SIR YOUR BASIC QUERY IS ANSWERED AND YOU SHALL GET THE BENEFITS OF

LTCG AS PER PREVAILING NORMS EVEN IF YOU BUY YOUR NEW PROPERTY IN
JOINT NAMES 1ST NAME BEING YOURS AND SECOND NAME BEING YOUR WIFES
MOST CRITICAL POINT IS PAYMENT
PAYMENT HAS TO MADE BY THE PERSON CLAIMING EXEMPTION

http://www.business-standard.com/article/pf/capital-gains-tax-exemption-forjoint-property-also-113020901091_1.html
Buying a home is usually a joint decision between a husband and wife. Or at
least the investment is in joint names. Typically, the earning spouse is
responsible for the entire financial investment including the repayment of the
home loan; but the sale agreement and all other property papers record the joint
ownership of the property. Any rentals or income earned from the property are
also distributed between the two owners. However, if a new property is bought
(in joint names) by a spouse using the sale proceeds of another flat in order to
claim the capital gains tax exemption; will the investment done in other spouses
name be entitled to exemption under the Income Tax Act?
In one of the recent situations that came up before the Delhi High Court; an
individual had sold an inherited flat and earned some long term capital gains. At
the time of filing his income tax returns, the tax payer had claimed a deduction
under section 54F of the Income Tax Act (the Act) on the ground that the sale
proceeds were invested in the acquisition of a residential home in the joint
names of himself and his wife. Section 54F of the Act provides that if a tax payer
invests the sale proceeds received from the sale of any capital asset for buying a
residential property; the long-term capital gains on sale of the property would be
exempt.
The income tax officer, during the course of assessment, took the view that
under Section 54F, the investment in the residential house should be made in the
tax payers name and in as much as the residential house was purchased by the
assessee in the name of his wife, the deduction was not allowable. He reduced
the deduction and computed the capital gains accordingly.
At the second appellate level; the authority admitted the tax payers claim and
allowed the exemption from capital gains accordingly. However, the Income Tax
department preferred an appeal before the Appellate Tribunal. The honourable
Tribunal, while relying on various judgements, was also of the opinion that the
exemption under section 54 should be available to the tax payer. It also observed
that section 54F being a beneficial provision, enacted for encouraging
investment in residential houses should be liberally interpreted to include
investment done in the spouses name too.
On a further appeal with the High Court by the Department, the High Court also
agreed to the view adopted by the Tribunal. The High Court noted that the entire

purchase consideration was paid only by the assessee and not a single penny
was contributed by his wife. It held that a purposive construction of the legal
provisions is to be preferred as against a literal construction. Further, even if the
provisions of section 54F are literally constructed, there is nothing in the section
to show that the house should be purchased in the name of the tax payer only.
The High Court observed that section 54F does not require that the new
residential property should be purchased in the name of the tax payer; it merely
says that the tax payer should have purchased / constructed a residential
house.
It was observed that exemption under section 54 and 54F of the Act which relate
to investment of capital gains in a new house property are on similar grounds. In
this connection reliance was placed on an earlier decision by the Andhra Pradesh
High Court where in it was observed that the object of granting exemption under
section 54 of the Act is that a person who sells a residential house for the
purpose of purchasing another convenient house must be given exemption so far
as capital gains are concerned.
The word assessee must be given a wide and liberal interpretation so as to
include his legal heirs also. Without the liberal interpretation, the object of
granting the exemption would get frustrated.
Relying on this and other decisions by various judicial authorities, the High Court
observed that for the purposes of section 54F, the new residential house need
not be purchased by the tax payer in his own name nor is it necessary that it
should be purchased exclusively in his name. The High Court further observed
that the assessee in the said case has not purchased the new house in the name
of a stranger or somebody who is unconnected with him. The same has been
purchased only in the name of his wife. The fact that the entire investment for
the house has come out of the sale proceeds and that there was no contribution
from the assessees wife is undisputed. In view of the same, the High Court
allowed the exemption from long-term capital gains in favour of the tax payer.
It may be noted that section 54F of the Act requires that in order to claim
exemption, the residential house should be purchased by the tax payer, but does
not stipulate that the house should be purchased in the name of the tax payer
only. Including wifes name in the property for any other social / economic
reasons should not stand in the way of exemption granted by the said provision
of the Act. These sections promote impetus to house construction and as long as
this purpose is served; other factors should not matter.
INTERPRETATION : PAYMENT HAS TO BE FROM THE FILE OF PERSON CLAIMING
EXEMPTION

http://www.moneycontrol.com/master_your_money/stocks_news_consumption.php?
autono=943826
Subhash Lakhotia
Tax and Investment Consultant
Tax Guru: CNBC Awaaz
Generally speaking whenever investment is made in a residential house property so as to
save Capital Gains tax, the investment in the house property should be in the name of the
person who is deriving Capital Gain.
However, a very interesting decision was given by the Delhi High Court in the case of CIT v.
Ravinder Kumar Arora 342 ITR 38.
This decision is very important and of practical utility to large number of investors who are
interested to make investment in residential house property for the purpose of saving their
Capital Gains tax. The brief facts in this case were that the assessee filed his return for the
assessment year 2007-08 showing a total income of Rs. 64,32,220.
In the assessment proceedings, it was noticed by the Assessing Officer that the assessee is
a proprietor of M/s. Arora Service Station and is running a petrol pump.
During the relevant year, the assessee has shown long-term capital gains of Rs. 45,49,045
on sale of plot of land bearing Khasra No. 526/1, Min and Old No. 526, MIN Khasra No. 552
and Old Khasra No. 37 situated at Mohuddinpur Kanwani, Tehsil Dadri, District Gautam
Budh Nagar, UP. This plot of land was purchased by the assessee in his name on January
27, 1989.
As per the details filed by the assessee, it was noticed by the Assessing Officer that this land
was sold for a sale consideration of Rs. 4,33,00,000 to M/s. Nirala Developers Pvt. Ltd. vide
sale deed dated July 1, 2006.
Out of the total gain arising from sale of land, the assessee claimed exemption of capital
gain to the extent of Rs. 3,18,59,276 under section 54F of the Act on account of purchase of
a new house property.

The assessee, vide reply dated November 19, 2009, filed a copy of the purchase deed
through which a residential house bearing No. 8, Block No. 7, situated in layout plan of
Safdarjung Enclave, New Delhi, was purchased on March 1, 2007, for a total consideration
of Rs. 3,28,15,000 and claimed exemption under section 54F of the Act for Rs. 3,18,59,276.
On going through the purchase deed of the above residential house, it was noticed by the
Assessing Officer that the purchase deed was made jointly in the names of the assessee
and his wife, Smt. Manju Arora.
The assessee had claimed exemption under section 54F of the Act with reference to the
whole amount invested in the said house property. The Assessing Officer, vide questionnaire
dated December 4, 2009, asked the assessee to explain his claim of exemption under
section 54F of the Act with reference to the whole amount invested in the said house in as
much as the property was purchased jointly with his wife.
The assessee, vide reply dated December 15, 2009, submitted that wifes name was only
included in the sale deed just to avoid any litigation after his death though all the funds
invested in the said house were provided by the assessee himself as was clear and evident
from the bank statement.
The assessee, therefore, submitted before the Assessing Officer that the exemption under
section 54F of the Act is to be allowed with reference to the full amount of purchase
consideration paid by him for the aforesaid residential house.
The assessees submission was considered by the Assessing Officer. The Assessing Officer
noted that though all the payments were made by the assessee, the residential house was
purchased jointly in the names of the assessee and his wife.
The Assessing Officer then referred to section 54F of the Act only to the extent of his right in
the new residential house purchased jointly with his wife.
The Assessing Officer, therefore, allowed 50 per cent of the exemption claimed under
section 54F of the Act as against the total claim of Rs. 3,18,59,276 made by the assessee.
The Assessing Officer allowed the claim only to the extent of Rs. 1,59,29,638 and the
balance 50 per cent being Rs. 1,59,29,638 was disallowed.
Aggrieved by that order, the assessee filed the appeal before the Commissioner of Incometax (Appeals), which was also dismissed. However, in further appeal before the Income-tax
Appellate Tribunal (hereinafter referred to as the Tribunal), the assessee has succeeded
there as the Tribunal has held that the assessee is entitled for the benefit of section 54F of
the Act with reference to the total investment of Rs. 3,28,15,000.
Aggrieved with the order of the Income-tax Appellate Tribunal, the Income tax Department
came up in appeal before the Honourable judges of the High Court.

The Honourable High Court judges opined that looking to the facts and circumstances of the
case the question of law was to be decided in favour of the assessee and against the
Revenue.
The Honourable judges were of the view that a plain reading of the aforesaid provision
indicates that in order to get benefit of this section, the assessee should, inter aila,
'purchase' a house. As per the Revenue, this house has to be purchased in the name of the
assessee only and the benefit is not given if it is purchased by the assessee jointly with his
wife.
The Honourable judges gave due importance to the important factual findings recorded by
the Tribunal in this case are that it was the assessee who independently invested in the
purchase of new residential house.
Along with the name of his wife also and that it was the assessee who paid stamp duty and
corporation tax at the time of registration of the sale deed of the house so purchased and
has also paid commission and legal expenses in connection with the purchase of the house.
The Tribunal further records that whole of the purchase consideration has been paid by the
assessee and not even a single penny has been contributed by the wife in the purchase of
the house.
The Tribunal also noted the argument that the property was purchased by the assessee in
the joint names with his wife for 'shagun' purpose and because of the fact that the assessee
was physically handicapped.
Finally the Honourable judges of the High Court were of the view that the conditions
stipulated in section 54F stand fulfilled. It would be treated as the property purchased by the
assessee in his name and merely because he has included the name of his wife and the
property purchased in the joint names would not make any difference.
Such a condition has to be, rather, encouraged which gives empowerment to women. There
are various schemes floated by the Government itself permitting joint ownership with wife.
If the view of the Assessing Officer (AO) or the contention of the Revenue is accepted, it
would be a derogatory step. In conclusion although the judges gave their verdict in favour of
the assessee but still they made it clear that section 54F of the Act is the beneficial provision
which should be interpreted liberally in favour of the exemption/deduction to the tax payer
and deduction should not be denied on hyper technical ground.
The Andhra Pradesh High Court in the case of Late Mir Gulam Ali Khan v. CIT (1987) 165
ITR 228 (AP) has held that the object of granting exemption under section 54 of the Act is
that an assessee who sells a residential house for purchasing another house must be given
exemption so far as capital gains are concerned.

The word assessee must be given wide and liberal interpretation so as to include his legal
heirs also. There is no warrant for giving too strict an interpretation for the word assessee
as that would frustrate the object of granting exemption.
The above mentioned decision of the Honourable judges of the High Court with regard to
purchase of property in joint names of the assessee as well as his wife who had not
contributed to the purchase would be a guiding factor for such tax payers who have similar
type of situation in their practical life.
The Author is Tax and Investment Consultant at New Delhi for last over 40 years. He
is also the director of M/s. RN Lakhotia & Associates LLP & The Strategy Group.