Section 54F deduction allowed when residential property purchased in wife's name using LTCG proceeds

ITAT Chennai allowed deduction under section 54F where assessee purchased residential property in wife's name using LTCG sale proceeds. Following precedents in CIT v. Natarajan and CIT v. Kamla Wahal, tribunal held that new residential house need not be purchased in assessee's own name for section 54F deduction. Since property was purchased in spouse's name (not stranger) using entire sale proceeds without wife's contribution, deduction was granted. AO directed to allow claimed deduction.

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Issues:
Appeal against disallowance of deduction u/s. 54F of the Income Tax Act for Assessment Year 2012-13.

Detailed Analysis:

1. Background and AO's Action:
The assessee appealed against the disallowance of a deduction u/s. 54F of the Income Tax Act for the Assessment Year 2012-13. The AO reopened the assessment based on information that the assessee had deposited cash into a bank account. The AO noted that the assessee sold an immovable property for Rs. 50,40,000 and claimed a deduction of Rs. 44,27,994 for investing in a residential property in his wife's name. The AO considered this deduction not allowable as the property was in the wife's name, who files taxes separately.

2. Appeal to Ld.CIT(A):
The assessee appealed to the Ld.CIT(A), who upheld the AO's decision to disallow the deduction.

3. Arguments Before the Tribunal:
The assessee contended that the Ld.CIT(A) erred in not following the decision of the Hon'ble Madras High Court and relied on the principle that in case of doubt, a construction favoring the assessee should be adopted. The Department argued that the deduction is only allowable if the property is purchased in the assessee's name.

4. Tribunal's Decision:
After considering the arguments and facts, the Tribunal found that the assessee had purchased the residential property in his wife's name, and the predominant judicial view allowed deduction u/s. 54F even if the property is not in the assessee's name. Citing various High Court decisions, the Tribunal directed the AO to grant the deduction claimed u/s. 54F.

5. Precedent and Decision:
The Tribunal relied on the decision of the Hon'ble Delhi High Court in the case of CIT v. Kamla Wahal, which emphasized that for the purposes of Section 54F, the new residential house need not be purchased exclusively in the assessee's name. The Tribunal dismissed the appeal and allowed the deduction claimed u/s. 54F.

In conclusion, the Tribunal allowed the appeal, directing the AO to grant the deduction claimed u/s. 54F of the Income Tax Act for the Assessment Year 2012-13, based on the legal precedent and the specific circumstances of the case.

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