In the recent case, the Chennai Bench of the Income Tax Appellate Tribunal ( ITAT ) directed the Income-tax Assessing Officer ( AO ) to allow the claim of the assessee under Section 54F of the Income Tax Act,1961 as the assessee has fulfilled the necessary conditions required under the aforementioned section. The Tribunal upheld full deduction made for purchase of property in wife’s name out of bank loan.
The assessee, Velayutham Surya Narayanan had sold vacant land in Neelangarai for Rs.184 Lacs on 12-08-2015. The assessee claimed a deduction under section 54F of Rs.162.30 Lacs when they bought a residential property in Pudupakkam Village. This purchase included Rs. 70.50 Lacs for the land (sale deed dated 04-05-2016) and Rs. 84.47 Lacs for building a villa (construction agreement dated 25-03-2016) with M/s Isha Homes (India) Pvt. Ltd.
Upon poring over the important documents it was found that the said deed and the construction deed were in the name of the assessee’s wife. It was also found that the assessee’s wife was sanctioned with a bank loan of Rs.126 Lacs by The Karur Vysya Bank Ltd. and the property was exclusively bought under the name of the assessee’s wife who was separately assessed to tax.
The AO denounced the deduction claimed by the assessee. Even though the assessee cited various judicial decisions to support the claimed deduction it was rejected by the AO by referring to the Chennai tribunal’s decision in D. Devadass, wherein the deduction was denied because the investment was made in the name of the assessee’s unmarried daughter. Thus the deduction was denied and an assessment was framed, raising a demand against the assessee. The CIT(A) also agreed with the AO’s decision. The assessee filed an appeal upon being dissatisfied with the decision.
The two-member bench of Manu Kumar Giri (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member) found that the assessee has taken into consideration the necessary conditions that are required to claim the deduction under Section 54F other than the fact that the new investment was made under the name of the assessee’s wife.
Section 54F clearly explains the exemption for deduction and it was found that the aforementioned section does not require the same sale proceeds to be used for new investment and also allows reinvestment within certain time limits. The section is meant to be liberally interpreted. The decision made by the High Court of Delhi in CIT v. Ravinder Kumar Arora [2011] was referred to support the view of the tribunal.
The Tribunal allowed the claim made by the assessee under section 54F of the Act and ordered the AO to allow the Income tax deduction claimed by the assessee under section 54F of the Act. N. Arjun Raj appeared for the appellant and AR V Sreenivasan appeared for the respondent.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
