2017 (12) TMI 1769 - AT - Income Tax

Disallowance of exemption u/s 54F - residential house property purchased in the name of his wife - HELD THAT - In light of legal proposition so laid down in case of Mahadev Balai 2017 (1) TMI 183 - ITAT JAIPUR where the investment in the new house property has flown from the assessee, which is not in dispute in the instant case, merely for the reason that the new residential house property has been purchased by the assessee in the name of his wife, the same cannot be basis for the denial of deduction claimed u/s 54F of the Act. Regarding the second condition of claiming the deduction u/s 54F as have gone through the affidavit so filed by the assessee and are of the view that the same is clear and self-explanatory wherein the assessee has categorically stated that on the date of purchase of residential property, which happens to be the date prior to date of sale of the original asset, he didn t own any other house other than the new asset. In that view of the matter, the contention so raised by the ld AR is accepted. Assessee is held eligible for deduction under section 54F in respect of residential house property purchased in the name of his wife. - Appeal of the assessee is allowed.

Summary

Issues:
Challenge to disallowance of exemption claimed under section 54F of the Income Tax Act for the purchase of a residential property in the name of the assessee's wife.

Analysis:
1. Issue of Disallowance of Exemption under Section 54F:
- The assessee sold three agriculture lands and purchased a residential property in the name of his wife, claiming exemption under section 54F.
- The Assessing Officer disallowed the claim, stating that the property was purchased in the wife's name, not the assessee's, and questioned the ownership of multiple residential houses by the assessee.
- The assessee argued that the investment source was personal, citing relevant court decisions allowing deductions for investments made in the spouse's name.
- The CIT(A) upheld the disallowance based on a Rajasthan High Court decision, emphasizing a legal interpretation of the term "assessee."
- The assessee appealed, referencing recent court decisions supporting deductions for investments made in the spouse's name.
- The Rajasthan High Court ruled in favor of the assessee, emphasizing that the legislation does not specify the investment should be in the assessee's name, allowing the deduction for the property purchased in the wife's name.

2. Verification of Ownership of Residential Houses:
- The Assessing Officer raised concerns about the assessee's ownership of multiple residential houses, a condition for claiming the deduction under section 54F.
- The assessee provided an affidavit confirming single ownership of residential houses, which the CIT(A) did not dispute.
- The court accepted the affidavit as clear evidence, confirming that the assessee did not own more than one residential house at the time of the original asset's transfer, meeting the deduction condition.

3. Legal Precedents and Interpretations:
- The assessee relied on various court decisions supporting deductions for investments made in the spouse's name under section 54F.
- The court emphasized the need for a legal interpretation of the term "assessee," allowing deductions for investments made by the assessee, even if in the spouse's name.
- The court highlighted the legislative language's lack of specificity regarding the investment's ownership, leading to a decision in favor of the assessee.

In conclusion, the appellate tribunal allowed the assessee's appeal, granting the deduction under section 54F for the residential property purchased in the name of the assessee's wife, based on legal interpretations and supporting evidence provided during the proceedings.