[2002] 123 taxman 290 (delhi)
High Court of Delhi
Balraj
v.
Commissioner of Income-tax
S.B. SINHA, CJ.
AND A.K. SIKRI, J.
IT REFERENCE NO. 73 OF 1983
DECEMBER 6, 2001
Section 54 of
the Income-tax Act, 1961 - Capital gains - Profits on sale of property used for
residential house - Assessment year 1975-76 - Whether section 54 speaks of
purchase only and for availing benefit under this section, it is not necessary
that assessee should become owner of property - Held, yes - Whether, where
assessee paid a sum at time of entering
into an agreement for purchase of a property within a year from sale of another
property, he would be entitled to benefit provided under section 54 even though
there was no registration within said period - Held, yes
Facts
The assessee sold a property on 3-12-1974 for Rs. 98,000. On 6-2-1975,
he entered into an agreement to purchase another property for Rs. 2.03 lakhs
and paid Rs. 1.73 lakhs at the time of entering into that agreement. The
assessing authorities as well as the Tribunal held that since there was no
registration of the property in the assessee’s name, he could not claim benefit
provided under section 54.
On reference :
Held
For the purpose of attracting the provisions of section 54, it is not
necessary that the assessee should become the owner of the property. Section 54
speaks of purchase. Moreover, the ownership of the property may have different
connotations in different statutes. In view of various decisions of the Supreme
Court, it was to be held that the Tribunal went wrong in holding that for the
purpose of applicability of section 54, registration of document is imperative.
Therefore, the assessee was entitled to exemption in terms of section 54.
Cases referred to
CIT
v. T.N. Aravinda Reddy [1979] 120 ITR 46/2 Taxman 541 (SC), CIT
v. Podar Cement (P.) Ltd. [1997] 226 ITR 625/92 Taxman 541 (SC), Mysore
Minerals Ltd. v. CIT [1999] 239 ITR 775/106 Taxman 166 (SC) and CIT
v. R.L. Sood [2000] 245 ITR 727/108 Taxman 227 (Delhi).
C.S. Aggarwal for the Applicant. R.D. Jolly and Ms. Prem Lata Bansal
for the Respondent.
Judgment
S.B. Sinha, CJ. - The question which arises for consideration in this reference is as
under :
“Whether, on the
facts and in the circumstances of the case, the Tribunal was correct in holding
that the assessee had not purchased the property within one year from the date
of sale of his residential house so as to be entitled to exemption under
section 54 of the Income-tax Act, 1961 ?”
2.
The basic fact of the matter is not in dispute. The assessee sold a property,
15/16, East Patel Nagar, New Delhi, belonging to him on 3-12-1974 for Rs.
98,000. By reason of the agreement of sale coupled with possession the assessee
purported to have purchased a property No. 12, West Patel Nagar, New Delhi, for
Rs. 2,03,000 on 6-2-1975. It is not in dispute that if the aforementioned
transaction amounts to purchase of property, the same would be within a period
of one year. The only question, which, therefore, arises for consideration is
whether the aforementioned agreement dated 6-2-1975 would answer the
description of purchase within the meaning of section 54 of the Income-tax Act,
1961 (‘the Act’). Out of the consideration of Rs. 2,03,000, the assessee
admittedly at the time of entering into the aforementioned agreement paid a sum
of Rs. 1,73,000 which was more than the amount of Rs. 98,000 which he received
by way of consideration in terms of the transaction which took place on
3-12-1974. Section 54 relates to profit on sale of property used for residence.
The said provision reads, thus :
“54. Profit on
sale of property used for residence.—(1) Subject to the provisions of
sub-section (2), where, in the case of an assessee being an individual or a
Hindu undivided family, the capital gain arises from the transfer of a
long-term capital asset, being buildings or lands appurtenant thereto, and
being a residential house, the income of which is chargeable under the head
‘Income from house property’ (hereafter in this section referred to as the
original asset), and the assessee has within a period of one year before or two
years after the date on which the transfer took place purchased, or has within
a period of three years after that date constructed, a residential house, then,
instead of the capital gain being charged to income-tax as income of the
previous year in which the transfer took place, . . .”
3.
The Assessing Officer, the appellate authority as well as the Tribunal rejected
the claim of the assessee in respect of the assessment year 1975-76 on the
ground that he did not become the owner of the property, as the said
transaction was not evidenced by registration thereof as provided under section
17 of the Registration Act. For the purpose of attracting the provisions of
section 54, it is not necessary that the assessee should become the owner of
the property. Section 54 speaks of purchase. Moreover, the ownership of the
property may have different connotations in different statutes. The question
which arises for consideration appears to be squarely covered by a decision of
the Apex Court in CIT v. T.N. Aravinda Reddy [1979] 120 ITR 461 where it has been held that the word ‘purchase’ occurring in section
54(1) of the Act had to be given its common meaning, viz., buy for a
price or equivalent of price by payment in kind or adjustment towards a debt or
for other monetary consideration. Each release in this case was a transfer of
the releasor’s share for consideration to the release and the transferee, the
assessee, “purchased” the share of each of his brothers and the assessee was,
therefore, entitled to the relief under section 54(1). The question now is no
longer res integra having regard to the decision of the Apex Court in CIT
v. Podar Cement (P.) Ltd. [1997] 226 ITR 6252. The Apex Court categorically held that section 22 of the Act does not
require registration of sale deed. The meaning of the word ‘owner’ in the
context of section 22 has been held to be a person who is entitled to receive
income in his own right. The Apex Court in Mysore Minerals Ltd. v. CIT
[1999] 239 ITR 7751 and this Court in CIT v. R.L. Sood [2000] 245 ITR 7272 have held that registration of the document is not mandatory for
claiming depreciation on the property. In this view of the matter, we have no
doubt in our mind that the learned Tribunal went wrong in holding that for the
purpose of applicability of section 54, registration of document is imperative.
We, therefore, answer the question in the negative, i.e., the assessee
is entitled to exemption in terms of section 54.
4. The
reference is disposed of.
nn