Exemption u/s 54 was available even if the new residential property was purchased in the joint names of assessee, her daughter and son in law

FACTS
Assessee sold a residential property and invested entire amount on purchase of a new residential property in joint names of assessee with her daughter and son in law and claimed exemption under Section 54. Assessing Officer held that assessee was entitled for claim of exemption only to extent of her share in new residential property.

The CIT (A) allowed the assessee’s appeal.

Consequently, the revenue filed an appeal before the ITAT.

HELD
The ITAT confirmed the order passed by the CIT(A) and dismissed the revenue’s appeal on the following grounds:

The CIT(A) had followed the ratio contained in the decision of Jurisdictional High Court in the case of CIT vs. Dinesh Verma 2015 233 Taxman 409 (Punj. & Har.)

The Hon’ble High Court in the case of Dinesh Verma (supra) held that the assessee would be entitled to the benefit of exemption u/s 54B only on the amount invested by him after the sale of his original property and not on the amount invested by his wife jointly in the same property. The high court also held that the plain reading of provisions of section 54 of the Act indicated that in order to claim the benefit of exemption u/s 54, the assessee should, invest the capital gain arising out of sale of residential property in purchase of another residential property within stipulated time. Nothing contained in Section 54 precluded the assessee to claim the exemption in case the property was purchased jointly with close family members, who are not strangers or unconnected to her provided the assessee invested the entire amount of Long Term Capital Gain.

Based on the principle, he held that in the instant case, since the entire investment is made by the assessee herself, albeit in joint names with daughter and son-in-law, the assessee is entitled to exemption u/s 54. The ITAT also observed that the Ld. DR was neither able to controvert the facts of the present case as noted by the CIT(A) nor had he pointed out how the decision in the case of Dinesh Verma (supra) was applicable against the assessee in the facts of the present case.