Capital gain exemption u/s 54F denied as new house was in the name of husband
In a recent judgment, ITAT has held that capital gain exemption u/s 54F was not allowable as the new house was in the sole name of husband and was purchased out of bank loan by the husband.
ABCAUS Case Law Citation:
ABCAUS 3934 (2024) (04) ITAT
Important Case Laws relied upon:
CIT v. Polar Cement (P) Ltd. (1997) 226 ITR 625 / 92 Taxman 541 (SC)
Bajaj Tempo Ltd. v. CIT (1992) 196 ITR 188 / 62 Taxman 480
In the instant case, the assessee had challenged the order passed by the CIT(A)/NFAC in disallowing the capital gain exemption u/s 54F to the appellant assessee on the ground that the new asset is in the name of the Husband of the assessee.
The assessee was a working woman. On the basis of an enquiry carried out by the Investigating wing, it was seen that her husband had purchased a Flat. The sources for the above purchase was stated as loan from the bank and partly gift from the assessee.
On further investigation of the sources of gifts given by the assessee to her husband, it was noticed that the sources of gift emanated from the sale consideration of her 1/5th share of property of which possession was handed over to the buyer. However, the sale deed was not registered.
With respect to the sale consideration of the said property, the assessee in her Return of Income filed belatedly nearly 5 years after the due date, claimed Nil income after claiming exemption u/s 54F of the Act on the Long Term Capital Gains earned.
On examination of the manual Return of Income filed by the assessee, it was seen that the assessee had neither invested the proceeds of the sale of the property in another residential property for claiming exemption u/s 54F of the Act nor there was any deposit in the Capital Gain Accounts Scheme
Hence, there was no evidence with regard to claim of exemption u/s 54F of the Act by the assessee which appeared to be as false and resulted in escapement of income leading to re-assessment proceedings.
Finally, the AO rejected the claim of the assessee towards exemption u/s 54F and made addition to the total income of the assessee.
Before the Tribunal, the assessee submitted that she had sold her landed property and purchased a new asset in the name of her husband within the prescribed period and therefore, was entitled for exemption denied by the AO.
The Tribunal noted that the agreement to purchase the property by the husband of the assessee was much earlier than the property sold by the assessee. Further, the assessee was only the guarantor of the loan obtained by her husband.
The Tribunal opined that a guarantor is not the borrower of a loan. The liability of a guarantor towards a loan is secondary. Assessee was not the co-purchaser of the property with his husband. Consideration for the purchase of property paid by the husband of the assessee.
Therefore, it cannot be said that the property was purchased out of the sale proceeds of the property of the assessee. As the property purchased by the loan amount and amount received as gift by the husband of the assessee, the husband of the assessee was the owner of the purchased property.
The Tribunal observed that the decision of Hon’ble Supreme Court relied upon by the assessee where it has been held that “owner is a person who is entitled to receive income from the property in his own right” will not help the assessee, because, the assessee had no right to receive income from the property in her own right. How the assessee will exercise right to receive income from the husband’s property in her own right in the case in our hand? The Tribunal opined that the assessee, during the lifetime of her husband will not be able to exercise such right.
The Tribunal further opined that the beneficial provision of the Income Tax Act should be interpreted strictly.
Thus, the Tribunal opined that the assessee was not the owner of the property as she did not pay consideration amount to the seller, she was not the borrower of the loan out of which the new property had been purchased by her husband in his name.
Accordingly, the Tribunal held that the lower authorities had correctly decided the case of the assessee and it upheld the decision of the lower authorities.
As a result, the appeal of the assessee was dismissed.
Download Full Judgment ABCAUS 3934 (2024) (04) ITAT Click Here >>
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