100% Section 54F exemption granted for joint purchase with son where assessee paid entire consideration
Issue
Whether an assessee is entitled to the full exemption under Section 54F of the Income-tax Act when the new residential property is purchased jointly with his son, who made no financial contribution, specifically when the son’s name was added for convenience due to medical reasons.
Facts
Transaction: The assessee sold a residential house during Assessment Year 2012-13 and reinvested the sale consideration into a new residential house.
Claim: The assessee claimed full exemption under Section 54F for the investment.
AO’s Restriction: The Assessing Officer (AO) restricted the exemption to 50%, arguing that the new property was purchased jointly in the name of the assessee and his son, implying the assessee only owned half.
Reason for Joint Name: The assessee explained that his son suffered from schizophrenia. His name was added to the sale deed solely for convenience and to ensure social security/avoid inconvenience in the future, not to split ownership.
Source of Funds: It was undisputed that the entire consideration for the new property was paid by the assessee alone.
No Double Claim: The Department acknowledged that the son had not claimed any separate exemption under Section 54F regarding this property.
Decision
Substance over Form: The Tribunal/Court looked beyond the technical title of the deed. Since the entire investment came from the assessee, he is the real owner of the property for tax purposes.
Purpose of Name Inclusion: The inclusion of the son’s name was necessitated by special family circumstances (medical condition) and did not reflect a financial partnership or separate ownership interest.
Entitlement: Since the assessee bore the full cost of the new asset, restricting the benefit to 50% was unjustified.
Ruling: The assessee is entitled to the 100% exemption under Section 54F.
Key Takeaways
Source of Funds is Decisive: For Section 54/54F exemptions, the primary criteria is who invested the capital gains. If the assessee paid the full amount, the exemption cannot be diluted merely because a family member’s name (spouse/child) is added to the title deed for safety or convenience.
Dominion over Property: In cases of joint registration without contribution from the second holder, the assessee is treated as the full owner for claiming tax benefits.
IN THE ITAT JAIPUR BENCH ‘B’
Daulat Singh Haldea
v.
Income Tax Officer
Narinder Kumar, Judicial Member
and Gagan Goyal, Accountant Member
and Gagan Goyal, Accountant Member
IT Appeal No. 1366 (JPR.) of 2025
[Assessment year 2012-13]
[Assessment year 2012-13]
NOVEMBER 11, 2025
Dilip Shivpuri, Adv. for the Appellant. Gaurav Awasthi, JCIT for the Respondent.
ORDER
Narinder Kumar, Judicial Member.- Assessee-appellant is feeling dissatisfied with the order dated 22.09.2025, passed by Learned CIT(A), NFAC, relating to the assessment year 2012-13, as thereby his appeal challenging the assessment order dated 11.12.2019 has been allowed only partly.
2. Arguments heard. File perused.
3. Vide assessment order dated 11.12.2019, relating to the assessment year 2012-13, passed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), following additions were made and the total income of the assessee was computed at Rs. 1,62,73,460/-:
“With the above remarks total income of the assessee is computed as under : –
| Income from house property | Rs. 1,84,800/- |
| Income from Short term Capital Gain | Rs. 5,43,882/- |
| Income from other sources | Rs. 72,282/- |
| Add: | |
| Long term Capital Gain as discussed above | Rs. 1,55,00,000/- |
| Gross total income | Rs. 1,63,00,964/- |
| Less: deduction u/s 80C | Rs. 27,500/- |
| Total taxable income | Rs. 1,62,73,464/- |
| Rounded off | Rs. 1,62,73,460/- |
Assessed u/s 143/147 at total income of Rs. 1,62,73,460/-. Issue demand notice. Charge interest as per ITNS-150 appended to this order which is forming part of this order. penaltynotice u/s 271(1)(c) and 271(1)(b) are being issued. Necessary forms are issued. “
4. When the matter came up before Learned CIT(A), by way of appeal filed by the assessee, assessee-appellant got certain reliefs in his favour.
Cost of Indexation-No grievance
5. Ld. AR for the appellant has submitted that as regards the sale of immovable property, Learned CIT(A) has already directed the Assessing Officer to verify copy of the accounts statement issued by M/s Unitech and also the copy of sale deed dated 23.05.2011 and then allow cost of indexation as per relevant provisions of the Act. Accordingly, Ld. AR for the appellant has submitted that in this regard, the assesseeas no grievance against the impugned order whereby directions have been issued to the Assessing Officer as regards the cost of indexation.
Exemption claimed under section 54EC-NO grievance
6. As regards exemption claimed by the assessee u/s 54EC of the Act, Learned CIT(A) has already held vide impugned order that the investment made by the assessee-appellant satisfied the provisions of section 54EC as regard tax free bonds of REC limited on 31.03.2012 worth Rs. 25,00,000/- and Bonds of NHAI for Rs. 25,00,000/-, and while observing that the assessee is eligible for the said exemption u/s 54EC of the Act, already directed the Assessing Officer to allow the said exemption claimed by the assessee, and as such, the assessee has no grievance in this regard as well.
Grievances of the appellant-Disallowing claim regarding transfer expenses relating to sale of immovable property.
7. As submitted by Ld. AR for the appellant, grievance of the appellant is that Learned CIT(A) has wrongly confirmed the assessment order, while disallowing claim of the assessee, as regards transfer expenses, relating to the sale of the immovable property as per sale deed dated 23.05.2011.
8. When show cause notice was issued to the assessee on 05.12.2019, he was also directed to prove transfer of expenses of Rs. 5,00,000/- as regards the immovable property sold vide abovesaid sale deed dated 23.05.2011.
However, as finds mentioned in para 3 of the assessment order, the assessee did not furnish any response or details/documents as regards the transfer expenses, cost of indexation and exemption of Rs. 93,00,000/-.
9. That is how, assessment order came to be passed.
Claim relating to Transfer Expenses
10. From the submission made by the appellant before Learned CIT(A), it transpires that the appellant was vendor as regards the immovable property, description of which tallied with the contents of accounts statement issued by M/s Unitech and from the recital of the sale deed. Thereupon, Learned CIT(A) directed the Assessing Officer to allow the cost of indexation on verification of copy of the said accounts statement issued by M/s Unitech and copy of sale dated 23.05.2011.
Claim of transfer expenses was disallowed by the authorities below for want of any evidence.
Case of the appellant is that the appellant has not been able to trace out any proof regarding payment made to the broker relating to the transaction pertaining to immovable property.
As regards payment of any amount by way of transfer expenses or to the broker, as claimed, admittedly, assessee did not lead any cogent or convincing evidence before the Assessing Officer or before the Appellate Authority.
In absence of any evidence regarding payment of any amount by way of brokerage by the assessee to any broker, learned CIT(A) has rightly disallowed said claim.
Even before us, the appellant has not produced any material or evidence in support of said claim.
Therefore, as regards the claim of transfer expenses, we do not find any merit in the contentions raised on behalf of the appellant. As such, the impugned order to this extent is upheld.
Another grievance-Reinvestment in property and claim under section 54F
11. Ld. AR for the appellant has referred to para 7.1.12 of the impugned order, and submitted that the assessee-appellant is feeling aggrieved by the impugned order whereby the claim of the assessee u/s 54F of the Act, as regards reinvestment has been allowed only to the extent of 50%, and not in entirety.
In this regard, case of the appellant is that during the year under consideration he sold immovable property for a consideration of Rs. 1,55,00,000/-, and submitted before the department copy of sale deed dated 23.05.2011.
12. Admittedly, as per copy of the sale deed relating to the immovable property in which he is said to have reinvested, and claimed exemption u/s 54F of the Act of the entire amount so reinvested.
As per said sale deed, same came to be executed not only in the name of the assessee-appellant, but also in the name of his son.
Keeping in view that the name of his son also appears in the sale deed and the observations made by the Assessing Officer in the remand report, Ld. CIT(A) allowed exemption u/s 54F only to the extent of 50%, even though the share of father and son does not find mention in the deed.
13. Ld. AR for the appellant has submitted that the entire amount has been invested by the assessee-appellant, by spending from his own funds for purchase of the immovable property, the reason being that the son of the assessee is as challenged boy and not having any source of income.
14. In this regard, in para 7.1.12, Learned CIT(A) observed that the assessee did not file in the appellate proceedings any proof in respect to the disability of the son or in proof of the claim that his son was having no source of income.
Learned CIT(A) relied on decision in Jai Narayan v. ITO [IT Appeal No. 447 of 2006, dated 13-8-2007] (complete citation given in the relevant para of the impugned order).
Learned CIT(A) also relied upon another decision in CIT v. V. Natarajan ITR 271 (Madras), so as to deny the claim as regards remaining 50%.
15. It may be mentioned here that in his remand report, the Assessing Officer reported to Learned CIT(A) that the assessee was eligible for exemption u/s 54F of the Act, only to the extent of 50% as the assessee had failed to establish disability of his son and that his son was having no source of income.
16. From para 7.1.14 of the impugned order passed by Learned CIT(A), it transpires that it was only during the proceedings conducted by the Assessing Officer for the purposes of remand report called for by Learned CIT(A) that the assessee put forth his submission to the effect that he had made the entire payment for purchase of the flat i.e. property purchased by reinvestment and that name of his son was mentioned in the sale deed only to ensure smooth transfer of the said property, if required, after the death of the assessee, particularly because his son is incapable of doing even basic things, but, otherwise the flat belongs to him (to the assessee).
As claimed by the assessee, his son has been suffering from schizophrenia since long. In this regard, photocopies of some medical prescriptions have been placed on record. Nothing to the contrary has been submitted by the department.
At this stage, reference to relevant portion of section 54F of the Act is required to be made. Relevant portion reads as under:
“Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house.
54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,—
(a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45;
(b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45:
Provided that nothing contained in this sub-section shall apply where—
(a) the assessee,—
(i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or
(ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or
(iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and
(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property.”.
As per section 54F of the Act, individual or Hindu Undivided Family (HUF) is entitled to claim an exemption on long-term capital gains (LTCG). When the net sale proceeds from the sale of a long-term capital asset (excluding a residential house) is reinvested in acquiring a new residential house in India, provisions of section 54F would come into application.
The objective of the provision is to encourage reinvestment of the gains earned from the sale of immovable property for the purposes of economic growth.
Full exemption is allowed to be granted if the cost of the new house equals or exceeds the net sale consideration of the original asset.
Partial exemption would be allowed where the new house costs less than the net sale consideration, calculated proportionally having regard to the Long-Term Capital Gain and the amount invested in new house.
As regards purchase of the property jointly in the name of the assessee and someone else, section 54F does not prohibit purchase of the properly jointly. However, the assessee should retain legal ownership or have control over the new asset so as to claim full exemption. It is not case of the department that the assessee is not having legal ownership or full control over the new asset. Courts have adopted a liberal interpretation and observed that the law does not strictly mandate the new house to be in the exclusive name of the assessee. The assessee must be a legal owner of the new property. Simply because name of a child, son here, is added in the sale deed as a joint owner of the new asset, for the purposes of convenience, it would not disentitle the assessee from claiming full exemption claim under section 54F of the Act, particularly, when the funds were invested by the assessee. Significant to note that extent of the share of the son of the assessee does not at all find mention in the sale deed. This fact lends support to the claim of the assessee that name of the son has been shown as a joint owner of the new asset only for the purposes of convenience or to avoid inconvenience in future.
One of the essential ingredients is that the entire capital gain must be reinvested. Here, department has not disputed that payment of the entire amount for purchase of said immovable property was made by the assessee. It is not case of the department that any amount for purchase of said immovable property was invested or contributed by anyone other than the appellant, or say, the son of the assessee, in whose name also the immovable property has been purchased. As per sale deed, sale consideration of the new asset i.e. Rs. 40 lacs was paid through 5 cheques, details of which finds mention at page 5 of the deed. It is not case of the department that any of the cheques was issued by the son of the assessee or by anyone else to pay the sale consideration of the new asset. Department does not claim that there was any doubt regarding source of the investment made by the assessee.
It is not case of the department that son of the assessee has claimed any exemption under section 54F of the Act separately to the extent of 50%. This also lends support to the claim of the assessee for 100% exemption.
As regards decision in Jai Narayan’s case relied on by Learned CIT(A) in the impugned order, Hon’ble High Court of Punjab & Haryana Court, while referring to the decision in V. Natarajan’s case (supra) by Hon’ble Madras High Court (relied on therein by counsel for the assessee), referred to it only to disagree while observing that the Hon’ble Court was unable to accept the view laid down in that case. Here complete text of decision in Jai Narayan’s case has not been made available to us on behalf of the department. In V. Natarajan’s case (supra), new asset was purchased by the assessee in the name of his wife after sale of original estate.
Therefore, decision in Jai Narayan’s case does not come to the aid of the department. As a result, the assessee is held entitled to 100% exemption under section 54F of the Act. Findings recorded by Learned CIT(A) on this issue are therefore set aside.
Result
17. In view of the above discussion, the appeal is partly allowed as regards 100 % exemption claimed by the assessee-appellant under section 54F of the Act. The Assessing Officer to make recalculations accordingly in accordance with law.
As regards the claim of transfer expenses, the appeal is hereby dismissed, while confirming the impugned order passed by Learned CIT(A).
File be consigned to the record room after the needful is done by the office.