Jitendra V Faria v. ITO

INCOME TAX ACT, 1961

--Capital gains--Deduction under section 54Assessee selling property owned with his wife----Where a flat was jointly owned by assessee and his wife which was sold, assessee invested his share in another residential property by making entire investment himself along with stamp duty and registration charges in such a case assessee would be entitled to full exemption under section 54, even though the property was in joint name with his brother.--Assessee owning a flat jointly with his wife sold the flat and computed long-term capital gain being 50 Per cent share of property. Assessee invested certain amount in another residential property and claimed exemption under section 54 offering balance amount to capital gain of new property for convenience. However, entire investment along with stamp duty and registration charges were paid by assessee. While making assessment AO observing that new property was purchased in name of two persons restricted exemption to 50 per cent. CIT (A) directed AO to tax entire capital gain on sale of property. Held: It was found that wife had already offered her share of capital gain in her return of income. Thus there was no justification in order of CIT (A) for taxing the entire capital gain in assessee's hand. There was no justification in the AO's action, in so far entire investment was made by the assessee and only for the safety reason he had included the name of his brother. It was found that in the assessment order itself, the AO had observed that entire cost of new property was borne by the assessee though the property was in the joint name with his brother.