The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) allowed deduction under Section 54 of the Income Tax Act with respect to the new residential house property purchased in the name of the wife.
In the return of income for the Assessment Year 2016-17, the Gopalkrishna Pandu Shetty, claimed deduction under Section 54 of the Income Tax Act in respect of payment of INR 98,91,500/- made towards the purchase of new residential house property. It is admitted position that aforesaid payment was sourced from aggregate sale consideration of INR 1,71,00,000/- [INR 81,00,000/- plus INR 90,00,000/-] received by the Appellant from the sale of two residential properties owned by the Appellant
Since the new residential house property was registered in the name of the wife of the Appellant, the Assessing Officer denied the claim of deduction under Section 54 of the Income Tax Act and brought to tax INR 1, 35, 14,034/- as Long Term Capital Gain ( LTCG ) in the hands of the Appellant vide Assessment Order, dated 19/12/2018, passed under Section 143(3) of the Income Tax Act.
Mr. Manish Sheth submitted that aforesaid agreement was actually executed by the Appellant on behalf of the seller .The Appellant was told that the Appellant could not execute the aforesaid agreement on behalf of the seller as well as the purchaser. Therefore the new residential house property was purchased in the name of Appellant’s wife even though the entire sale consideration was paid by the Appellant.
Further vehemently contended that the sole reason for denial of deduction claimed by the Appellant under Section 54 of the Income Tax Act was that the new residential house property was in the name of the wife of the Appellant. It was submitted that the Delhi High Court had, in the case of Commissioner of Income Tax Vs. Kamal Wahal had allowed the claim of deduction under Section 54F of the Income Tax Act in respect of a residential house property purchases of an assessee in the name of his wife.
Per contra, Manish Ajudiya relied upon the decision of Bombay High Court in the case of Prakash s/o Timaji Dhanjode (supra) on which reliance was placed by the CIT (A) while confirming the disallowance of deduction claimed by the Appellant under Section 54 of the Income Tax Act.
The bench observed that for the purpose of Section 54F of the Income Tax Act was that deduction under Section 54F of the Income Tax Act was to be allowed in case of purchase of new residential house property purchased by an assessee in the name of his wife.
In the present case also, the two member bench of the tribunal comprising Prashanth Maharishi (Accountant member) and Rahul Choudhary (Judicial member) there was no dispute that the entire consideration for the purchase of new residential house property was sourced from aggregate sale consideration received by the Appellant from the sale of two residential properties owned by the Appellant.
The Appellant has also been able to provide a reasonable explanation for purchase of new residential house property in the name of his wife. ITAT holds that the Appellant was entitled to claim deduction under Section 54 of the Income Tax Act in respect of the new residential house property purchased in the name of his wife. Accordingly, the present appeal preferred by the Assessee was allowed.
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