sec.54f for property registration
This query is : Resolved
15 January 2010
An assessee has sold a plot of land and purchased a property in the name of his wife due to his severe illness.my question is this, whether assessee can claim deduction U/s 54 F, even if he has invested the sale consideration in the name of his wife. If there is any High Court/ Supreme Court case in support of this query....
15 January 2010
Cannot claim.
Citation:- Prakash Vs ITO ,ITA No I5/2002 decided by Bombay High Court on 12/09/2008.
RATIO DECIDENDI
For qualifying exemption under section 54F, assessee's ownership and domain over the asset is a must right from the sale of original asset till the purchase and/or construction of the residential house i.e., the 'new asset'.
Citation:- Prakash Vs ITO ,ITA No I5/2002 decided by Bombay High Court on 12/09/2008.
RATIO DECIDENDI
For qualifying exemption under section 54F, assessee's ownership and domain over the asset is a must right from the sale of original asset till the purchase and/or construction of the residential house i.e., the 'new asset'.
15 January 2010
agree and thanks for case.
16 January 2010
thanks.... but need more detail over the problem
23 July 2025
You're dealing with a situation where an assessee (taxpayer) has sold a plot of land and used the proceeds to buy a property in the name of his wife due to his severe illness, and you’re asking whether the assessee can claim the exemption under **Section 54F** in this scenario.
### Section 54F Overview:
Under Section 54F, the taxpayer can claim an exemption from capital gains tax if:
1. **The capital gain** arising from the sale of long-term capital assets (like land or property) is reinvested in the purchase or construction of a **residential property**.
2. The taxpayer **does not own more than one residential property** at the time of sale (except the new property purchased).
### Key Issue:
* The main issue here is whether the exemption can be claimed if the **new property is in the name of the wife** instead of the assessee's own name.
### The Legal Ruling:
* As per the case **Prakash v. ITO (ITA No 15/2002)** decided by the Bombay High Court on 12/09/2008, it was ruled that **for claiming the exemption under Section 54F, the taxpayer must own the new property from the time of the sale of the original property until the reinvestment**.
* In this case, it was clarified that the **ownership and domain over the new asset** (the residential property) should remain with the taxpayer (assessee) from the time of selling the original asset to the time of purchasing the new property.
* Since the property is in the **wife’s name** and not the assessee's name, the **assessee is not considered to have ownership** of the new residential property, which means they **cannot claim the exemption** under Section 54F.
### Ratio Decidendi (Legal Principle):
The **ownership** and **control over the new asset** are crucial for claiming the exemption under Section 54F. The exemption is available only if the taxpayer maintains continuous ownership and control over the newly acquired asset.
* **"Ownership and domain over the new asset"**: The High Court emphasized that the assessee needs to maintain ownership and control over the new property from the time of the sale of the original asset until the reinvestment is made.
### Why Can’t the Assessee Claim Exemption?
* Since the property was purchased in the wife’s name, the assessee doesn’t satisfy the requirement of owning the new residential property.
* The exemption under Section 54F requires the taxpayer to **own** the new house, and if it’s not in the taxpayer's name, the exemption cannot be claimed.
### Possible Solutions:
If the assessee wants to claim the exemption, the property should ideally be registered in **his own name**. If there are concerns about his health, the assessee could look into:
* **Transferring the property** to his name before claiming the exemption, but this must be done legally and before the due date of filing the tax return.
* **Consulting with a lawyer** about any specific provisions under the **Transfer of Property Act**, as well as looking into other tax-planning strategies, such as investing in **Section 54EC bonds**, which would allow for deferring capital gains tax without having to deal with ownership issues.
### Conclusion:
To claim the exemption under **Section 54F**, the assessee **must** own the new property, and the exemption cannot be claimed if the property is in the wife’s name.
Does this help clear up the situation? If you need more details or further case law, feel free to ask!
### Section 54F Overview:
Under Section 54F, the taxpayer can claim an exemption from capital gains tax if:
1. **The capital gain** arising from the sale of long-term capital assets (like land or property) is reinvested in the purchase or construction of a **residential property**.
2. The taxpayer **does not own more than one residential property** at the time of sale (except the new property purchased).
### Key Issue:
* The main issue here is whether the exemption can be claimed if the **new property is in the name of the wife** instead of the assessee's own name.
### The Legal Ruling:
* As per the case **Prakash v. ITO (ITA No 15/2002)** decided by the Bombay High Court on 12/09/2008, it was ruled that **for claiming the exemption under Section 54F, the taxpayer must own the new property from the time of the sale of the original property until the reinvestment**.
* In this case, it was clarified that the **ownership and domain over the new asset** (the residential property) should remain with the taxpayer (assessee) from the time of selling the original asset to the time of purchasing the new property.
* Since the property is in the **wife’s name** and not the assessee's name, the **assessee is not considered to have ownership** of the new residential property, which means they **cannot claim the exemption** under Section 54F.
### Ratio Decidendi (Legal Principle):
The **ownership** and **control over the new asset** are crucial for claiming the exemption under Section 54F. The exemption is available only if the taxpayer maintains continuous ownership and control over the newly acquired asset.
* **"Ownership and domain over the new asset"**: The High Court emphasized that the assessee needs to maintain ownership and control over the new property from the time of the sale of the original asset until the reinvestment is made.
### Why Can’t the Assessee Claim Exemption?
* Since the property was purchased in the wife’s name, the assessee doesn’t satisfy the requirement of owning the new residential property.
* The exemption under Section 54F requires the taxpayer to **own** the new house, and if it’s not in the taxpayer's name, the exemption cannot be claimed.
### Possible Solutions:
If the assessee wants to claim the exemption, the property should ideally be registered in **his own name**. If there are concerns about his health, the assessee could look into:
* **Transferring the property** to his name before claiming the exemption, but this must be done legally and before the due date of filing the tax return.
* **Consulting with a lawyer** about any specific provisions under the **Transfer of Property Act**, as well as looking into other tax-planning strategies, such as investing in **Section 54EC bonds**, which would allow for deferring capital gains tax without having to deal with ownership issues.
### Conclusion:
To claim the exemption under **Section 54F**, the assessee **must** own the new property, and the exemption cannot be claimed if the property is in the wife’s name.
Does this help clear up the situation? If you need more details or further case law, feel free to ask!
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