Exemption u/s 54/54F for house purchased in wife name. Jurisdictional High Court to be followed

Exemption u/s 54/54F for house purchased in wife name, Deduction allowed for change in jurisdictional High Court with favourable judgment

ABCAUS Case Law Citation:
ABCAUS 3292 (2020) (04) ITAT

Important case law relied upon by the parties:
CIT, Faridabad vs Dinesh Verma
CIT vs., Kamal Wahal 351 ITR4
CIT vs. Ravinder Kumar Arora [2012] 342 ITR 38 (Del.)

Principles of judicial comity and legal propriety require that in the case of conflicting judgments by different High Courts, the view adopted by the jurisdictional High Court is binding within its jurisdictional area.

The above settled law applies to judgment passed by the Income Tax Authorities also.

However at the same time, if on the disputed subject, there are contrary view of different non jurisdictional High Courts and on the disputed subject, there is no judgment of the jurisdictional High Court, then the view favourable to the assessee should be taken.

In the instant case, the appeal was filed by the assessee against the Order of the CIT(A) denying exemption under section 54/54F of the Income Tax Act, 1961 (the Act) by making addition under the Head Long Term Capital Gains.

In the instant case, the assessee had declared long term capital gain on sale of two properties. He had invested the sale proceeds of the long term gain in purchasing another property in the name of his wife.

The assessee, during the assessment proceedings claimed that he had fulfilled/all the technical conditions for exemption of  long term capital gains under sections 54/54F of the Act. In support of this claim, the assessee relied on several decisions of different High Courts and ITATs.

However, the Assessing Officer (AO) did not accept the explanation of the assessee and relied on the judgment of Jurisdictional High Court wherein it was held that the assessee  is not entitled to benefit conferred  u/s 54B  if  the  property is purchased by a person other than the assessee, including his close related even his wife and children.

The AO denied the exemption u/s 54/54F to the assessee and made the impugned addition.

The assessee challenged the addition before the CIT(A). The assessee contended that since it is a beneficial provision, therefore, benefit should be allowed to him.

However, the CIT(A) on the basis of the jurisdiction of the ITO where the return had been filed and also the place where assessment was framed held that the decision relied upon by the ITO being the decision of the jurisdictional High Court was binding on the assessee and accordingly, appeal of the assessee was dismissed.

Before the ITAT, the assessee submitted the PAN of the assessee was transferred to his place of current residence. The case of the assessee had also been transferred, therefore, jurisdictional High Court would be different than the one relied upon by the Assessing Officer (AO). He submitted that the date on which appeal was filed would be material point of time for consideration of the issue regarding jurisdiction.

Exemption u/s 54 / 54F for house purchased in wife name. Jurisdictional High Court to be followed

Thus, the assessee submitted that due to the change in his address, the applicable jurisdictional High Court’s judgment should be followed wherein it had been held 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. In the said case, the Hon’ble High Court, having regard to the rule of purposive construction and the object of Section 54F, answered the question of law in favour of the assessee and allowed the exemption for the house purchased in the name of the wife of the assessee.

The assessee also relied upon the judgment of the jurisdictional High Court wherein it was held that when whole of the purchase consideration had been paid by the assessee and not even a single penny had been contributed  by  the  wife  in  the  purchase  of the house,  the assessee was entitled to full exemption.

The Tribunal noted that in the case of the assessee, the jurisdiction and PAN of the assessee  had been admittedly transferred and the CIT(A) who decided the first appeal of the assessee was bound  to follow the Judgments of the Hon’ble High Court under which jurisdiction he himself lied and not the ITO. Since the case of assessee was transferred at the first appellate stage, therefore, the jurisdiction did not lied with the jurisdictional High Court as per the seat of the ITO.

Accordingly, the Tribunal set aside the Orders of the authorities below and deleted the entire addition.

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