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Case title: Dilip B. Mundada v. The Dy. CIT, Pune
According to the Pune Bench of the Income Tax Appellate Tribunal (ITAT), the new asset must be bought in the assessee's name in order to qualify for the section 54F deduction.
The two-member bench of S.S. Godara, a judge, and Dipak P. Ripote, an accountant, noted that section 54F does not require the assessee to make an investment in the new home; rather, it states that the assessee must buy a new home. The assessee stated that he invested the money used to purchase the apartment. It was factually false, though. The payments for the apartment were paid by his wife, according to the paperwork.
On March 30, 2013, the assessee, Dilip B. Mundada, sold a property for Rs. 1,51,000 during the year under review. In calculating the long-term capital gain, the assessee had made a deduction according to section 54F. The assessee asserted to have acquired Flat Nos. 401 and 402. Only Flat No. 402 received approval from the Assessing Officer to the Assessee. The contract for buying Flat No. 401 was signed on 11.08.2011 by the appellant's wife, Mrs. Uma Mundada. Since the original item was sold on March 28, 2013, it is known that flat number 401 was bought 17 months earlier. The wife of the appellant has a loan from ICICI Bank that she used to buy the apartment. In addition to being a director for the business, Mrs. Uma Mundada makes money, which she utilised to purchase flat number 401. Mrs. Uma Mundada doesn't file a joint ROI with her husband; she does it separately. Her salary gains went toward the purchase of flat number 401.
The assessee appealed the AO's decision to the Commissioner of Income Tax because they were unhappy with it (Appeal). The CIT (A) ruled that flat no. 401 had previously been purchased around 17 months prior to the sale, hence the sale money could not have been utilised to buy it. As a result, the circumstances of the appellant's case are different from those of the case he referenced. The argument made by the appellant that the two flats are connected and share a kitchen is inadmissible in light of the requirements for section 54F exemption. After 10 months of purchasing apartment no. 1, the appellant purchased flat no. 402 in his name and then claimed to have combined the two flats to create a single dwelling unit. As opposed to what was intended by section 54F, flat no. 401 was acquired one year prior. Due to the fact that flat number 401 was acquired before a year had passed since the sale of the original asset, flats 401 and 402 cannot be regarded as single residential units. The appeal was denied by CIT (A).
According to the assessee, he bought Flat No. 401 in his wife's name for her security. By registered agreement dated 11/08/2011 in the name of Mrs. Uma D. Mundada, Flat No. 401 was acquired. Due to a change in the construction plan, there was a supplemental agreement that allowed the builder to raise the carpet size of the apartment from 777 square feet to 841 square feet. The assessee had not made any additional payments to account for the area's growth. The agreement's clauses were all preserved in their entirety from the original form. In accordance with a purchase agreement dated June 26, 2012, the assessee acquired Flat No. 402. The two flats were combined into one by the assessee. The taxpayer was therefore qualified for a deduction under section 54F.
The government said that Flat No. 401 was bought in Mrs. Uma Mundada's name on August 11, 2011, more than a year before the Hadapsar Pune property was sold. The assessee won't be qualified. The two apartments were bought independently and under two different contracts. Apartment Nos. 401 and 402 cannot be combined into one flat since, according to the construction design, they are two independent flats. It is unlawful for the assessee to have demolished the wall separating the two units. Mrs. Mundada, an independent taxpayer with her own PAN and source of income, made the payments for Flat No. 401.
The ITAT drew attention to section 54F, which mandates that the assessee who sold the asset must buy the replacement asset within the allotted time frame. The phrase "bought a residential dwelling" appears in section 54F. In this context, the term "bought" does not mean "invested." The transaction must be legitimate. The name of the individual must appear in the paperwork for the purchase to be valid. The purchase agreement in this instance is in the name of the assessee's wife, an independent assessee who generates revenue on her own. The CIT (A) and AO's decision to limit the assessee's claim for a deduction under section 54F for Flat No. 402 was affirmed by the ITAT.