Sec 54 deduction is available when new residential property is purchased in spouse’s name: ITAT Mumbai
Gopalkrishna Pandu Shetty Vs ACIT (ITAT Mumbai) Appeal Number : ITA No. 2471/MUM/2023
Facts:
- The appellant claimed deduction under Section 54 of the Income Tax Act for a payment made towards the purchase of a new residential property. However, since the property was registered in the name of the appellant’s wife, the deduction was denied by the Assessing Officer.
- This denial was based on the interpretation that Section 54 requires the property to be in the name of the assessee. The Ld. Commissioner of Income Tax (Appeals) upheld this decision, citing the judgment of the Hon’ble Bombay High Court in the case of Prakash s/o Timaji Dhanjode.
- However, the appellant argued that there were valid reasons for registering the property in the wife’s name. The appellant, being a director of the seller company, was unable to execute the sale deed in both capacities as seller and purchaser. Therefore, the property was purchased in the wife’s name despite the entire consideration being paid by the appellant.
ITAT Mumbai held as below:
- In the present case, there was no dispute that the entire consideration for the purchase of new residential house property was sourced from aggregate sale consideration received by the Appellant from the sale of two residential properties owned by the Appellant.
- The Appellant has also been able to provide a reasonable explanation for purchase of new residential house property in the name of his wife.
- The purpose of Section 54F, similar to Section 54, is to encourage investment in residential houses. As long as the entire investment comes from the assessee and there is a genuine reason for purchasing in the spouse’s name, deduction should be allowed.
- Hon. Delhi High Court had, in the case of Commissioner of Income Tax – XII Vs. Kamal Wahal: [2013] 351 ITR 4 had allowed the claim of deduction under Section 54F of the Act in respect of a residential house property purchases of an assessee in the name of his wife.
- In view of the aforesaid, given the facts and circumstances of the present case and the above judgment of Hon’ble Delhi High Court, we hold that the Appellant is entitled to claim deduction under Section 54 of the Act in respect of the new residential house property purchased in the name of his wife.
