Purchase in Own Name:

It may be noted that almost all the decisions favouring the assessee have been cases where the property has
been purchased in the name of the spouse of the assessee and where funds have flown from the assessee. In all
such cases, in any case, clubbing provisions would operate and the property would be regarded for both income
tax and wealth tax purposes as the property of the assessee. The natural corollary is that the benefit of the
exemption should also be given in such cases.
On the other hand, the decisions which have gone against the assessee have been cases where the property was
purchased in the name of a son, daughter-in-law or grandson etc.
The law seems to recognize that properties of a person can be purchased in the names of certain close relatives.
Given this legal background, can the intention be to deny the benefit of an exemption, the conditions of which
are otherwise fulfilled, on the mere ground that the property is purchased in the name of one such close
relative?
In view of the fact that the issue involves interpretation of tax exemption provisions and that the said provisions
do not in any case require that the investment has necessarily to be made in the name of the assessee, leading
to a possibility of a debate, the better view seems to be that purchase of a property in the name of a spouse or
close relative should qualify for the benefit of the exemption u/s. 54, 54B or 54F, as long as the funds belonging
to the assessee are used and the assessee retains domain over the property. However, given the fact that while
planning one's affairs one should not plan in a manner so as to attract unnecessary litigation, it is advisable to
purchase the property in the joint names of the assessee and such close relative, rather than in the name of the
close relative alone. And most preferred option is to buy in own name only.
Investment must in residential property Not in Land / Commercial property etc.
Sale of Property claimed as Deduction:
As per the provisions of section 54, if the new house property is transferred within a period of three years of its
purchase or construction, the amount of capital gains arising therefrom, together with the amount of capital
gains exempted earlier, will be chargeable to tax in the year of transfer as short term capital gains.
Capital Gain Account Scheme
Although as per section 54 the assessee is given 2 years to purchase the house property or 3 years for the
construction of the house property, yet the capital gains on the transfer of the original house property is taxable
in the year in which it is sold. The Income-tax return of that year is required to be submitted in the relevant
assessment year on or before the specified due date for filing the Income-tax return.
To avoid the above situation, the Income-tax Act specifies an alternative in the form of deposit under the Capital
Gains Account Scheme.
The amount of capital gain which is not utilized by the assessee for the purchase or construction of the new
house before the date of furnishing of the Income-tax return should be deposited by him under the Capital
Gains Account Scheme, before the due date of furnishing the return. In this case the amount already utilized by
the assessee for the purchase-construction of the new house shall be eligible for exemption.
Unutilized the amount deposited for the purchase or construction of a residential house within the specified
period, the amount not so utilized shall be charged as capital gains of the year in which the period of 3 years
from the date of sale of the original asset expires and it will be long-term capital gain of that previous year.