Capital Gain Exemption u/s. 54/54F

[PRIYAM KHAMBHATA]

Respected Sir

My Father is super senior citizen and he has sold his residential property Rs.1500000 and the said amount has been given to his daughter in-law to invest New Residential property and She has invested such funds in New Residential Property purchased of  Rs.3900000 in the name of her and his husband within one year from the date of original Residential property transferred. 

Can my father claim Exemption u/s. 54 in the Return of Income (he has transferred all money to daughter in-law bank account).  Property not in the name of my father but in the name of Daughter in-law and Son 

Please guide me and if any case laws available in this regard please share me 

Thanking you 

[Sadanand Bulbule]

Your father’s claim for exemption u/s 54 is legally doubtful because the new property is not in his name but in the daughter-in-law and son’s name. Courts have sometimes allowed exemption when property is in spouse’s name, but extension to daughter-in-law / other relatives is generally not accepted unless very strong facts exist.

This is my personal opinion. Plz consult the subject experts.

[shalini taknet]

No, your father likely cannot claim exemption u/s 54. The new property must be purchased in his name (or jointly with him) for the exemption to apply, transferring funds to daughter-in-law for a property solely in her and sons names doesnt qualify.

Section 54 requires the assessee to reinvest LTCG in a new residential house within specified timelines. Courts emphasize ownership/control by the assessee. While spouse names are sometimes allowed (e.g., ITAT cases for practicality), son/DIL is stricter-exemption denied in similar scenarios like u/s 54B for land.

Advice: Dont claim it in ITR to avoid scrutiny. Super senior status irrelevant here. Show CA bank statements/sale deeds; low reassessment odds. Tax LTCG at 12.5%+cess if unexempted (~Rs. 37k tax on Rs. 15L indexed gains).

AI Summary

Capital gain exemption unavailable where new residential property is held in relatives' names without the assessee's ownership or control. Section 54 permits exemption only if the assessee reinvests long term capital gain in a new residential house purchased in the name of the assessee or jointly with the assessee; ownership and control by the assessee are the operative conditions. Purchases solely in the names of a son and daughter in law after transfer of sale proceeds to them will generally not satisfy the requirement. Narrow spouse exceptions exist but do not reliably extend to other relatives. Claiming exemption on these facts risks scrutiny absent documentary proof of beneficial ownership or joint title.