Deduction u/s 54F allowed for residential house purchased in the name of wife – ITAT
In a recent judgment, the ITAT Chennai has allowed Deduction u/s 54F for residential house purchased in the name of wife holding that assessee and his wife would have commonality of interest to make investment in new house.
ABCAUS Case Law Citation:
ABCAUS 4084 (2024) (06) ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the action of the Assessing Officer (AO) in denying exemption/deduction u/s 54F of the Income Tax Act, 1961 (the Act) pertaining to the purchase of residential house in the name of the His wife.
The assessee sold a piece of vacant land. Against the same, the assessee claimed deduction u/s 54F on the ground that the assessee entered a sale deed for purchase of land and an agreement for construction of a residential house.
However, upon perusal of relevant documents, it was noted by AO that the said deed as well as construction agreement was in the name of assessee’s wife. It further transpired that that his wife was also sanctioned a loan by the Bank. It was thus seen that the property was purchased in exclusive name of assessee’s wife who was separately assessed to tax.
Accordingly, the AO proceeded to deny the impugned deduction to the assessee. The assessee relied on various judicial decisions in support of impugned deduction. However, the same could not find favor with the AO who referred to the decision of Co-ordinate Bench while arriving at such a conclusion.
The Tribunal observed that in the case relied upon by the AO, such deduction was denied since the investment was made by the assessee in the name of unmarried daughter.
The Tribunal further observed that the assessee fulfilled all the other eligibility conditions to claim the deduction u/s 54F except for the fact that the new investment has been made in the name of his wife.
The Tribunal observed that as per the provisions of Section 54F, the assessee could purchase new house within a period of one year before or two years after the date on which the transfer has taken place. Alternatively, the assessee could construct new house within a period of three years from the date of transfer.
The Tribunal opined that in view of the provisions, there is no requirement that the same sale proceeds should have been utilized to make the new investments. In fact, in a case, where the assessee purchases new house within one year before the date of transfer, he would not be in a position to utilize the same sale proceeds which would accrue to him in future. Therefore, this logic of lower authorities that the same money should have been utilized to make the new investments does not find our acceptance. This view is duly supported by the decision of Hon’ble High Court of Madras.
The Tribunal observed that another objection of the revenue was that the investment had been made in the name of assessee’s wife out of Bank Loan. It is settled position that the provisions of Sec.54F are beneficial provisions and should be given a liberal construction to the maximum extent possible.
The Tribunal observed that from the bank statements of the assessee, it could be seen that the assessee himself has paid an amount to the builder towards cost of construction of new property. The various payments to sub-registrar had also been paid from the same bank account. This lend certain credence to the claim of the assessee. The assessee and his wife would have commonality of interest to make investment in new house.
On these facts, the Tribunal opined that the assessee would be eligible to claim the deduction u/s 54F of the Act.
The Tribunal further added that the decision of Hon’ble High Court of Delhi supports this view. In the said case, the investment was made by the assessee jointly with his wife. The AO restricted the deduction to the extent of 50%. However, Tribunal allowed full deduction and Hon’ble High Court upheld the action of Tribunal.
Following the similar ratio the Tribunal directed AO to allow the claim of the assessee.
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