6 May 2022 4:15 AM GMT
The Banglore Bench of the Income Tax Appellate Tribunal (ITAT) headed by N.V. Vasudevan (Vice-President) and B.R. Baskaran (Accountant Member) has ruled that the capital gain exemption cannot be denied to the wife for the mere presence of the husband's name in the purchase document.The appellant/assessee is an individual, and she filed her return of income for the year...
The Banglore Bench of the Income Tax Appellate Tribunal (ITAT) headed by N.V. Vasudevan (Vice-President) and B.R. Baskaran (Accountant Member) has ruled that the capital gain exemption cannot be denied to the wife for the mere presence of the husband's name in the purchase document.
The appellant/assessee is an individual, and she filed her return of income for the year under consideration, declaring a total income of Rs. 9,06,860. The assessee had earned long-term capital gain on the sale of land and claimed exemption under section 54F of the Income Tax Act from it to the extent of Rs. 1,56,33,870. The assessee offered a net long-term capital gain of Rs. 51,355.
The AO examined the long-term capital gain declared by the assessee. It was noticed that the assessee, along with 3 other persons, had sold a property for a consideration of Rs. 5.35 crores. The assessee's share of the consideration was Rs. 1,60,50,000/-. The assessee claimed that she had purchased a residential house property in a project named "M/s. Prestige Ozone" for a sum of Rs. 1,72,29,993/-. Accordingly, she claimed a deduction under section 54F of the Income Tax Act to the extent of Rs. 1,56,33,870.
The AO examined the details of the purchase of the property at Prestige Ozone. The AO noticed that the initial agreement was entered into by the assessee's husband, Y.C. Rami Reddy, with M/s Prestige Properties for the construction of a building at a cost of Rs. 46,35,610. Subsequently, a sale deed was registered for the purchase of plot No.8, having an extent of Rs.6,108 sq.ft. for a consideration of Rs.39,67,933, on which the construction has happened. The sale deed was executed in favour of Y.C. Rami Reddy and the assessee. The assessee claimed that she had reimbursed all the payments made by her husband to him and she had also incurred further expenses for interior design, etc. Accordingly, the assessee claimed that the entire cost of purchase was met by her, and the property was purchased by her from her husband.
The AO examined the claim of the assessee for a deduction under section 54F of the Income Tax Act. The AO took the view that the assessee was not eligible for a deduction under section 54F of the Income Tax Act on the grounds that she had already held a 50% share in the Prestige Ozone building and, hence, there was no necessity for her to pay the full consideration of Rs. 1.72 crores to her husband.
The assessee challenged the order of the AO before the CIT (A). The CIT (A) held that the expenditure incurred on interiors, renovation, furnishing, etc. after the registration of the plot, i.e., after 24.2.2007, cannot be taken as part of the cost of acquisition. On October 27, 2007, the assessee purchased only 50% of the rights from her husband, and she already held 50%.The release deed given by the husband of the assessee was registered on 25.1.2010, which is 3 years from the date of the sale of the original property. Accordingly, the CIT (A) took the view that, irrespective of the amount of payment made to her husband, the assessee can be said to have acquired only 50% of the property on 25.1.2010, which falls within 3 years from the date of sale of the original property. As a result, he concluded that the deduction under section 54F of the Income Tax Act should be limited to 50% of the cost of acquiring an asset.
The issue raised was whether the CIT (A) was justified in ignoring expenditure of Rs.81,71,910/- incurred on the new house property for computing deduction under section 54F of the Income Tax Act.
The ITAT observed that the assessee's husband had advanced money initially. Subsequently, the assessee has reimbursed the money to her husband, and finally, it was the assessee who actually gave funds for the acquisition of the property.
"We notice that the CIT (A) has taken the view that the funds given by the assessee should not be taken into account and, in our view, the said view of the CIT (A) is not, in our view, correct in law," the tribunal said.
The ITAT ruled that the deduction under section 54F of the Income Tax Act only induces an assessee to make an investment in residential house property. If the assessee has given money for the acquisition of the property, either directly to the builder or as reimbursement to her husband, then the assessee should be given the benefit of a deduction under section 54F of the Act for the cost of acquisition.
Case Title: Y. Manjula Reddy Vs. ITO
Citation: ITA No.1780/Bang/2013
Counsel For Appellant: A.R. Padam Chand Khincha
Counsel For Respondent: D.R. Sankar Ganesh K.
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