2018 (12) TMI 908 - AT - Income Tax

Denial of deduction claimed u/s 54 - purchase of new property/flat is in the name of assessee s wife and adult daughter and not in assessee s own name - Held that - Hon ble Bombay High Court in the case of Prakash 2008 (9) TMI 234 - BOMBAY HIGH COURT had an occasion to interpret the provisions of Section 54/54F and held that for claiming deduction under the aforesaid provisions the new house property must be owned by the assessee and/or having legal title over the same. Therefore, if the new house property in respect of which the assessee has claimed deduction under section 54/54F of the Act is not purchased in the name of the assessee, no deduction under the said provisions can be claimed. Thus in the present case since the purchase of new property/flat is in the name of assessee s wife and adult daughter and not in assessee s own name, the assessee is not eligible to claim deduction under section 54 of the Act - decided against assessee.

Summary

Issues:
1. Delay in filing the appeal.
2. Denial of deduction claimed under section 54 of the Income Tax Act, 1961.

Analysis:
1. Delay in filing the appeal:
The appeal was filed with a delay of 80 days. The Tribunal, after considering the reasons for the delay as explained by the assessee, condoned the delay and proceeded to hear the appeal on its merits.

2. Denial of deduction claimed under section 54:
The dispute in the appeal revolved around the denial of deduction claimed under section 54 of the Income Tax Act, 1961. The assessee had sold a property but did not offer any capital gain initially. The Assessing Officer (AO) reopened the assessment and calculated the long term capital gain. The assessee contended that the cost of acquisition should be higher than what was considered by the AO and that the benefit under section 54 should be allowed as the capital gain was reinvested in a new property. However, the Commissioner of Income Tax (Appeals) denied the deduction under section 54 as the new property was purchased in the name of the assessee's wife and adult daughter, not in the assessee's name.

3. Legal Interpretation:
The Tribunal analyzed whether the assessee was eligible to claim deduction under section 54 for the investment made in a property purchased in the name of the wife and adult daughter. The Tribunal referred to Section 54 of the Act, which allows deduction if the capital gain from the sale of the original asset is invested in a new asset. The Tribunal acknowledged that the source of investment was clear and that the original asset was owned by the assessee and his wife. However, following the decision of the Hon'ble Bombay High Court in a similar case, the Tribunal held that for claiming deduction under section 54, the new property must be owned by the assessee or have legal title over it. Since the new property was not purchased in the name of the assessee but in the name of the wife and adult daughter, the Tribunal upheld the denial of deduction under section 54.

4. Decision:
Ultimately, the Tribunal dismissed the appeal filed by the assessee, upholding the decision of the Commissioner of Income Tax (Appeals) to deny the deduction claimed under section 54 of the Income Tax Act, 1961. The judgment was pronounced in open court on 30th November 2018.