On sale of an asset and reinvestment where a claim is sought to be made for
exemption u/s.54 / 54F, it is commonly found that assessees make investment in the
names of family members. This would be made either singly in the name of a family
member or in the name of the assessee with a family member as co-owner to the
property in which investment is sought to be made, is used for claim of exemption.
While there may be no difficulty in urging that the assessee has included a family
member as co-owner only for sentimental reasons or for succession planning, the
investment being out of the funds of the assessee, the benefit of exemption should
be available to the assessee. However, where the investment is singly made in the
name of a relative difficulties can arise. Courts have held that where the investment
is in the name of the spouse of the individual, the benefit of exemption would be
available. Such decision has been rendered in the following cases:
CIT v V.Natarajan [2006] 287 ITR 271 (Mad)
CIT v Ravinder Kumar Arora [2012] 342 ITR 38 (Del)
CIT v Kamal Wahal [2013] 351 ITR 4 (Del)
DIT(IT) v Jennifer Bhide [2012] 349 ITR 80 (Kar)
However, where the investment is singly made in the name of a son or daughter, the
Bombay High Court in Prakash v ITO [2009] 312 ITR 40 (Bom) has held that the
benefit of exemption cannot be claimed. The difference in the view taken is probably
because in case of investment in the name of spouse the clubbing provisions are
applicable whereas if the investment is made in the name of a son or daughter the
same are not applicable. It would therefore be advisable for assessees to keep these
aspects in mind while claiming exemption u/s.54 / 54F by way of reinvestment in
another property particularly where there is a contemplation to reinvest in the name
of a relative.
section 54, # section 54F, # reinvestment, # relative, # spouse, # son, # daughter
