Deduction u/s. 54 cannot be denied for investment in joint names

By Accommodation Times Bureau
A careful reading of section 54 as well as section 54EC makes it clear that when capital gains arise from the transfer of long term capital asset to an assessee and the assessee has, within the period of one year before or two years after the date on which the transfer took place purchase or has, within the period of three years after the date of transfer, construct residential house, then instead of capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the provisions made under the section which grants exemption from payment of capital gains as set out thereunder. Therefore, in the entire section 54, the purchase to be made or the construction to be put up by the assessee should be there in the name of the assessee, is not expressly stated. Similarly, even in respect of section 54EC, the assessee has at any time within a period of six months after the date of such transfer invested the whole or any part of the capital gains in the long term specified asset then she would be entitled to the benefit mentioned in the said section. There also, it is not expressly stated that the investment should be in the name of the assessee. Therefore, to attract section 54 and section 54EC what is material is the investment of the sale consideration in acquiring the residential premises or constructing a residential premises or invest the amounts in bonds set out in section 54EC. Once the sale consideration is invested in any of these manner, the assessee would be entitled to the benefit conferred under this provision. In the absence of an express provision contained in these section that the investment should be in the name of the assessee only, any such interpretation would amount to Court introducing the said word in the provision which is not there. It amounts the courts legislating when the Parliament has deliberately not used those words in the said section.

In the instant case, the assessee has purchased the property jointly with her husband. She has invested the money in rural bonds jointly with her husband. It is nobody’s case that her husband contributed any portion of the consideration for acquisition of the property as well as bonds. The source for acquisition of the property and the bonds is the sale consideration. It is not in dispute. Once the sale consideration is utilized for the purpose mentioned under sections 54 and 54EC, the assessee is entitled to the benefit of those provision. As the entire consideration has flown from the assessee and no consideration has flown from her husband, merely because either in the sale deed or in the bond her husband’s name is also mentioned, in law he would not have any right. In that view of the matter, the assessee cannot be denied the benefit of deduction of the aforesaid amount. The Tribunal, on proper appreciation of the material on record, has rightly allowed the appeal and set aside the order passed by the assessing authority as well as the Appellate Commissioner.


Director of Income-tax, International Taxation, Bangalore


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