Joint Purchase with Son-in-Law Does Not Bar Full Deduction u/s 54: ITAT Allows ₹3.67 Cr Exemption [Read Order]
The Tribunal upheld the CIT(A)’s finding that the assessee had contributed over 90% of the purchase consideration and was therefore entitled to full deduction. The tribunal confirmed the cost of acquisition adopted by the assessee, based on a registered valuer’s report and stamp duty authority certificate, rejecting the AO’s reliance on the ready reckoner value.
![Joint Purchase with Son-in-Law Does Not Bar Full Deduction u/s 54: ITAT Allows ₹3.67 Cr Exemption [Read Order]](https://images.taxscan.in/h-upload/2025/11/12/2104639-joint-purchase-full-deduction-itat-exemption-taxscan.webp "Joint Purchase with Son-in-Law Does Not Bar Full Deduction u/s 54: ITAT Allows ₹3.67 Cr Exemption [Read Order]")
In a dispute over the quantum of deduction under Section 54 of the Income Tax Act, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) dismissed the Revenue’s appeal challenging the relief granted to the assessee on the ground that the joint purchase of property with son-in-law doesn't bar deduction under Section 54.
The appeal filed by the Revenue was directed against the order of the CIT(A) for AY 2021-22. The Revenue challenged the CIT(A)’s acceptance of the cost of acquisition adopted by the assessee and the allowance of full deduction under Section 54, claiming that the property was jointly held with her son-in-law.
The AO had restricted the Section 54 deduction to 50% of the investment, citing joint ownership of the new property with the assessee’s son-in-law, and had considered the cost of acquisition based on the ready reckoner value as on 01.04.2001.
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The assessee contended that she had invested ₹3.67 crore of the total ₹4.17 crore consideration in the new property and that the purchase agreement did not specify ownership percentages, making the AO’s assumption arbitrary.
Before the CIT(A), the assessee submitted additional evidence, including a registered rectification deed specifying the proportionate share in the property and a stamp duty authority certificate indicating the fair market value of the original asset as of 01.04.2001.
She also relied on a valuation report obtained from a government-registered valuer, which accounted for market conditions and comparable sales, justifying the cost of acquisition she had adopted.
The CIT(A) carefully examined the submissions and the documentary evidence and requested a remand report from the AO, which was not furnished despite ample opportunity. Considering the merit of the assessee’s submissions and the investment actually made, the CIT(A) allowed the full Section 54 deduction of ₹3.68 crore.
The Revenue argued before the Tribunal that the CIT(A) acted prematurely without the remand report, relied on an amended purchase deed presented during appeal proceedings, and incorrectly allowed valuation exceeding the ready reckoner limit under the proviso to Section 55(2)(b).
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It was also contended that Section 54 benefits should accrue only for the assessee’s own benefit, not for a jointly purchased property.
The assessee’s representative highlighted that the AO did not dispute the amount invested by her and that the valuation report and stamp duty certificate substantiate the cost of acquisition.
Upon reviewing the records, the Tribunal noted that the AO had not challenged the actual investment made by the assessee and that the purchase agreement initially did not mention ownership shares.
The two-member bench of Amit Shukla (Judicial Member) and Padmavathy S ( Accountant Member) found that the CIT(A) had correctly considered the amended rectification deed, verified valuation evidence, and the actual amount invested to allow the full deduction.
The fair market value adopted by the assessee was consistent with the stamp duty authority certificate, and there was no violation of the proviso to Section 55(2)(b). The procedural objection regarding the remand report was also found to be without merit.
In conclusion, the Tribunal dismissed the Revenue’s appeal, upholding the CIT(A)’s order and allowing the assessee the full Section 54 deduction of ₹3.68 crore, based on the actual investment made and supported valuation, despite joint ownership with her son-in-law.
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