Exemption under section 54 is avaliable even if residential property is purchased in the joint name of assessee, daughter and son-in-law

Rachna sold her residential property and invested the entire amount in the purchase of a new residential property in the joint names of her daughter and son-in-law and claimed exemption under section 54 of the income tax act. The tax officer disallowed her exemption on the grounds that new property can only be purchased in her name.

CIT(A) allowed her appeal. Consequently, the Tax officer filed an appeal before the Tribunal.

Tribunal held that ” Nothing contained in Section 54 of income tax act 1961 precluded the assessee to claim the exemption in case the property was purchased jointly with close family members, who are not strangers or unconnected to her provided the assessee invested the entire amount of Long Term Capital Gain.

ITO vs Rachna Arora (Chandigarh Tribunal)

PS: It is a welcome judgment for taxpayers. There is a number of cases in which taxpayers do not buy property in their own names and document of ownership are drafted in the name of close relatives.

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