Exemption u/s 54F allowed. Investment in name of spouse and respective share immaterial

Exemption u/s 54F allowed by ITAT holding that investment in purchase of plot in the name of the spouse and their respective shares is immaterial

In a recent judgment, ITAT Chennai has allowed exemption u/s 54F observing that entire investment in purchase of plot is in the name of the husband and the share of assessee in the said investment is immaterial so long the assessee has a direct connection/nexus with the husband.

ABCAUS Case Law Citation:
4669 (2025) (07) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) NFAC confirming disallowance of claim of exemption under section 54F of the Income Tax Act, 1961 (the Act).

The appellant assessee was working overseas for several years and had been transferring his earnings in abroad by way of Inward remittance through his NRI Account in India.

The appellant was not having any source of income apart from the interest on the Bank Deposits made through her inward remittance. The appellant sold one of the lands held by him in India. The appellant filed the return of income for the relevant assessment year claiming exemption of the capital gain arising on sale of land on account of the investment made by her u/s 54F of the Act.

The Assessing Officer (AO) issued notice u/s 148 of the Act. The assessee furnished the letter for justification of its claim of deduction u/s 54F of the Act. However, the same was rejected and the assessment was completed u/s 143(3) RWS 148 of the Act with an addition towards the disallowance of claim u/s 54F of the Act.

Before the Tribunal, the assessee submitted that the CIT(A) having accepted the claim of deduction u/s 54F of the Act in the hands of the appellant’s husband for the claim made for the same sale proceeds and the said proceedings having attained finality, the disallowance of claim of deduction in the hands of the present appellant on mere hyper technical ground that the newly reinvested property was only in the name of the husband was not sustainable in law.  

The Tribunal observed that in past also the assessee with her husband had sold property in which the share of the appellant was 50%. The appellant had claimed deduction u/s 54F which was disallowed during scrutiny assessment proceedings. Identical disallowance was also made in the case of appellant’s husband. The disallowance made in the case of appellant’s case was confirmed by the CIT(A) but the Hon’ble ITAT while deciding the appeal filed by the appellant against the order of CIT(A) had set aside the matter to the file of CIT(A) who allowed the deduction.

The Tribunal further observed that the order of CIT(A) in the case of appellant’s husband wherein claim of deduction u/s 54F had been accepted had not been challenged by the Revenue. 

The Tribunal opined that the entire investment in purchase of plot is in the name of the husband of the appellant and the share of assessee in the said investment is immaterial so long the assessee has a direct connection/nexus with the husband.

The Tribunal noted that in similar situation, the Hon’ble Delhi High Court had held that the predominant judicial view is 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.

As a result, the Tribunal held that the exemption u/s. 54F could not be denied to the assessee by the authorities below.

Accordingly, the Tribunal set aside the order of the CIT(A) and deleted the addition on account of Long Term Capital Gain. 

Download Full Judgment Click Here >>

• ITAT allows exemption of Rs. 25 lakhs u/s 10(10A) to non-government employees
• PCIT has revisionary jurisdiction u/s 263 over the cases passed by the NFAC or the JAO
• Appellate court interfering with MACT finding must undertake reappreciation of evidence
• When delay is not huge & involves huge monetary liability, lenient approach to be taken
• EoGM of company can not ratify diversion of fund raised by preferential issue – SC