ITAT allows 50 percent capital gain exemption to joint-owner of property

ITAT allows 50 percent capital gain exemption to joint-owner of property

Law provides an exemption to a seller of a residential property when the sale is used for acquiring another residential property

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has allowed 50 percent as capital gain exemption under Section 54 of the Income Tax Act, 1961 to the joint owner of a property.

The assessee Mumtaz Naseem Syed filed her Income Tax Return (ITR) and was selected for scrutiny.

The assessing officer (AO) disallowed the 50 percent deduction under the IT Act on the ground that the new property in which the capital gain amount was invested, was in the joint name of the assessee and her son, as the payments were made out of the earnings/contribution of her son Khalid Naseem.

Aggrieved by the order, the assessee filed an appeal before ITAT.

Advocate Ajay Kumar, the counsel for the revenue department submitted that the assessee and her son together invested in the residential property at JP Greens. The deduction claimed under the IT Act was restricted to 50 percent.

He further stated that the assessee did not have any source of income but her son had a credit deposit of Rs.1 crore. There was no deposit from the assessee and the only deposit came after the sale of the property. Later, Rs.1 crore was paid by the son to purchase the JP Greens property.

(Section 54 of the IT Act provides an exemption to sellers of a residential property when the sale is used for acquiring another residential property).

Thus, the division bench of ITAT comprising Yogesh Kumar US (judicial member) and Dr. BRR Kumar (accountant member) ruled, "Since the assessee and her son have jointly invested in the property and are the joint-owners of the house having 50 percent right, title, and interest, the AO is, therefore, correct in restricting the claim of the assessee to Rs.1,79,23,884 by making an addition of Rs.74,49,302 to the total income."