By TIOL News Service

AHMEDABAD, OCT 04, 2018: THE ISSUE BEFORE THE BENCH IS - Whether a genuine claim of exemption from capital gains tax u/s 54F can be denied to the assessee-HUF merely because sale deed was executed in the name of a member. AND THE VERDICT IS NO.

Facts of the case

The assessee-HUF was holding a capital asset which was sold for consideration of Rs. 19 lacs. The capital gain arising out of such transaction was around Rs. 12.71 lakhs, which was claimed as exempt u/s 54F on the ground that it had purchased new residential house for Rs. 20 lacs. The AO scrutinized such claim and noticed that purchase of the new residential house was in the name of two members of the HUF and not in the name of HUF. He was of the opinion that for claiming exemption u/s 54F, the purchase of a new capital asset had to be by the same assessee who had sold the capital asset which was a subject-matter of gain. Therefore, the AO rejected such claim of the assessee. On appeal, the CIT(A) as well as the Tribunal reversed such decision.

The High Court held that,

++ the Tribunal was right in coming to the conclusion that this was substantial compliance with the requirement of section 54F of the Act when neither the source of acquisition of the new capital asset nor the account of such new asset in the name of the HUF are doubted. Mere technicality that the sale deed was executed in the name of member of the HUF rather not HUF, would not be sufficient to defeat the claim of deduction. By mere names of the purchasers in the sale deed, the rights of the HUF and other members of the HUF do not get defeated. If at all, the persons' named in the sale deed hold the property of the trust for and on behalf of HUF and the other members of the HUF.

(See 2018-TIOL-2064-HC-AHM-IT)