Opinion Of Eminent Legal Luminaries On Controversial Issues

Whether Benefit of Section 54F Is Available If Purchased In Joint Names?

QUERY: As per sections 54/54F of the Act capital gain arising from sale of a residential house is exempt if the amount of capital gain is invested in purchase or construction of another residential house by the assessee. Whether the exemption is available if the new house is purchased by the assessee jointly in the name of wife?
ANSWER: In CIT v. Ravinder Kumar Arora [342 ITR 38 (Del.)], the facts were, the assessee claimed exemption of capital gain to the extent of Rs. 3,18,59,276/- under section 54F of the Act on account of purchase of a new house property, out of the total gain arising from sale of land. The AO rejected the claim because the house had been purchased in the joint names of the assessee and wife. The Tribunal found that it was the assessee who independently invested in the purchase of new residential house though in his own name but along with the name of his wife also and that it was the assessee who paid stamp duty and corporation tax at the time of registration of the sale deed of the house so purchased and had also paid commission and legal expenses in connection with the purchase of the house. The Tribunal further recorded that the whole of the purchase consideration had been paid by the assessee and not even a single penny had been contributed by the wife in the purchase of house. The Tribunal held that the assessee was entitled to the exemption.

On appeal to Delhi High Court, it held that section 54F of the Act, is beneficial provision which should be interpreted liberally in favour of exemption / deduction to the tax payer and deduction should not be denied on hyper technical ground. The condition stipulated in section 54F stood fulfilled. It would be treated as the property purchased by the assessee in his own name. Merely because he had included in name of his wife and the property purchased in the joint names would not make any difference. The assessee was entitled to exemption under section 54F.

This view has been reiterated by the Delhi High Court in CIT v. Kamal Wahal [351 ITR 4]
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