Section 54 relief can extend to a residential flat in a spouse's name, while section 48 transfer was denied.

Expenditure used to buy a flat in the wife's name was not treated as transfer under section 48 because it was not directly connected with the capital asset's transfer or supported by any enforceable obligation arising from that transfer, so the deduction was disallowed. By contrast, investment of sale consideration in another residential flat did qualify for relief under section 54(2) even though the new property stood in the wife's name, because the exemption depends on investment in the qualifying residential house and not solely on the title holder; the exact eligible amount was left for verification.

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Issues: (i) Whether the amount spent by the assessee for purchasing a flat in the name of his wife could be treated as expenditure incurred wholly and exclusively in connection with the transfer so as to be deducted under section 48. (ii) Whether the assessee was entitled to deduction under section 54(2) in respect of the flat purchased in the name of his wife.

Issue (i): Whether the amount spent by the assessee for purchasing a flat in the name of his wife could be treated as expenditure incurred wholly and exclusively in connection with the transfer so as to be deducted under section 48.

Analysis: The claim was examined on the footing that the expenditure was said to have been incurred to enable the sale of the residential property and to settle the family arrangement. The record did not show any legal encumbrance on the property or any enforceable obligation arising from the transfer itself. The amount paid for the wife's accommodation was therefore not regarded as expenditure directly connected with the transfer of the capital asset.

Conclusion: The deduction under section 48 was not allowable.

Issue (ii): Whether the assessee was entitled to deduction under section 54(2) in respect of the flat purchased in the name of his wife.

Analysis: The assessee had sold the original residential flat and invested part of the sale consideration in another residential flat purchased in the name of his wife. The provision was construed in the light of the beneficial object of exemption for investment in a residential house. On that basis, the fact that the new flat stood in the wife's name did not by itself disentitle the assessee from relief, and the amount invested was held to fall within the exemption scheme, subject to verification of the exact cost and related expenses by the Assessing Officer.

Conclusion: The assessee was entitled to claim deduction under section 54(2) in respect of the flat purchased in the wife's name, subject to verification.

Final Conclusion: The capital-gains addition was not sustained in full, and the matter was sent back for verification of the eligible amount while recognizing the assessee's entitlement to section 54 relief for the wife's flat.

Ratio Decidendi: For exemption provisions dealing with investment of capital gains in a residential house, the decisive factor is the investment of the sale consideration in the qualifying property, and the relief is not denied merely because the new residential property stands in the name of the assessee's spouse.

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