2023 (1) TMI 720 - AT - Income Tax

Deduction claimed u/s 54 - assessee and her son have jointly invested the house property and are the joint owners of the house property having 50% right, title and interest over the property - Whether required under law that the house should be purchased in the name of the assessee only? - HELD THAT - The property has been acquired jointly by the assessee and her son further the sale proceeds from the old house were received by the assessee on 10/09/2013 whereas the payment were made to JP Greens in two installments on 30/08/2013 and on 07/09/2013. The amount have been paid from the joint account of the assessee along with her son. The assessee did not had any source of income to pay Rs. 1,00,00,000/- before she receives the sales proceeds from the old assets, there have been credit entries in the Joint Bank Account, which obviously was the income of assesse s son and the amount of Rs. 1,00,00,000/- has been paid from the income of the son. Since the assessee and her son have jointly invested the house property and are the joint owners of the house property having 50% right, title and interest over the property, the Assessing Officer is, therefore, correct in restricting the claim of the assessee u/s 54 by making an addition to the total income of the assessee. Therefore, we do not find any error or legal infirmity in the orders of the Lower Authorities. Thus, the grounds of appeal of the assessee dismissed.

Summary

Issues:
Assessment of capital gains, Restriction of exemption under section 54, Joint ownership of property, Legal validity of penalty proceedings.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2014-15, where the assessee raised various grounds challenging the additions made by the Assessing Officer (AO) under section 143(3) of the Income-tax Act, 1961. The primary contention was that the additions amounting to Rs 74,49,302 were not in accordance with the law and hence not sustainable. The AO had restricted the exemption under section 54 to 50% based on the ownership ratio of the property purchased jointly by the assessee and her son. The CIT(A) upheld the AO's decision, leading to the current appeal.

The facts of the case revealed that the assessee had sold a property and received sale proceeds in a joint account with her son, which were used to purchase another property jointly. The AO found that the son had significant deposits in the joint account, indicating the source of funds for the property purchase. The AO restricted the deduction claimed under section 54 to 50% due to the joint investment in the new property. The assessee argued before the CIT(A) that the property purchased need not be in the name of the assessee only to claim exemption under section 54.

The Tribunal noted that the property was acquired jointly by the assessee and her son, with funds from the joint account. The assessee did not have an independent source of income to make the initial payment for the new property, which was funded by the son's income. As both were joint owners with a 50% interest, the AO's decision to restrict the deduction was deemed correct. The Tribunal found no error in the lower authorities' orders and dismissed the appeal, upholding the addition of Rs 74,49,302 to the total income of the assessee.

In conclusion, the Tribunal affirmed the decision of the lower authorities regarding the restriction of exemption under section 54 due to joint ownership of the property and the source of funds used for the purchase. The appeal was dismissed, and the order was pronounced on 17th January 2023.