Savita Bhasin v. ITO [ITA No. 161/Del/2020, dt.
13-8-2020] : 2020 TaxPub(DT) 3191 (Del.-Trib.)
Reinvestment allowance under section
54F--Co-ownership--Transfer of property held prior to sale--Alleged
afterthought--Tax evasion
Facts:
Assessee returned the capital gains on the sale of an
agricultural land/property on 8-12-2013 and claimed section 54F benefit by
purchasing a residential property on 7-12-2015. As on 31-3-2013 assessee
co-owned two residential properties with his wife/legal representative (assessee
died while the case was in proceeding). On 1-11-2013 (prior to the sale) the
assessee sold the co-owned property in one of his house's to his son based in
USA vide an agreement to sell which was not registered (thru a power of
attorney granted to the assessee by his son). The rent from the said property
transferred to his son was offered as rental income in the return of this own
for the said assessment year. It was the case of the assessing officer and
Commissioner (Appeals) that on the date of sale he owned more than one property
either on his own or as a co-owner and that the transfer of one of the co-owned
property to his son, was an afterthought to circumvent capital gains tax by
claiming section 54F thus deserves disallowance under evasionary grounds as
well. Assessee claimed on the date of sale he was not in ownership of any
property and was only a co-owner after all and section 54F seeks exclusive
ownership and not co-ownership besides the fact that there only one property in
co-ownership while the other one already was transferred to his son much
earlier to the transfer of the agricultural land thus being eligible for
section 54F benefit. On higher appeal to ITAT by the assessee --
Held in favour of the assessee that he was eligible for the
benefit of section 54F.
Co-ownership is not the condition envisaged under section
54F but what section 54F calls for is an exclusive ownership thus cannot stand
in the way of the assessee availing section 54F benefit as he was only a
co-owner.
The transfer to this son though not registered for all
legal purposes would have made his son a beneficial owner thus squarely fitting
into section 2(47)(vi) read with section 269UA (Section 269UA explicitly says
an agreement for transfer would cover one which is registered or unregistered
of an immovable property for the purpose of income tax).
The rental income being offered in his son's tax return
under house property made it an excellent case of tax planning. By virtue of
the power of attorney held by the assessee granted by his son even though all
electricity/municipal taxes/rent stood all collected in his hand they were only
for and behalf of his son as per the power of attorney granted is what the ITAT
held. Even the residential property transferred being used for commercial
letting purposes was inconsequential as the decision goes to say as end purpose
of the residential property if that was used for commercial letting out cannot
alone make the residential property to be read a commercial property.
The date of registration of property is inconsequential it
is the date of transfer which is the effective date of transfer of the property
as per the registration act as well. Registration confers ownership from the
date of the agreement.