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Purchase of Property in the name of Son eligible for Capital Gain Exemption: ITAT

In an assessee-friendly ruling, the Income Tax Appellate Tribunal (ITAT), Delhi bench has recently allowed capital gain exemption under section 54 of the Income Tax Act, 1961 to the assessee for the purchase of new property in the name of his son’s name. The Tribunal, while delivering the order, observed that the exemption is allowable since the capital gain from the sale of the old asset was used for investing in the name of a person who has a direct relationship with the assessee.

Before the authorities, the assessee claimed that has purchased the new house in the name of the youngest son. According to the assessee, the purchase of property in the name of the son was acquired by the assessee himself through the consideration received from the sale deed of an earlier old property. The bank statement and the cheque issued to the builder as well as the confirmation received from the builder demonstrated that the payment was made by the assessee for purchase of new property within the stipulated time as prescribed under section 54.

The Tribunal observed that the benefit of the income tax act and its provisions related to exemption and deduction has to be taken into account while computing the income of the assessee and it is the proper procedure on the part of the Assessing Officer to follow all the aspect of taxation within the corners of Income Tax Act.

“As regards the name under whom the property is purchased, it can be seen that the son of the assessee is a direct relation and as per the Hon’ble Delhi High Court decision in case of CIT(A) Vs. Kamal Vahal 351 ITR 4 where the assessee purchased a new house in name of his wife, the claim under Section 54 is held valid. Thus, the exemption could not be denied if the entire investment had come out of the proceeds of an old property. Thus, the order of the CIT(A) is not justified in light of the decision in case of Kamal Vahal,” the Tribunal said.

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Refer: ITA NO. 2754/DEL/2019

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