2006 (9) TMI 565 - HC - Income Tax

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal disallowing exemption under Section 54F of Income Tax Act for investment in residential house in name of wife.

Analysis:
The appellant challenged the order of the Income Tax Appellate Tribunal disallowing exemption under Section 54F of the Income Tax Act for an investment in a residential house in the name of his wife. The assessing officer initially disallowed the exemption, which was upheld by the Appellate Authority. The Tribunal, in its order, noted the lack of documentary evidence regarding the purchase and valuation of the property, especially since it was in the name of the wife. The Tribunal held that ownership of the property by the wife precluded the appellant from claiming exemption. The appellant then filed affidavits asserting his ownership of the property despite it being in the wife's name. This led the Court to examine the legal concept of ownership in tax matters.

The Court considered the affidavits filed by both the appellant and his wife, which clearly stated that the property, though in the wife's name, was owned by the appellant. The Court noted that a benami transaction, where a property is purchased in the name of another, is not prohibited. Relying on the Supreme Court's interpretation of ownership in tax matters, the Court concluded that the appellant, as the beneficial owner, was entitled to the exemption under Section 54F of the Act. The Court emphasized that the appellant's right to receive income from the property in his own right established his ownership for tax purposes.

In light of the legal principles established by the Supreme Court and the evidence presented in the affidavits, the Court overturned the Tribunal's decision and granted the appellant the exemption under Section 54F of the Income Tax Act. The Court held that since the appellant was the beneficial owner of the property, despite it being in the wife's name, he met the criteria for exemption. The judgment favored the assessee, setting aside the Tribunal's order and directing the authorities to provide the exemption as per the Court's decision. The Court answered the question of law in favor of the assessee, concluding the case with no costs incurred.