CPT V24P7-Art1 (Content).pmd - Taxmann

Direct Tax Laws
ANALYSIS OF THE DECISION OF THE
MADRAS HIGH COURT IN DR. (SMT.)
P.K. VASANTHI RANGARAJAN’S CASE
(SUPRA)
2. The assessee was a joint owner, along with
her husband of an immovable property A. The
property consisted of a clinic in the ground
floor and a residential portion on the first
floor. The assessment year concerned was 2000-
01. The assessee had been declaring 50% of
the share in the property as owned by her in
the wealth-tax assessment since 1989-90. The
assessee had entered into a joint development
agreement with a builder/promoter for
construction of eight flats/apartments in the
property B owned by her during the financial
year 1998-99 and parted with possession of
the property during the previous year, pertaining
to the assessment year 2000-01. As per the
terms of the agreement the builder/promoter
would construct all the eight flats at its cost
and would allot four flats to the assessee by
retaining the other four flats for its business
purposes. Though initially the assessee argued
that the transfer of property took place during
the previous year pertaining to the assessment
year 2001-02 on account of handing over of
(completed) flats only in June 2000, the issue
was confirmed by the Tribunal that the correct
assessment year in which transfer took place
by way of handing over of property to the
builder/promoter was 2000-01 and not 2001-
02 as contended by the assessee. The dispute
with regard to the year in which assessment
had to be made did not travel further, as the
decision rendered by the Tribunal attained
finality on this issue.
The assessee claimed benefit of exemption under
section 54F of the Income-tax Act, as she had
invested in purchase of a residential property
within the stipulated limit as set out in section
54F of the Act. The Assessing Officer rejected
the contention of the assessee as the then proviso
to section 54F disentitled the assessee from
claiming the benefit for investing the capital
gains in yet another house property. It is to
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be noted that the assessee was a joint-owner
of a residential property at that time. The
disallowance made by the Assessing Officer
stood confirmed till the Tribunal’s stage. The
assessee filed an appeal in the High Court.
The High Court agreed with the contention
raised on behalf of the assessee that “when the
individual assessee owns a residential house
along with somebody else under a joint
ownership or as a co-owner therein, the
ownership in a status other than that of
individual/HUF would not result in denial of
exemption”.
The High Court after assimilating facts made
the following observations at para 13 of its
order-
“The facts thus reveal that as joint owners
of the property, the assessee and her
husband had shown 50% share with
reference to the clinic and the residential
portion in their respective returns. Thus,
it is clear that as on the date of the
transfer, the assessee did not own a
residential house in her name only, the
income from which was chargeable under
the head “income from house property”,
to bring into operation, the proviso to
section 54F. The rejection of the claim for
exemption would arise if only the property
stands in the name of the assessee, namely,
individual or HUF. Given the fact that
the assessee had not owned the property
in her name only to the exclusion of anybody
else including the husband, but in joint
name with her husband, we agree with
the submission of the learned senior counsel
appearing for the assessee herein that
unless and until there are materials to
show that the assessee is the exclusive
owner of the residential property, the
harshness of the proviso cannot be applied
to the facts herein. Apart from that, 50%
ownership is with reference to the clinic
situated in the ground floor. As such, the
entire property is not an exclusive
residential property. Hence, we are inclined