Capital gains: Exemption u/s. 54F: A. Y. 2008-09: Exemption in case of investment in residential house: For claiming deduction u/s. 54F, new residential house need not be purchased by assessee exclusively in his own name: Purchase of new house in name of wife: Exemption could not be denied

The assessee sold his joint property which gave rise to proportionate long term capital gains. He invested the sale proceeds in a residential house in the name of his wife and claimed deduction u/s. 54F. The Assessing Officer denied the claim for deduction holding that for deduction u/s. 54F, investment in residential house should be in the assessee’s name. The Commissioner (Appeals) allowed the assessee’s claim. The Tribunal confirmed the order of the Commissioner (Appeals), holding that section 54F, being a beneficial provision enacted for encouraging investment in residential houses, should be liberally interpreted.

On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:

“i) In CIT vs. Ravinder Kumar Arora [2012] 342 ITR 38 /[2011] 203 Taxman 289/ 15 taxmann.com 307 (Delhi), it was held that where the entire purchase consideration was paid only by the assessee and not a single penny was contributed by any other person, preferring a purposive construction against a literal construction, more so when even applying the literal construction, there is nothing in section 54F to show that the house should be purchased in the name of the assessee only.

ii) Section 54F in terms does not require that the new residential property shall be purchased in the name of the assessee; it merely says that the assessee should have purchased/constructed ‘a residential house’.

iii) Therefore, the predominant judicial view for the purposes of section 54F is that the new residential house need not be purchased by the assessee in his own name nor is it necessary that it should be purchased exclusively in his name. It is moreover to be noted that the assessee in the present case has not purchased the new house in the name of a stranger or somebody who is unconnected with him. He has purchased it only in the name of his wife.

iv) The substantial question of law is answered in favour of the assessee and against the revenue.”