In ACIT v. Sri B. Surendra Choudary, the division bench of the ITAT, Hyderabad bench held thatthe new property registered in the name of assessee’s wife is eligible to get deduction under section 54F of the Income Tax Act even if the wife is having independent income.
The decision was based on the judgment in CIT Vs. Natarajan and CIT Vs. Kamal Wahal. Extending the benefit of deduction the wife, in the present case, the bench clarified that though section 54F is a beneficial provision, the status of the wife is irrelevant.
The assessee, sold one of his property and purchased a new one in the name of his wife within one year of the sale and claimed deduction u/s 54F. As the cost of the new property is more than the capital gains accrued to the assessee amounting to Rs. 1,82,76,239, the assessee was of the view that there would not be any capital gains as per the provisions of section 54F of the Act.Denying the claim, the AO held that exemption u/s 54F was allowable only if the property was purchased in the name of the assessee and not in the name of the assessee’s wife, and disallowed the exemption u/s 54F.
The first appellate authority allowed the claim, following the judicial pronouncements and found that the benefit of s. 54F is available to the wife of the assessee.
The Revenue approached the ITAT contending that the deletion of addition on account of long term capital gains made against the assessee saying that the assessee has purchased the new asset in the name of his wife who is having independent income. It was further observed that s. 54/54F, being beneficial provisions, it cannot be extended to the wife of the assessee in the present case.
The bench noted that the first appellate authority has allowed the deduction u/s 54F relying on the various case laws wherein the definition of the term ‘assessee’ is extended to the family members of the assessee as section 54/54F are beneficial provisions. But, in the present case, the question raised by the Revenue is that, whether the wife who is having independent income can avail the benefit u/s 54F.
In the opinion of the bench, the term ‘assessee’ was already defined by various courts to include wife and other dependent family members. “Whether to exclude those members who are also having independent income is, in our view, misplaced. What is relevant is whether the net consideration derived from the property is invested in the new asset. In the given case, the assessee has invested whole of the net consideration in the new asset, hence, the assessee is allowed to get the benefit u/s 54F. Here the benefit is extended to the assessee not to the wife of the assessee. It is absolutely irrelevant to qualify the status of the wife of the assessee to extend the benefit u/s 54F. As discussed, the net consideration from the original asset is invested in the new asset is relevant, whether in his own name or in the name of his family member will qualify for the deduction u/s 54F.”
