ITAT Grants Section 54 Deduction for New Residential Property in Wife’s Name

Gopalkrishna Pandu Shetty Vs ACIT (ITAT Mumbai)

In the case of Gopalkrishna Pandu Shetty Vs ACIT (ITAT Mumbai), the appellant challenged the denial of deduction under Section 54 of the Income Tax Act for the Assessment Year 2016-17. The dispute arose as the new residential property was registered in the name of the appellant’s wife. The order by the Ld. Commissioner of Income Tax (Appeals) was contested, leading to a detailed analysis by the ITAT Mumbai.

The appellant claimed deduction under Section 54 for a payment made towards the purchase of a new residential property. However, since the property was registered in the name of the appellant’s wife, the deduction was denied by the Assessing Officer. This denial was based on the interpretation that Section 54 requires the property to be in the name of the assessee. The Ld. Commissioner of Income Tax (Appeals) upheld this decision, citing the judgment of the Hon’ble Bombay High Court in the case of Prakash s/o Timaji Dhanjode.

However, the appellant argued that there were valid reasons for registering the property in the wife’s name. The appellant, being a director of the seller company, was unable to execute the sale deed in both capacities as seller and purchaser. Therefore, the property was purchased in the wife’s name despite the entire consideration being paid by the appellant.

The ITAT Mumbai analyzed the precedents and held that the appellant is entitled to claim deduction under Section 54 despite the property being registered in the wife’s name. Citing the judgment of the Hon’ble Delhi High Court in the case of Commissioner of Income Tax – XII Vs. Kamal Wahal, the ITAT emphasized that the purpose of Section 54F, similar to Section 54, is to encourage investment in residential houses. As long as the entire investment comes from the assessee and there is a genuine reason for purchasing in the spouse’s name, deduction should be allowed.

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