The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the capital gain exemption under section 54B of the Income Tax Act, 1961 cannot be claimed for the agricultural land purchased in the name of the wife of the assessee.
The assessee, Mr. Karamvir, while filing his return of income has claimed deduction of Rs.65,15,210/-under section 54B of the Income Tax Act, 1961. The assessee has purchased four properties out of which two of the properties were purchased on 24 .01.2012 and on 16.08.2012 amounting to Rs.35,83,277/- and Rs.14,63,929/- in the name of the assessee’s wife.
The issue before the Tribunal was whether the properties purchased by the assessee in the name of the assessee’s wife are eligible for deduction u/s 54B or not.
A bench of Sh. Saktijit Dey, Judicial Member and Dr. B. R. R. Kumar, Accountant Member has observed that “the Hon’ble Karnataka High Court in the case of Antony Parakal Kurian Vs. ACIT [2022] 138 taxmann.com 440 held that the phrase ‘owns’ used by the proviso (a)(i) to section 54F(1) plays a significant role . What is relevant is the assessee should not own more than one residential house, other than the new asset, on the date of transfer of the original asset. The Hon’ble Court held that Section 54F encourages investment in a residential house. For qualifying for the exemption under section 54F, what is mandatory is the investment to be made in a residential house in the name of the assessee only. Section 54F shouldn’t be construed liberally to give wide and liberal interpretation to the word ‘assessee’ so as to include the assessee’s legal heirs as well.”
Upholding the order of the first appellate authority, the bench observed that “Hence, keeping in view the facts of the case, provisions of the Act and the legal proposition, we decline to interfere with the decision of the ld. CIT(A) in disallowing the claim of deduction u/s 54B with regard to the agricultural land purchased on 24.01.2012 and on 16 .08.2012 amounting to Rs .35,83,277/- and Rs.14,63,929/-.
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