ITAT allowed sec. 54 relief to woman who purchased new house jointly in name of married daughter & son-in-law

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  • Last Updated on 8 November, 2021

Capital gains - Profit on sale of property used for residence (Ownership of new property)

Case Details: ITO v. Smt. Rachna Arora - [2021] 131 307 (Chandigarh - Trib.)

Judiciary and Counsel Details

    • Smt. Annapurna Gupta, Accountant Member and R.L. Negi, Judicial Member
    • Ashok Khanna, Addl. CIT for the Appellant. 
    • Parikshit Aggarwal, CA for the Respondent.

Facts of the Case

The assessee sold a residential property for consideration of a certain amount and invested the entire amount in purchasing a new residential property in joint names of assessee with her daughter and son-in-law. The share of three co-owners was 34 percent, 33 percent, and 33 percent, respectively.
The assessee claimed exemption under section 54. However, the Assessing Officer (AO) held that the assessee was entitled to exemption only to the extent of her share in the new residential property, i.e., 34 percent of total consideration invested by her.
On appeal, the CIT(A) allowed the claim on noting the fact that the entire capital gains earned by the assessee had been invested in the new property purchased. AO filed the instant appeal before the Chandigarh Tribunal.


The Tribunal held that the AO had restricted the exemption to 34% of the Long Term Capital Gains without acknowledging the fact that the assessee had invested the entire Long Term Capital Gains in the purchase of residential property
In a similar issue of claim of exemption under section 54B, the Punjab & Haryana High Court, in the case of Dinesh Verma [2015] 60 461/233 Taxman 409 (Punj. & Har.), had ruled that assessee would be entitled to the benefit of exemption on the amount invested by him after the sale of his original property.
Drawing parity from the same, the CIT(A) has rightly allowed the claim of deduction under section 54. The assessee had invested her entire sale consideration in the new property and, therefore, was entitled to exemption of the entire amount of Long Term Capital Gains.

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