2024 (10) TMI 1558 - AT - Income Tax

LTCG - Exemption u/s 54F - transaction of the flat related to sale and purchase was done in his wife s name and assessee was not holding any property - Income of individual to include income of spouse, minor child, etc - AR stated that the assessee s wife is dependent, and the spouse s income is declared in the husband s return filed under section 139(1) and assessee is the beneficial owner of the property - whether the assessee can declare the income of capital gain of his wife in his return u/s 64? - HELD THAT - The section 64(1) prevails that the inclusion of the dependent s income u/s 64 of the Act is justified. In other issue the investment of new assets in the name of the wife is fully covered by the order of Simran Bagga 2024 (1) TMI 271 - ITAT DELHI We respectfully follow the order of Simran Bagga (supra). Contravention of section 54F relating to investment of capital gain in two flats not in single flat - As related to investment in two flats, which contravened the provisions of section 54F the said amendment of one house is implemented with effect from 01/04/2015, so the relevant section 54F is not application for the A.Y. 2014-15. AR placed purchase deeds of two flats, wherefrom it is clear that both the flats are adjacent flats and not in the open sky. So, both the units are taken as a single unit which is not contrary to section 54F of the Act. We respectfully relied on the order of D. Ananda Basappa 2008 (10) TMI 99 - KARNATAKA HIGH COURT We find that the assessee is eligible for deduction u/s 54F for purchasing two new flats in the name of his wife. We note that the sale and purchase of the flats are executed in the name of assessee s wife. DR has not pointed out any contrary decision against the proposition laid down above. We find no justification in rejection of claim u/s 54F - addition amount is deleted. Assessee appeal allowed.

Summary

Issues:
- Disallowance of exemption under section 54
- Application of provisions of section 64(1) of the Income-tax Act
- Eligibility for exemption under section 54F
- Contravention of section 54F relating to investment in two flats

Detailed Analysis:
The judgment involved an appeal against an order passed under section 250 of the Income-tax Act, 1961 for Assessment Year 2014-15. The assessee contested the disallowance of exemption under section 54 and the application of section 64(1) of the Act. The assessee, a salaried individual in the merchant navy, purchased a flat in 1991 in his wife's name, sold it in 2013, and bought two new flats in his wife's name. The Assessing Officer rejected the claim under section 54F as the property was not held in the assessee's name. The Commissioner of Income Tax (Appeals) upheld the assessment order, leading to the appeal before the tribunal.

The assessee argued that the entire investment was made by him in his wife's name, justifying the claim under section 54F. The assessee relied on judicial precedents emphasizing the liberal interpretation of provisions like section 54F. The tribunal considered relevant case laws and provisions to determine the eligibility for exemption. The tribunal noted that the amendment restricting investment to one flat came into effect from 01/04/2015, making the purchase of two adjacent flats permissible under section 54F for the relevant assessment year. The tribunal also highlighted that the spouse's income was declared in the husband's return, justifying the inclusion of dependent's income under section 64 of the Act.

The tribunal observed that the investment in two adjacent flats did not contravene the provisions of section 54F, especially considering the intention to treat them as a single unit. Relying on the order of a co-ordinate bench and a High Court decision, the tribunal allowed the appeal, deleting the addition made by the Assessing Officer. The tribunal emphasized the lack of contradictory decisions against the assessee's position and set aside the appeal order, granting the assessee the deduction under section 54F.

In conclusion, the tribunal allowed the appeal, holding that the assessee was eligible for the exemption under section 54F for purchasing two new flats in his wife's name. The tribunal highlighted the compliance with relevant provisions and case laws, ultimately deleting the impugned addition to the assessee's income.