Section 54F of the Income-tax Act, 1961 – Exemption to be granted even if investment in new residential property is made in the name of legal heir – Section 54F does not require investment to be made in assessee’s name

FACTS

The assessee filed his return of income showing, among other things, income under capital gains from sale of a property acquired on account of partition of the HUF. The assessee claimed a deduction u/s 54F by investing the sale consideration in a new residential property purchased in the name of his widowed daughter. The assessee’s daughter had no independent source of income and was entirely dependent on him. The A.O. denied the claim of deduction to the assessee and determined the total assessed income at Rs. 2,07,75,230. The CIT(A) upheld the A.O.’s order. Aggrieved, the assessee filed an appeal with the Tribunal.

It was held that there is nothing in section 54F to show that a new residential house should be purchased only in the name of the assessee. The section merely says that the assessee should have purchased / constructed a ‘residential house’. Noting that purposive consideration is to be preferred as against literal consideration, the Tribunal held that the word ‘assessee’ should be given a wide and liberal interpretation and include legal heirs, too. Thus, the A.O. was directed to grant exemption u/s 54F to the assessee for the amount invested in the purchase of a residential house in his daughter’s name.

The assessee’s appeal was allowed.