2020 (5) TMI 261 - AT - Income Tax

Assessee entitled to full deduction under Income Tax Act despite property purchase in joint names.

The Tribunal allowed the appeal, holding that the assessee is entitled to the full deduction under section 54 of the Income Tax Act. The decision was ... Deduction claimed u/s 54 - CIT-A restricted to 50% of the claim made on the reasoning that the new residential house has been purchased in the name of assessee and his son - HELD THAT:- As noticed that the entire consideration towards purchase of new residential house has flown from the bank account of the assessee. As held in the case of Mrs. Jennifer Bhide [2011 (9) TMI 161 - KARNATAKA HIGH COURT] that the deduction u/s 54 should not be denied merely because the name of assessee’s husband is mentioned in the purchase document, when the entire purchase consideration has flown from the assessee. Accordingly, following the decision rendered in the case of Mrs. Jennifer Bhide (supra) and the decision rendered by the co-ordinate bench in the case of Shri Bhatkal Ramarao Prakash [2019 (2) TMI 1059 - ITAT BANGALORE] we hold that the assessee is entitled to full deduction u/s 54 of the Act. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow deduction u/s 54 of the Act as claimed by the assessee. - Decided in favour of assessee. Issues:- Restriction on deduction claimed u/s 54 of the Act to 50% due to new residential house purchased in joint name- Interpretation of Sec.54F regarding purchase of new asset in joint namesAnalysis:1. The appeal concerned the restriction imposed by the AO and confirmed by the Ld CIT(A) on the deduction claimed u/s 54 of the Act to 50% due to the purchase of a new residential house property in the joint name of the assessee and her son. The assessee had sold a residential house property and purchased another one, with the claim for deduction being contested based on the joint ownership of the new property.2. The Tribunal examined a similar issue in the case of Shri Bhatkal Ramarao Prakash vs. ITO, where the purchase of a new residential house in joint names led to a restriction on the deduction u/s 54F of the Act. The co-ordinate bench followed the decision of the Hon’ble Karnataka High Court in DIT(Intl.) vs. Mrs. Jennifer Bhida, emphasizing that the assessee should be entitled to the full deduction under Sec.54F, irrespective of joint ownership, as long as the entire consideration flowed from the assessee.3. The assessee presented evidence showing that the entire sale consideration from the original house was received in her bank account, and subsequent payments for the new house were made solely from her account. This aligns with the principle established in the case of Mrs. Jennifer Bhide, where the Hon’ble Karnataka High Court ruled that deduction under Sec.54 should not be denied if the entire consideration originates from the assessee, even if the property is purchased in joint names.4. The Tribunal, in line with the precedent set by the Hon’ble Karnataka High Court and the co-ordinate bench decision, held that the assessee is entitled to the full deduction u/s 54 of the Act. Consequently, the order passed by Ld CIT(A) restricting the deduction was set aside, and the AO was directed to allow the deduction as claimed by the assessee. The appeal of the assessee was allowed based on the established legal principles and evidence presented.5. The judgment, pronounced on May 8, 2020, reaffirmed the importance of considering the source of funds and the beneficial ownership in determining the eligibility for deductions under relevant sections of the Income Tax Act. The decision provided clarity on the interpretation of Sec.54F and upheld the assessee's right to claim the full deduction despite the joint ownership of the new residential property.