The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) consisting of Dr. S. Seethalashmi (Judicial Member) and Rathod Kamlesh Jayantbhai (Accountant Member) held that the husband was entitled to a capital gain exemption for assets bought in the name of the wife.
The assessee, Kaushlendra Singh, sold immovable property for a consideration of Rs.14,75,000. The value of which was evaluated at Rs. 14,79,960 by the Stamp Duty Authority. Out of sale consideration, the assessee made an investment in the purchase of a new residential house property in the name of his wife within the prescribed time limit as prescribed under the provisions of section 54F of the Income Tax Act.
The assessee claimed exemption under section 54F of the Income Tax Act. Consequently, no capital gain was chargeable under the head "Long-term capital gain on the sale of immovable property." The AO, while completing the assessment, disallowed the exemption claimed under section 54F. The AO added the amount to the total income of the assessee as a long-term capital gain.
The AO held that since the assessee made an investment in immovable property in the name of his wife and the assessee and his wife are different persons as well as separate assessees, the deduction claimed under section 54F was not allowable to the assessee.
Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT (A). The CIT (A) rejected the arguments and submissions made by the assessee.
The assessee argued that only the assessee's investment in the purchase of a new residential house in the name of his wife could justify the denial of the deduction claimed under section 54F of the Income Tax Act. Thus, it was evident that the CIT (A) was not justified in not allowing the exemption claimed under section 54F.
The ITAT observed that the assessee claimed exemption against the investment of a new residential house in the name of his wife, which is justifiable.
"We observed that the exemption claimed u/s 54F of the Act on this account is Rs. 6,33,190/-. It is further noticed that the Assessing Officer has not disputed the purchase of a new house in the name of the wife of the assessee, though the claim was denied by the AO . Therefore , the claim of deduction u/s 54F of the Act cannot be denied merely on the ground that the new residential house was purchased in the name of the assessee's wife when the investment made by the assessee from the sale proceeds of the existing asset and yielded a capital gain from the said transactions," the ITAT added.
Case Title: Kaushlendra Singh Versus ITO
Citation: ITA. No. 191/JP/2021
Counsel For Appellant: C.P. Chawla (ITP)
Counsel For Respondent: Runi Pal (Addl.CIT)