2021 (4) TMI 299 - AT - Income Tax

Tribunal upholds exemption for joint property investment under Section 54

The Tribunal upheld the CIT(A)'s decision to grant exemption under Section 54 of the Income Tax Act on the entire Long Term Capital Gains invested in a ... Exemption u/s 54 - Long Term Capital Gains earned by the assessee being invested in another property - Capital Gains invested in the property purchased in name of her married daughter and son-in-law - AO had restricted the claim of exemption to the extent of assessee’s share in new property purchased, being 34 % only on her own share, while the Ld.CIT(A) allowed the entire claim on noting the fact that the entire capital gains earned by the assessee had been invested in the new property purchased - only contention of the Revenue being that the decision of Dinesh Verma [2015 (7) TMI 486 - PUNJAB & HARYANA HIGH COURT] has not been followed by the Ld. CIT(A) - HELD THAT:- We find that the Ld.CIT(A) had taken note of the said decision. He had, we find, taken note of the decision and applied the same to the facts of the present case noting categorically that though the said decision pertained to claim of exemption u/s 54 B of the Act, yet the ratio would be applicable in the instant case also. Assessee had invested the entire Long Term Capital Gains in the purchase of residential property within the stipulated time, while the AO had restricted the exemption to 34 % of the Long Term Capital Gains without acknowledging the fact that the assessee had invested the entire Long Term Capital Gains in the purchase of residential property. We have gone through the decision of the Hon’ble Jurisdictional High Court, reproduced in the impugned order, and find that it had allowed exemption of capital gains, to the extent of the sale consideration invested by the assessee in the new asset, denying the exemption to the extent invested by his wife, on noting the fact that the investments in the new property had been made both by the assessee and his wife. The Hon’ble High Court held that the assessee would be entitled to the benefit of exemption u/s 54 B only on the amount invested by him after the sale of his original property. Drawing parity from the same, the Ld. CIT(A), we find, has in the present case, noted the fact that the assessee has invested her entire sale consideration in the new property and, therefore, is entitled to exemption of the entire amount of Long Term Capital Gains. We do not find any infirmity in the same.- Decided against revenue. Issues involved:Claim of exemption u/s 54 of the Income Tax Act on Long Term Capital Gains invested in another property.Detailed Analysis:1. The primary issue in this case was the claim of exemption u/s 54 of the Act on Long Term Capital Gains invested in a new property. The Revenue contended that the CIT(A)'s decision was not in line with the jurisdictional High Court's ruling in a specific case. The AO had restricted the exemption to 34% of the total LTCG invested by the assessee, whereas the CIT(A) allowed the entire claim as the entire capital gains were invested in the new property jointly with the daughter and son-in-law.2. The CIT(A) justified the allowance of the exemption by highlighting that the assessee invested the entire sale consideration in the new property to avoid future disputes. The CIT(A) referred to various High Court judgments supporting the view that joint investment with family members does not preclude claiming exemptions u/s 54. The case law of Dinesh Verma Vs. CIT was cited to support this argument.3. The High Court's decision in the Dinesh Verma case was discussed, where it was clarified that the benefit of Section 54B is applicable only to the amount invested by the assessee after the sale of the original property. The Tribunal upheld the view that joint investment with a spouse is permissible but does not entitle the spouse to the benefits under Section 54B.4. The Tribunal found that the CIT(A) correctly applied the legal principles to the facts of the case. The Revenue failed to challenge the factual findings or demonstrate how the High Court's decision was against the assessee. Consequently, the Tribunal dismissed all grounds of appeal raised by the Revenue and upheld the CIT(A)'s decision to allow the exemption on the entire Long Term Capital Gains invested in the new property.In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to grant exemption u/s 54 on the entire Long Term Capital Gains invested in the new property, despite joint ownership with family members.