BACKGROUND

The assessee had sold a residential property and claimed exemption under Section 54F on the basis that the sale consideration had been reinvested in acquisition of another residential property in the name of his wife. The claim was initially disclosed in the return but was later questioned through reassessment proceedings, resulting in denial of exemption. The CIT(A) and ITAT also rejected the claim.

Before the High Court, the assessee contended that Section 54F did not require the new residential property to be registered exclusively in his own name and relied upon judgments including Jangpal Singh Tanwar, Gurnam Singh and Kamal Wahal. The Revenue relied upon decisions of the Punjab and Haryana High Court holding that the new property must be purchased in the assessee's own name.

COURT OBSERVATIONS

The Court first found that both the original asset and the new asset were residential properties. Consequently, Section 54F was not the applicable provision; Section 54 governed the transaction. The Court specifically noted that this distinction had not been noticed by the Assessing Officer, CIT(A) or ITAT.

The Court then held that exemption under Section 54 could be claimed only where the sale of the original residential property and purchase of the new residential property were transactions executed by the same assessee. Husband and wife are distinct legal entities, and the two transactions could not be clubbed merely because the husband had provided the funds.

The Court relied particularly upon Jai Narayan and Dinesh Verma, holding that where the statutory provision refers to purchase by the “assessee”, purchase of the new property in the name of another person, including the spouse, does not satisfy the statutory requirement.

The Court also considered and disagreed with the approach in Kamal Wahal, V. Natarajan and Mrs. Jennifer Bhide. It agreed with the reasoning in Kamal Kant Kamboj and held that Gurnam Singh was distinguishable because that case concerned property purchased jointly in the names of the assessee and his son, whereas the property in the present case stood solely in the wife's name.

The Court further observed that Bahadur Singh had followed Dinesh Verma and that the SLP against Bahadur Singh had been dismissed by the Supreme Court on 29.08.2023. The Court held that the questions raised by the assessee therefore stood conclusively decided against him.

Finally, Jangpal Singh Tanwar was distinguished because in that case the reinvestment was jointly in the names of the assessee, his wife and his son, and the other joint owners had also contributed to the investment. The Court also noted that Jangpal Singh Tanwar had not noticed the earlier decisions in Dinesh Verma and Bahadur Singh.

FINAL VERDICT

The High Court held that the questions of law raised by the assessee stood conclusively decided against him and that the investment in property solely in the wife's name did not qualify for the exemption under the applicable provision. The appeal was therefore dismissed, with no order as to costs.

CASE REFERRED BY COURT

• Jai Narayan v. Income Tax Officer — Punjab and Haryana High Court — 2007.
• Commissioner of Income Tax, Faridabad v. Dinesh Verma — Punjab and Haryana High Court — 06.07.2015.
• Kamal Kant Kamboj v. Income Tax Officer, Ward-3, Haryana — Punjab and Haryana High Court — 2017
• Bahadur Singh v. Commissioner of Income Tax (Appeals) — Punjab and Haryana High Court — 2023
• Bahadur Singh SLP, SLP (Civil) Diary No.31033 of 2022 — Supreme Court of India — 29.08.2023
• Commissioner of Income Tax v. Gurnam Singh — Punjab and Haryana High Court — 2010
• Commissioner of Income Tax v. Kamal Wahal — Delhi High Court — 2013.
• Commissioner of Income Tax v. V. Natarajan — Madras High Court — 2006.
• Mrs. Jennifer Bhide — Karnataka High Court — 2011.
• CIT v. Vegetable Products Ltd. — Supreme Court of India — 1973.