The Income Tax Appellate Tribunal (ITAT), Hyderabad bench has recently held that the tax benefit under section 54 of the Income Tax Act is allowable to an assessee on purchasing a new house in the name of his spouse even if he is already an owner of a property and is receiving income from house property.
The assessee purchased a house at Chennai in the name of his wife and claimed deduction under section 54F of the Income Tax Act.
The Assessing Officer denied that the claim is not allowable since the assessee is already an owner of a property and is receiving income from house property, hence, 54F is not allowable.
Relying on various judicial pronouncements, the Tribunal observed that the object of granting exemption u/s 54F of the Act, is that the house should have been purchased for residential purposes, must be given exemption so far as capital gains are concerned that the word “assessee” must be given a wide and liberal interpretation so as to include his legal heirs also and there is no warrant for giving too strict interpretation on the word “assessee” as that would frustrate the object of granting the exemption.
“In the case before us, the assessee and his wife are independent income tax assessees and the assessee already owned one house at Kilpauk, Chennai. The assessee therefore, cannot be said to have invested in order to avoid capital gains to tax in his hands, as u/s 54F(1), the assessee is entitled to exemption u/s 54F even if he already holds one property in his name. Therefore, the investment by the assessee of the capital gains in purchase or construction of a residential house at Alagappa Nagar, Chennai in the name of his wife will not disentitle the assessee from exemption u/s 54F of the Act,” the Tribunal said.
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