The Income Tax Appellate Tribunal (ITAT) Mumbai bench has held that no tax relief under section 54 can be granted to the assessee for the sale of an old property if the new property was purchased in the name of his wife and daughter.
The assessee sold his old residential property and purchased a new one in the name of his wife and daughter and claimed tax relief under section 54 of the Income Tax Act while filing returns. The Assessing Officer denied the claim of the assessee and assessed 50% of the long-term capital gain at the hands of the assessee.
As per Section 54 sub-section (1) of the Act, the capital gain derived by the assessee from the sale of the original asset if invested by him in the purchase of a new asset within the stipulated period would be eligible for deduction under the said provision.
The assessee contended that section 54 is a beneficial provision it should be construed liberally and benefit under the section should be allowed to the assessee. It was further submitted that the interpretation of Section 54 and 54F no way suggest that the new house property, wherein, the assessee invested the capital gain has to be purchased in the name of the assessee. According to him, the provision only requires the assessee to invest the capital gain in the purchase of a new house property.
The Tribunal noticed the decision of the Bombay High Court in the case of Prakash interpreted the said provision and held that for claiming deduction under the aforesaid provisions the new house property must be owned by the assessee and/or having legal title over the same.
“Therefore, as per the ratio laid down in the aforesaid decision of the Hon’ble Jurisdictional High Court if the new house property in respect of which the assessee has claimed deduction under section 54/54F of the Act is not purchased in the name of the assessee, no deduction under the said provisions can be claimed. Though I must observe, there are judicial precedents holding contrary view including the decision of the Hon’ble Delhi High Court in the case of ITO vs. Kamal Waha 351 ITR 4. However, since I am bound by the decision of the Hon’ble Jurisdictional High Court rendered in the case of Prakash (supra), following the ratio laid down therein I hold that since the purchase of new property/flat is in the name of assessee’s wife and adult daughter and not in assessee’s own name, the assessee is not eligible to claim deduction under section 54 of the Act,” the Tribunal said.Subscribe Taxscan AdFree to view the Judgment