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May 23, 2022

Investments done in the name of Wife, Husband might claim a capital gain exemption

by CA Shivam Jaiswal in Income Tax

Investments done in the name of Wife, Husband might claim a capital gain exemption

Facts and Issue of the case

The assessee  sold immovable property situated Sitapura, Jaipur for sale consideration of Rs.14,75,000/- on 11/10/2010. The value of which evaluated at Rs.14,79,960/-  by the Stamp Duty Authority. Out of sale consideration  of Rs. 14,75,000/-  the assessee made investment of Rs. 7,48,000/- in the purchase  of new residential house property in the name of his wife namely, Smt. Garima Singh, within the prescribed time limit as prescribed under the provisions of section  54F of the Act. Accordingly,  the   assessee claimed exemption u/s 54F of the Income tax Act. Consequently, no capital gain was chargeable under the head Long term capital gain on sale of above immovable property. Despite these facts, the AO while completing assessment u/s 143(3)/147 of the Act on 08/12/2018 disallowed the exemption claimed u/s 54F of the Act at Rs. 6,33,190/- and added the same to the total income of the assessee as long-term capital gain, holding/observing  that since the assessee  made investment  in immovable property in the name of his wife and the assessee  and his wife are different persons as well as separate assessee  the deduction claimed u/s 54F of the Act, is not allowable to the assessee.

The AO arrived the findings as held that the assessee did not file her return of income voluntary as per provision of section 139 of the IT Act, 1961 besides having taxable income for A.Y. 2011-12, therefore, penalty proceedings u/s 271F of the Income Tax Act, 1961 is hereby initiated .The AO findings are that total income as assessed at Rs. 7,98,730/- u/s 143(3) read with section 147 of the Income Tax Act, 1961. ITNS-150 showing calculation of fax and interest chargeable, if any, is attached herewith part of this order. The penalty proceeding u/s 271F and 271(1)(c) of the IT Act is hereby initiated.

Being aggrieved by the assessment order, the assessee preferred an appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee has reiterated its arguments .The ld. CIT(A) for the reasons stated in his order has rejected the arguments and submissions made by the assessee. Aggrieved by the CIT(A) order, the assessee is in appeal before us. Before the CIT (A), the assesee has reiterated that his submissions and which was not taken on record by the CIT (A). The Ld. DR, on the other hand strongly supporting the order of the CIT(A) submitted that there is no merit in arguments taken by the Ld. AR of the assessee and the AO has rightly taken has a fit case for confirming the addition made by the AO.

Observation of the court

The court has heard both the parties, perused materials available on record. The assessee claimed exemption U/s 54F of the Act against the investment of new residential house in the name of his wife is justifiable . The assesee sold immovable property for sale consideration of Rs.14,75,000/- on 11-10- 2010.The value of which was estimated at Rs.14,79,960/-by the Stamp Duty Authority. Out of the sale consideration of Rs. 14,75,000/- the assesee made investment of RS.7,48,000/- in the purchase of new residential house property in the name of his wife namely, Smt. Garima Singh, within the prescribed time limit as prescribed under the provisions of section 54F of the Act.

Further Court observed that the exemption was 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 new house in the name of 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 his wife when the investment made by the assessee from the sale proceeds of the existing asset and yielded capital gain from the said transactions.

Further court has taken into consideration that the Ld AR for the assesse has placed the reliance on various decisions in which exemption u/s 54/ 54F/54B/54EC of the Act has been allowed not withstanding the fact that investment in a new residential house was made in the name of wife/brother /sons. The CIT (A) erred in not allowing the exemptions claimed u/s 54F by following the decision has not allowed the exemption claimed by the assessee u/s 54F of the Act at Rs. 6,33,190/- holding observing that the decision of the Hon’ble jurisdictional Rajasthan High Court above, the contention of the assessee cannot be accepted. Court is of the considered view that the decision which was cited by the CIT (A) does not have any relevance with the present case. In considering the above facts and circumstances of the case and taking into averments made by the Ld AR for assesee and numerous decisions of various Court and jurisdictional courts. We are allowing the exemption claimed u/s 54F of the Act. Grounds 1 to 3 of the appeal are related to each other. Hence all the ground are allowed and set aside the order passed by the NFAC.

Conclusion

The appeal of the assessee is allowed by the court.

Kaushlendra_Singh_Jaipur_vs_Ito_Ward_5_3_Jaipur_Jaipur_on_4_May_2022-1

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