2020 (4) TMI 217 - AT - Income Tax

Clarification on Section 54F Exemption: Property Ownership Not Mandatory

The judgment clarified that exemption under section 54F can be claimed even if the investment in a new residential property is not in the assessee's name. ... Exemption u/s 54F - investment in the name of husband / spouse - assessee has claimed the entire long term capital gain as exempt from tax u/s 54F by purchasing a new residential property in the name of her husband - denied deduction u/s 54F as the assessee has not invested the sale consideration in her name - HELD THAT:- In the entire section 54, the requirement that the purchase to be made or the construction to be put up by the assessee, should be in the name of the assessee, is not expressly stated. Therefore, to attract section 54 of the Act, what is material is the investment of the sale consideration in acquiring or constructing residential premises. Once the sale consideration is invested in any of these manners, the assessee would be entitled to the benefit conferred under these provisions. In the absence of an express provision contained in these provisions that the investment should be in the name of the assessee only any such interpretation would amount to introducing words in the provision which are not there. The Court could not legislate when Parliament has deliberately not used those words in the section. The same view was taken by the Hon’ble Madras High Court in the case of CIT v. Gurnam Singh [2008 (4) TMI 28 - PUNJAB AND HARYANA HIGH COURT] Assessing Officer has to see whether the investment in the new residential house has been made out of the sale consideration received from the sale of property situated at Corporation No.13, Narayanaswamy Iyengar Street, Gandhinagar, Bengaluru. If the purchase of new house situated at 25 & 26, 5th Cross, Gandhinagar, Bengaluru, was made out of sale consideration on transfer of capital asset, then the assessee is entitled to deduction u/s 54F of the Act. Accordingly, remit this issue to the file of the Assessing Officer with the above observations for fresh consideration - Appeal filed by the assessee is partly allowed for statistical purposes. Issues involved:1. Disallowance of exemption u/s 54F for investment in the name of spouse.2. Denial of deduction u/s 54F by Assessing Officer and CIT(A).3. Interpretation of provisions of section 54 for reinvestment of capital gains in a new residential property.Issue 1: Disallowance of exemption u/s 54F for investment in the name of spouse:The appellant claimed exemption u/s 54F by investing the capital gains from the sale of a property in a new residential property held jointly with her husband. The Assessing Officer and CIT(A) denied the deduction, stating that the investment was not made in the appellant's name. However, the provisions of section 54 do not explicitly require the investment to be in the name of the assessee. Citing judicial precedents, including the Hon'ble High Court decisions, it was highlighted that the investment of sale consideration in acquiring or constructing residential premises suffices for claiming the benefit under section 54. The absence of a specific requirement for the investment to be in the assessee's name indicates that any interpretation imposing such a condition would be unwarranted. The judgment emphasized that the investment made from the sale proceeds qualifies for the deduction u/s 54F, irrespective of the name in which the property is purchased.Issue 2: Denial of deduction u/s 54F by Assessing Officer and CIT(A):The Assessing Officer and CIT(A) disallowed the exemption u/s 54F, contending that the investment in the new residential property was not made in the appellant's name. They relied on a judgment to support their decision, distinguishing it from the appellant's cited cases. However, the judgment highlighted that the predominant judicial view, including that of various High Courts, supports the notion that the new residential property need not be purchased exclusively in the assessee's name for claiming the deduction u/s 54F. It was noted that the investment from the sale proceeds suffices for eligibility under section 54F. Consequently, the judgment remitted the issue back to the Assessing Officer for fresh consideration, emphasizing that the crucial aspect is whether the investment in the new residential property was made from the sale consideration received from the transferred property.Issue 3: Interpretation of provisions of section 54 for reinvestment of capital gains:The judgment analyzed the provisions of section 54, emphasizing that the deduction/exemption under the section is available when the gain from the transfer of a residential house is reinvested in another residential property as per the conditions stipulated. It underscored that the essential condition is to invest the capital gains in a new residential property, without a specific requirement for the property to be purchased in the assessee's name. Citing judicial precedents, the judgment elucidated that the investment made from the sale consideration suffices for claiming the benefit under section 54F. The judgment highlighted that any interpretation mandating the property to be in the assessee's name would introduce words not present in the provision, contrary to legislative intent.This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the legal interpretations applied in the context of the disallowance of exemption u/s 54F for investment in the name of a spouse.