Capital Gain Exemption not allowable to House purchased in Wife’s Name: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Pune bench has held that the capital gain exemption under section 54F of the Income Tax Act, 1961 shall not be allowable to a new house purchased in the name of wife.

The assessee, Mr. Dilip B Mundada sold his residential property and purchased a new house in the name of his wife for her security. While filing the income tax returns for the relevant year, the assessee claimed that the amount for Flat No. 401 was invested by him. The Assessing Officer observed that the documents filed in the paper book that the payments for Flat No.401 were made by Mrs. Uma Mundada and denied exemption to the assessee.

A bench of Shri S.S.Godara, Judicial Member and Dr. Dipak P. Ripote, Accountant Member observed that the Flat No.401 was admittedly purchased vide registered Purchase Agreement dated 11/08/2011 for total consideration of Rs.40,00,000/-. The stamp duty and registration charges had been paid by Mrs. Uma Mundada on the total value of Rs.40,00,000/-.

“Thus, the Flat No.401 has been registered in the records of Registrar of Properties in the name of Mrs. Uma Mundada on 11/08/2011,” the Tribunal said.

The Tribunal observed that “the section 54F have two important phrases, “an assessee being an individual” and “the assessee has purchased”. Thus the section starts with the word “an assessee being an individual” and then refers to the same assessee as “the assessee has purchased” means the assessee who has sold the asset has to purchase the new asset withing the specified time period. The section 54F uses the word, “purchased a residential house”, here the word purchased is used, it does not mean invested. The purchase has to be a legal purchase. To have an effective purchase the name of the person must be mentioned in the document. In this case the purchase agreement is in the name of the wife of the assessee who is an independent assessee earning income independently. We find strength from the order of Hon’ble Rajasthan High Court.”

Denying the exemption to the assessee, the Tribunal held that “the new house should have been purchased by the assessee. The section 54F does not say that the assessee shall invest in the new house but it says the assessee shall purchase new house. Therefore, even on this ground the rejection of claim of section 54F for the Flat No. 401 is justified. Therefore, we hold that the Assessing officer has rightly restricted assessee’s claim for deduction u/s 54F for Flat No.402 only.”

Shri Pramod S Shingte appeared for the assessee.

To Read the full text of the Order CLICK HERE

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