Husband can’t be said to be the owner of house bought in wife’s name: HC

Case Details: Antony Parakal Kurian v. ACIT - [2022] 138 taxmann.com 440 (Karnataka)

Judiciary and Counsel Details

• • Mrs S. Sujatha & S. Rachaiah, JJ.
  • Sudheendra B.R., Adv. for the Appellant.
  • K.V. Aravind, Adv. for the Respondent.

Facts of the Case

During the relevant year, the assessee sold land and claimed long-term capital gain exemption under section 54F by making an investment in residential house. The assessee claimed that on the date of sale of such land, he was the owner of only one residential house.

However, Assessing Officer (AO) noticed that prior to date of sale of such land, the assessee had purchased a residential house in name of his wife. On said purchase of the residential house, the assessee also claimed the benefit of Section 54 exemption. Thus, he denied the exemption under section 54F on grounds that the assessee was holding two residential houses on the date of sale of land.

Lower authorities upheld the order of AO. Aggrieved-assessee filed the instant appeal before the Karnataka High Court.

High Court Held

The Karnataka High Court held that the phrase ‘owns’ used by the proviso (a)(i) to section 54F(1) plays a significant role. What is relevant is the assessee should not own more than one residential house, other than the new asset, on the date of transfer of the original asset.

Section 54F encourages investment in a residential house. For qualifying for the exemption under section 54F, what is mandatory is the investment to be made in a residential house in the name of the assessee only. Section 54F shouldn’t be construed liberally to give wide and liberal interpretation to the word ‘assessee’ so as to include the assessee’s legal heirs as well.

In the instant case, the second residential house property was standing in the name of the assessee’s wife as per the registered sale deed. For all practical purposes, and even as per section 14 of the Hindu Succession Act, 1956, the property standing in the name of a female heir becomes her absolute property.

Even if the assessee had claimed section 54 exemption by purchasing a house in the name of his wife but while considering the exemption under section 54F, such house cannot be construed as the property owned by the assessee.

Accordingly, residential house purchased in wife’s name cannot be considered as property owned by the assessee, thus, it cannot be construed as owned by the assessee for determining eligibility for exemption under section 54F.

List of Cases Reviewed

• • DIT, International Taxation v. Mrs. Jennifer Bhide [2011] 15 taxmann.com 82/203 Taxman 208/[2012] 349 ITR 80 (Kar.) (para 16) followed.

List of Cases Referred to

• • CIT v. M.J. Siwani [2014] 46 taxmann.com 170/226 Taxman 394/366 ITR 356 (Kar.) (para 9)
  • DIT, International Taxation v. Mrs. Jennifer Bhide [2011] 15 taxmann.com 82/203 Taxman 208/[2012] 349 ITR 80 (Kar.) (para 16).