Mahadev Balai vs. ITO (Rajasthan High Court)

DATE: November 7, 2018 (Date of pronouncement)
DATE: January 4, 2018 (Date of publication)
AY: -
FILE: Click here to download the file in pdf format
S. 54B Exemption: The fact that the investment and document is registered is made in the name of the spouse (wife) is not a ground for disallowing exemption from capital gains u/s 54B if the funds utilized for the investment belong to the assessee. Contra view in Kalya 251 CTR 174 (Raj) not followed

The High Court had to consider the following question of law at the instance of the assessee:

“Whether the Ld. ITAT was justified in disallowing the exemption under Section 54B of the act without appreciating that the funds utilized for the investment for purchase of the property eligible under Section 54B belonged to the Appellant only and merely the registered document was executed in the name of the wife and further, the wife had no separate source of income? “

HELD by the High Court allowing the appeal:

(i) On the ground of investment made by the assessee in the name of his wife, in view of the decision of Delhi High Court in Sunbeam Auto Ltd. and other judgments of different High Courts, the word used is assessee has to invest it is not specified that it is to be in the name of assessee.

(ii) It is true that the contentions which have been raised by the department is that the investment is made by the assessee in his own name but the legislature while using language has not used specific language with precision and the second reason is that view has also been taken by the Delhi High Court that it can be in the name of wife. In that view of the matter, the contention raised by the assessee is required to be accepted with regard to Section 54B regarding investment in tubewell and others.

Cases referred:

Kalya vs. CIT (251 CTR 174) (Raj), CIT vs. Kamal Wahal (351 ITR 4) (Del), CIT vs. V. Natarajan (287 ITR 271) (Mad), Late Gulam Ali Khan vs. CIT (165 ITR 228) (AP), DIT vs. Mrs. Jennifer Bhide (349 ITR 80) (Kar), CIT vs. Ravinder Kumar Arora (342 ITR 38) (Del)

Note: This has been followed by the Jaipur Bench of the Tribunal in Vivek Jain vs. DCIT (order annexed)

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