Little Things Make Big Days.

Shri Ramphal Hooda Vs. ITO

Whether the assessee is eligible for exemption u/s 54/54F, an investment in a new property is made in the name of his wife?
Held: Yes

Shri Ramphal Hooda Vs. ITO, I.T.A. No. 8478/Del./2019, 
Date of Pronouncement: 02.03.2020, ITAT - Delhi

Brief facts:
The long term capital gain from the sale of two properties was invested by the assessee in the name of his wife and exemption of LTCG u/s 54/54F of I.T. Act, 1961 was claimed. However, the A.O. denied the exemption under sections 54/54F of I.T. Act, 1961, to the assessee while relying on the judgment of the Hon’ble Punjab and Haryana High Court in the case of CIT, Faridabad vs Dinesh Verma in ITA No. 381 of 2014 dated 06.07.2015, wherein it was held that “the assessee is not entitled to the benefit conferred under section 54B if the subsequent property is purchased by a person other than the assessee, including his close related even such as wife and children.”

The Hon’ble ITAT held that since the entire sale amount of long term capital gain has been invested in the purchase of other property in the name of the wife of the assessee, the assessee would be entitled to exemption on account of long term capital gains. Also, In CIT v. Podar Cement (P.) Ltd. (1997 (5) TMI 2 - SUPREME Court), the Hon’ble Supreme Court has also accepted the theory of constructive ownership. Moreover, Section 54F mandates that the house should be purchased by the assessee and it does not stipulate that the house should be purchased in the name of the assessee only. In this view of the matter, the Orders of the below authorities were set aside and the entire addition was deleted.

Hence, the appeal was held in favour of the assessee.

Cases Referred:
CIT vs. Podar Cement (P.) Ltd. (1997 (5) TMI 2 - SUPREME Court
CIT vs., Ravinder Kumar Arora [2012] 342 ITR 38 (Del.)
CIT-XII vs. Shri Kamal Wahal [2013] 351 ITR 4 (Del.)