Wife eligible for Capital Gain Exemption If Money given for Acquisition of Property either directly to Builder or as Reimbursement to Husband [Read Order]

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the wife is eligible for capital gain exemption in respect of money given for the acquisition of the property either directly to the builder or as reimbursement to her husband.

The agreement for the purchase of property was first entered by the assessee’s husband in 2004 and had advanced money initially. Subsequently, the assessee has reimbursed the money to her husband and finally, it is the assessee who has actually given funds for the acquisition of the property. However, the sale agreement for transfer of plot was registered only on 24.2.2007 and it was registered in the name of the assessee and her husband. The Assessing Officer has taken the view that the assessee was already entitled to 50% of the right in the property. The first appellate authority confirmed the order.

The Tribunal bench comprising Shri N.V. Vasudevan, Vice President and Shri B.R. Baskaran, Accountant Member has observed that the Karnataka High Court has held in the case of Mrs. Jennifer Bhide that the deduction under section 54 of the Act should not be denied merely because the name of assessee’s husband is mentioned in the purchase document, when the entire purchase consideration has flown from the assessee.

“In the instant case also, the plot was purchased in the name of the assessee and her husband. Hence, what is required to be examined is the question, viz., who has funded the acquisition?,” the Tribunal said.

Allowing relief to the assessee, the Tribunal held that “the deduction under section 54F of the Act only induces an assessee to make investment in residential house property. If the assessee has herein given money for acquisition of the property either directly to the builder or as reimbursement to her husband, then the assessee should be given benefit of deduction under section 54F of the Act for the cost of acquisition.”

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