2018 (9) TMI 1700 - HC - Income Tax

Eligibility for deduction u/s. 54F - investment in new asset was not in the name of assessee HUF contrary to provisions of section 54F but in the name of two of the members of the HUF.- Held that - The materials on record would suggest that there was no dispute at the hands of the Revenue that the sale consideration arising out of the sale of the capital asset was used for acquisition of a new asset and that such newly acquired asset was also shown in the accounts of the HUF. Revenue s sole objection is that the sale deed was not executed in the name of the HUF but was in the name of two of the members of the HUF. Tribunal was right in coming to the conclusion that this was substantial compliance with the requirement of section 54F of the Act when neither the source of acquisition of the new capital asset nor the account of such new asset in the name of the HUF are doubted. Mere technicality that the sale deed was executed in the name of member of the HUF rather not HUF, would not be sufficient to defeat the claim of deduction. By mere names of the purchasers in the sale deed, the rights of the HUF and other members of the HUF do not get defeated. If at all, the persons named in the sale deed hold the property of the trust for and on behalf of HUF and the other members of the HUF. In the present case, the capital asset was sold by the HUF and purchased by the HUF as reflected in the accounts. The names of two members of the HUF shown in the sale deed was only a cosmetic in nature. - Decided against revenue

Summary

Issues:
- Eligibility for deduction u/s. 54F of the Income Tax Act when the investment in a new asset was not in the name of the assessee HUF as per provisions of section 54F.

Analysis:
1. Issue of Deduction under Section 54F:
- The case involved a dispute regarding the eligibility of a Hindu undivided family (HUF) for deduction under section 54F of the Income Tax Act. The HUF had sold a capital asset and claimed exemption for the capital gain by investing in a new residential house not in the name of the HUF but in the names of two HUF members.

2. Assessing Officer's Decision and Tribunal's View:
- The Assessing Officer initially denied the exemption, stating that the new residential house should have been purchased in the name of the same entity that sold the capital asset. However, both the CIT (A) and the Tribunal reversed this decision. The Tribunal observed that the investment in the new house, although in the names of HUF members, was from the resources of the HUF and was declared in the HUF's books of accounts.

3. Interpretation of HUF Law by the Tribunal:
- The Tribunal discussed the Hindu Law's perspective on HUF, emphasizing that a HUF has a separate status for income tax purposes. It noted that the property of the HUF can be held in the name of the Karta or HUF members, and a property can be held on behalf of the HUF or in individual capacity.

4. Judicial Precedents and Tribunal's Decision:
- The counsel for the Revenue cited judgments from different High Courts where exemptions were denied when the new asset was purchased in the name of a person other than the assessee. However, the Tribunal distinguished the present case, highlighting that the sale and purchase were by the HUF, with the names of members in the sale deed being cosmetic in nature.

5. Conclusion and Dismissal of Tax Appeal:
- The High Court upheld the Tribunal's decision, emphasizing that the sale proceeds were used for acquiring the new asset, which was reflected in the HUF's accounts. The Court found that the technicality of the sale deed being in the names of HUF members did not defeat the HUF's claim for deduction under section 54F. The Tax Appeal was dismissed based on the substantial compliance with the Act's requirements.