Deduction under Sec 54 Allowed Even if Property Purchased in Spouse’s Name
Delhi ITAT In its recent ruling, the Delhi Income Tax Appellate Tribunal (ITAT) in the matter of Dharam Veer Singh [ITA No.2778/DEL/2024 (A.Y.2012-13)] held that deduction under Section 54 of the Income-tax Act, 1961, is admissible even if the new residential property is purchased in the name of the assessee’s spouse, provided the investment is made from the assessee’s own funds.
Brief Facts
The assessee, a retired and physically handicapped individual, sold his residential property and invested Rs.18.72 lakhs (including stamp duty) in purchasing a new house in New Delhi in his wife’s name. He claimed a full deduction of Rs.37.74 lakhs under Section 54 of the Income-tax Act, including the balance amount allegedly spent on renovation. The Assessing Officer (AO) restricted the deduction to ₹18.72 lakhs, citing the absence of supporting evidence for the renovation expenses. Further, the CIT(A) disallowed the entire claim under Section 54, arguing that the new asset was not purchased in the assessee’s own name, relying on judicial precedents from other High Courts.
ITAT's Order
Relying upon the judgment of The Hon’ble Delhi High Court in the case of CIT vs. Kamal Wahal and CIT vs. Ravinder Kumar Arora, ITAT observed, "the CIT(A) has erred in coming to the conclusion that the benefit of deduction u/s. 54 of the Act is not admissible to the assessee as the house has been purchased by the assessee in the name of his spouse.
ITAT also observed that "the provisions of section 54F of the Act are pari materia with the provisions of section 54 of the Act. Thus, the law expounded by Hon’ble Jurisdictional High Court in respect of section 54F of the Act, would equally hold good for deduction claimed u/s. 54 of the Act."