession agreement with her two
daughters. However, we tend to agree with the view of the CIT(A) that the said
agreement does not actually effect transfer of assets to the name of the
assessee. Further, as pointed out by the AO, the said agreements have been
entered only to show some compliance with the provisions of sec. 54B/54F.
Accordingly, in our view, the term “assessee" used in sec. 54B/54F cannot be
extended to mean the major married daughters. Accordingly, we affirm the view
taken by the CIT(A). In the result, the appeal filed by the assessee is
dismissed.
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