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VKJ Law Offices of Vinay K. Jain Advocates & Solicitors

Income Tax Appellant Tribunal denies income tax benefits from sale of old property if new investment in the name of wife

The Income-Tax Appellate Tribunal (ITAT)’s Mumbai bench recently denied a taxpayer I-T benefits available when long-term capital gains arising from sale of a residential property are invested in a new house solely because the new property is in the name of Wife and Adult daughter.Similar view was taken by the Delhi HC had taken a view favourable to the taxpayer. ITAT’s Mumbai bench, though, was bound by the decision of the Bombay HC, which had taken a contrary view and held that the new property must be owned by the taxpayer or he or she must have legal title over it. Section 54 of Income Tax Act, 1961 gives two years from the sale date to invest long-term capital gains from the old house in a new house to get tax relief. 

Therefore, abiding by the legal provision u/s 54 of the act, and legal position maintained by the Bombay HC, there appears a common view that to avail benefits u/s 54, if the taxpayer wishes to register a new house in the name of his/her spouse or children, it would be wiser to all register the property in his name also to at least claim proportionate deduction. 

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