Supreme Court affirms assessee's right to relief under section 54 of Income Tax Act

The Supreme Court upheld the decision of the Tribunal and the AAC, ruling in favor of the assessee in an appeal against an order granting relief under section 54 of the Income Tax Act, 1961. Despite the property being purchased in the name of the assessee's wife, it was held that the property was effectively purchased by the assessee, entitling him to the relief under section 54. The Court emphasized the ordinary meaning of "purchase" and the intent behind the relevant section for exemption, ultimately dismissing the Revenue's appeal.

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Issues Involved:
Appeal against order granting relief u/s 54 of the IT Act, 1961.

Summary:
The appeal by the Revenue challenged the order granting relief u/s 54 of the IT Act, 1961. The assessee, an individual, sold a property and used the proceeds to purchase another property in the name of his wife. The Revenue contended that the conditions u/s 54 were not fulfilled as the property was not purchased in the assessee's name. However, the AAC accepted the claim that the property was purchased by the assessee, albeit benami in his wife's name, and granted the relief u/s 54.

The Revenue argued that the property was not purchased in the assessee's name and that the claim of it being held benami was not established. The assessee maintained that the property belonged to him, as he declared no intention to benefit his wife, and the sale proceeds were invested in the new property. The Revenue also raised the issue of a declaration u/s 281A, which was not applicable at the time of the transaction.

Upon review, it was found that the assessee had indeed invested the sale proceeds in the new property. The property was held by the wife in trust for the assessee, as per Sec. 82 of the Indian Trusts Act, 1882. The Supreme Court's observation emphasized the ordinary meaning of "purchase" and the intent behind s. 54(1) for exemption. The Tribunal agreed with the AAC's decision that the property was purchased by the assessee, entitling him to the relief u/s 54. The appeal was dismissed.

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