Section 54 exemption denied where new residential house was purchased in wife’s name, ITO holds

5-Second Takeaway

Section 54 exemption was denied because the assessee reinvested the capital gains in a residential house purchased in his wife’s name. The Tribunal held that the sale of the original asset and the purchase of the new house must both be executed by the same assessee, and that husband and wife are distinct legal entities for this purpose.

The case concerned a claim for exemption under section 54 on capital gains arising from the sale of a residential asset. The assessee had invested the sale proceeds in a new residential house, but the purchase was made in the name of his wife.

The Tribunal held that section 54 relief is available only when both the transfer of the original residential property and the acquisition of the new residential property are made by the same assessee within the prescribed period. It rejected the attempt to club a transaction done by the husband with a purchase standing in the wife’s name.

On that reasoning, the Tribunal treated husband and wife as separate legal entities for the purpose of the exemption. Since the reinvestment was not made by the assessee in his own name, the statutory condition was not satisfied.

The claim for exemption under section 54 was therefore refused, and the assessment against the assessee was sustained.