2015 (3) TMI 1420 - AT - Income Tax

Tax Tribunal Allows Claim for New House Construction in Favor of Assessee

The Tribunal ruled in favor of the assessee, holding that the construction of a new residential house need not be solely in the name of the assessee as ... Disallowance u/s 54F - Partial addition on the alleged ground that the appellant has invested the part of the capital gain towards the construction of residential house of which the land is owned by her spouse - HELD THAT:- As purpose of section 54F is that new residential house need not be purchased by the assessee in her own name. In the present case, the assessee has constructed a house on a plot owned by her husband and therefore, entire investment having come out of sale proceeds of the plot sold by the assessee and not from anywhere else. The assessee’s case is covered by the decision in the case of CIT vs. Kamal Wahal [2013 (1) TMI 401 - DELHI HIGH COURT] and CIT vs. Ravinder Kumar Arora [2011 (9) TMI 343 - DELHI HIGH COURT] which has been dealt in the case of CIT vs. Kamal Wahal (supra) and decision of the Hon’ble Punjab & Haryana High Court, in the case of CIT vs.Gurnam Singh [2008 (4) TMI 28 - PUNJAB AND HARYANA HIGH COURT] In view of the above discussion, the ld. CIT(A) is not justified in not allowing the claim of the assessee. Accordingly, the order of the ld. CIT(A) is reversed and the AO is directed to allow the claim of the assessee. Thus, the sole ground taken by the assessee is allowed. Issues:1. Disallowance under section 54F of the Income Tax Act, 1961 for investing in a residential house owned by the spouse.2. Interpretation of the requirement for a new residential house purchase/ construction under section 54F.Analysis:1. The appeal concerned the disallowance of Rs.8,00,000 under section 54F of the Income Tax Act, 1961, due to the investment in a residential house owned by the spouse of the assessee. The Assessing Officer (AO) disallowed the exemption claimed by the assessee as the house was being constructed by the husband of the assessee on a plot not owned by her. The CIT(A) upheld the AO's decision, leading to the appeal. The assessee contended that section 54F does not specify that the new residential house should be purchased only in the name of the assessee, citing various court decisions to support the argument. The Department, however, supported the decisions of the lower authorities.2. The Tribunal analyzed the facts and legal precedents cited by both parties. It noted that the assessee had sold a plot and invested a significant amount in a new residential house constructed on a plot owned by her husband. Referring to the decisions of various High Courts, including the Punjab & Haryana High Court and the Delhi High Court, the Tribunal emphasized that the new residential property need not be purchased exclusively in the name of the assessee. It highlighted the principle of purposive construction and the objective of section 54F to encourage investment in residential houses. The Tribunal concluded that the assessee's case aligned with the judicial findings, and the claim should be allowed. Consequently, the Tribunal reversed the CIT(A)'s order and directed the AO to allow the claim of the assessee, thereby allowing the appeal.In conclusion, the Tribunal ruled in favor of the assessee, emphasizing that the construction of a new residential house need not be in the name of the assessee alone as per section 54F. The decision was based on the interpretation of the law and previous judicial findings, highlighting the importance of purposive construction and the objective of encouraging investment in residential properties.