2024 (8) TMI 418 - AT - Income Tax

Exemption/deduction u/s 54F - new investment has been made in the name of his wife - HELD THAT - As per the provisions of Sec.54F, the assessee could purchase new house within a period of one year before or two years after the date on which the transfer has taken place. Alternatively, the assessee could construct new house within a period of three years from the date of transfer. In such a scenario, in our considered opinion, there is no requirement that the same sale proceeds should have been utilized to make the new investments. In a case, where the assessee purchases new house within one year before the date of transfer, he would not be in a position to utilize the same sale proceeds which would accrue to him in future. Therefore, this logic of lower authorities that the same money should have been utilized to make the new investments does not find our acceptance. The decision of C. Aryama Sundaram 2018 (8) TMI 864 - MADRAS HIGH COURT supports our view. Investment has been made in the name of assessee s wife out of Bank Loan - As settled position that the provisions of Sec. 54F are beneficial provisions and should be given a liberal construction to the maximum extent possible. AR has placed on record bank statements of the assessee. It could be seen that the assessee himself has paid an amount of Rs. 20 Lacs to the builder on 22-03-2016 towards cost of construction of new property. The various payments to sub-registrar have also been paid on 24-03-2016 from the same bank account. The same lend certain credence to the claim of the assessee. The assessee and his wife would have commonality of interest to make investment in new house. We are of the considered opinion that the assessee would be eligible to claim the said deduction. The decision of Ravinder Kumar Arora 2011 (9) TMI 343 - DELHI HIGH COURT supports our view. In this case, the investment was made by the assessee jointly with his wife. AO restricted the deduction to the extent of 50%. Tribunal allowed full deduction and Hon ble High Court upheld the action of Tribunal. We are of the considered opinion that similar ratio would apply here. Therefore, we direct AO to allow the claim of the assessee.

Summary

Issues:
- Eligibility of the assessee to claim deduction u/s 54F

Analysis:

Issue: Eligibility of the assessee to claim deduction u/s 54F

The appeal before the Appellate Tribunal ITAT Chennai pertained to the eligibility of the assessee to claim deduction under section 54F of the Income Tax Act for the Assessment Year 2016-17. The assessee had sold vacant land and reinvested the proceeds in a residential property, but the investment was made in the name of the assessee's wife. The Assessing Officer had denied the deduction on the grounds that the investment was not made in the assessee's name, and the Commissioner of Income Tax (Appeals) upheld this decision. The main contention was whether the assessee could claim the deduction u/s 54F despite the investment being in the name of the spouse.

The Appellate Tribunal considered the facts and relevant dates of the case. It noted that the assessee met all other conditions to claim the deduction u/s 54F except for the investment being in the name of the wife. The Tribunal interpreted the provisions of section 54F, which allow for the purchase or construction of a new house within specified time frames. It opined that there was no requirement for the sale proceeds to be utilized for the new investment, especially in cases where the new house was purchased before the sale of the original asset. The Tribunal cited the decision of the High Court of Madras in a similar case to support its view.

Another objection raised by the revenue was that the investment was made in the wife's name using a bank loan. However, the Tribunal emphasized that section 54F should be construed liberally to benefit the taxpayer. It considered the bank statements provided by the assessee, showing payments made towards the construction of the new property. The Tribunal found that there was a common interest between the assessee and his wife in making the investment, and therefore, the assessee should be eligible to claim the deduction. It referenced a case where the investment was made jointly by the assessee and his wife, and the High Court upheld the full deduction. The Tribunal directed the Assessing Officer to allow the claim of the assessee based on these findings.

Ultimately, the Appellate Tribunal allowed the appeal in favor of the assessee, ordering the Assessing Officer to grant the deduction under section 54F. The judgment was pronounced on 3rd June 2024.