Capital gain of one plot be used on another plot

It is necessary and obligatory to have investment made in residential house in the name of the transferor only and not in name of any other person. However, if the property is registered in the name of the spouse for the purpose of security etc, the assessee would be the deemed owner of the property and exemption is available in such a case.

You mentioned that flat was in name of husband, I would like to know that who is the real owner as the one who made the payment would be considered as the owner. Merely having property in ones name does not ipso facto makes them the owner . Nevertheless it is primafacie evidence as to the ownership.

As per Benami Transactions (Prohibition) Act, 1988

S.3. (1)

No person shall enter into any benami transaction.  [Buying property in name of some other person]

 S.3(2) Nothing in sub-section (1) shall apply to- (a) the purchase of property by any person in the name of his wife or unmarried daughter and it shall be presumed, unless the contrary is proved, that the said property had been purchsed for the benefit of the wife or the unmarried daughter;
 

So in your case husband can claim exemption even if the property has been acquired in name of wife 

CIT v. V. Natrajan, 287 ITR 271 (Mad.)

ITO v. Smt. Saraswati Ramanathan, 116 ITD 234 (Del.)

JCIT v. Smt. Armeda K. Bhaya, 95 ITD 313 (Mum.)

There are few more High court rulings which allowed the exemption where the property was in name of wife (Solely)

DO NOTE that exemption is available only if invested in name of wife or unmarried daughter

In other case exemption has been denied by the HIGH COURTS

CIT v. Gurnam Singh, 327 ITR 278

[Property was purchased in name of minor daughter]

CIT Vs. Ravinder Kumar Arora (Delhi HC)

Property was purchased in joint name with wife, exemption allowed