Capital gain exemption u/s 54 allowed for investment made in the name of spouse. Purposive construction is to be preferred as against the literal construction
In a recent judgment, the ITAT following the guidance provided by various High Courts and Coordinate Benches, allowed capital gain exemption u/s 54 allowed for investment made in the name of spouse.
ABCAUS Case Law Citation:
ABCAUS 3833 (2024) (01) ITAT
Important Case Laws relied upon by parties:
CIT vs. Natar ajan, [2006] 287 ITR 271
Kamlesh Keswani vs. ACIT
DIT vs. Mrs. Jennifer Bhide [2011] 15 taxmann.com 82
CIT vs. Sh. Mahadev Balai
Shankar Lal Kumawat vs. ITO
N Ram Kumar vs. ACIT [2012] 25 taxmann.com 337
Krishnappa Jayaramaiah vs. ITO – [2021] 125 taxmann.com 110
Mrs. Kamal Murlidhar Mokashi vs. ITO
CIT vs. Kamal Wahal [2013] 351 ITR 4
CIT vs. Ravinder Kumar Arora [2012] 342 ITR 38
In the instant case, the assessee had challenged the order passed by the CIT(A) in upholding an addition denying the deduction claimed under section 54 of the Income Tax Act, 1961 (the Act).
The appellant assessee was a non-resident individual. The Assessee had sold her property in India during the relevant assessment year. Out of the sale proceeds, she invested into a new residential house in India. The residential house in which the investment was made by the Assessee, was registered in the name of her spouse. The assessee filed return of income claiming deduction u/s 54 of the Act. The assessment u/s 143(2) of the Act was initiated and queries were raised regarding the claim of deduction u/s 54 of the Act.
The Assessing Officer disallowed the claim of deduction u/s 54 of the Act alleging that the residential property is registered in the name of the spouse of the Assessee and not in the name of the Assessee. The Assessing Officer also held that the payment was made from a joint account.
The Tribunal observed that the registry of the plot for the new property was completed when strict international travel restrictions were in place due to Covid 19. Therefore, the Assessee could not travel to India and the registry was completed in the name of spouse for the sake of convenience.
The Tribunal also noted that on this issue, guidance was available by the various orders of the Hon’ble High Courts and the Tribunal where deduction under section 54 / 54B was allowed where the investment was made by the assessee in the name of spouse/ widowed daughter.
Further, the Hon’ble Jurisdictional High Court has held that new house purchased in the name of the spouse of the assessee was eligible for claiming deduction under section 54F. The provisions of section 54F are pari-materia with the provisions of section 54 of the Act and thus, the principle derived equally applies to section 54 as well. The Hon’ble Jurisdictional High Court has also held in the various judgments that Purposive construction is to be preferred as against the literal construction, more so when even literal construction also does not say that the house should be purchased in the name of the assessee only. Section 54F/54 of the Act are the beneficial provisions which should be interpreted liberally in favour of the exemption/deduction to the taxpayer and deduction should not be denied.
Keeping in view, the entire facts of the case, the Tribunal opined that since, the sale proceeds have been duly invested in acquisition of new property within the due time allowed, the assessee is eligible for claim of de duction u/s 54F.
Accordingly, the appeal of the assessee was allowed.
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