No exemption on agricultural land purchased in name of wife under section 54B

Facts and Issues of the case    

The assessee filed return declaring  an income  of  Rs.8,72,370/-. The case was assessed computing  the  capital gains  at  Rs.1 ,07,50 ,047/-. The assessee claimed deduction u/s 54B of the Income Tax Act, 1961 of  Rs.65 ,15,210/-. There  is  no dispute that the assessee is eligible for deduction u/s 54B in principle. The  assessee has purchased  four  properties  out  of  which  two of  the properties  were purchased  amounting to Rs.35 ,83 ,277/-  and  Rs.14 ,63 ,929/-  in the name of the assessee’ s wife. The  issue is whether the properties  purchased  by the assessee in the name of the assessee’ s wife are eligible for deduction u/s 54 B or not.

Observations by the Court

Section 54B requires  the assessee to purchase the property from out of the sale consideration of the capital asset. It does not entitle the assessee to the benefit conferred therein if the subsequent property is  purchased  by  a person other than the assessee including a close relative even such as his wife or children. Indeed, an assessee can purchase an asset or a  part thereof in the name of his wife but he would not be entitled then to the benefit of Section 54B. Hence, keeping  in view the facts of the case, provisions of the Act and the legal proposition, the court declines to interfere  with the decision  of  the CIT(A) in disallowing the  claim  of deduction u/s 54 B with regard to the agricultural  land purchased  amounting to Rs.35 ,83 ,277/- and Rs.14 ,63 ,929/-.

Conclusion

A person can purchase an asset or a part thereof in the name of his wife or even close relatives but he would not be entitled then to the benefit of Section 54B.