Joint purchase of new home with wife does not defeat section 54 exemption, court holds

5-Second Takeaway

A taxpayer is not denied section 54 exemption merely because the new residential property was purchased jointly with his wife; the restriction of the claim to 50 per cent of the investment was unsustainable. The court directed the Assessing Officer to allow the section 54 claim in full.

The case concerned a capital gains claim under section 54 after the assessee invested the sale proceeds in a new residential property purchased jointly with his wife. The tax authorities treated the wife’s co-ownership as a reason to limit the exemption to half of the investment.

The court rejected that approach. It held that joint purchase of the new house, by itself, does not disentitle the assessee from section 54 relief, and the mere inclusion of the wife’s name as co-owner cannot defeat the statutory benefit.

In support of that conclusion, the court noted the settled view that similar exemption provisions do not require the new residential property to be purchased exclusively in the assessee’s own name. The decisive question was whether the sale proceeds were invested in a qualifying residential property, not how title was shared with a spouse.

The appeal was allowed and the Assessing Officer was directed to grant the section 54 deduction without restricting it to 50 per cent.