SUBH KARAN YADAV vs. INCOME TAX OFFICER

The delay, if any of the pronounced judgment, and reasons thereof. Not applicable CORAM: HON’BLE MR. JUSTICE DEEPAK SIBAL HON’BLE MS. JUSTICE RUPINDERJIT CHAHAL Present: Mr. Abhay Gupta, Advocate for the appellant. Mr. Varun Issar, Sr. Standing Counsel for the respondent-Income Tax Department. ***** DEEPAK SIBAL

Per contra, learned counsel appearing for the respondent- revenue, submitted that no fresh question of law arises in the instant appeal because the issue of fact and law raised by the appellant with regard to claim of exemption under Section 54-F of the Act with regard to reinvestment of the sale consideration of an assessee’s property, within 03 years of such sale, in the name of the assessee’s wife, stands conclusively decided against the appellant through the following judgments passed by different Division Benches of this Court:-

In the case in hand, admittedly, the original asset and the new asset were both residential properties and therefore, to such transaction, no exemption under Section 54-F of the Act could have been claimed. This distinction has not been noticed by either the Assessing Officer or CIT(A) or DINESH BANSAL 2026.08.14 12:30 integrity of this document Chandigarh

In the facts of the present case, Section 54 of the Act, (as it stood at the relevant time), would be the relevant provision. Section 54(1)(i) and (ii) reads as under:- “Profit on sale of property used for residence.

(1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (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], then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,— (i) if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not DINESH BANSAL 2026.08.14 12:30 integrity of this document Chandigarh

In the instant matter, it is the case of the appellant that the capital gain arising from the sale of a residential property owned by him be exempted under Section 54 of the Act because he has reinvested the entire capital gain, in the name of his wife, in the purchase of a residential house within the stipulated time.

After reading Section 54 of the Act we unhesitantly conclude that exemption under Section 54 can be claimed only if the transactions of sale of the original asset and purchase of the new asset, within the stipulated time, both being residential properties, are executed by the same assessee as defined under Section 2(7) of the Act. Husband and wife are different individuals and distinct legal entities. One of the above transactions by the husband and the other by the wife cannot be clubbed for claiming exemption under Section 54 of the Act.

The afore view of ours finds support from the following observations made by a Division Bench of this Court in Jai Narain’s case (supra):- “10. In interpreting the words contained in a statute, the court has not only to look at the words but also to look at the context and the object of such words relating to such matter and interpret the meaning intended to be conveyed by the use of the words under the circumstances. The word "assessee" occurring in section 54-B must be interpreted in such a manner as to DINESH BANSAL 2026.08.14 12:30 integrity of this document Chandigarh

To the same effect are the following observations made by another Division Bench of this Court in Dinesh Verma’s case (supra):- “16. Question No.4 must be answered in favour of the appellant. As we mentioned earlier, the respondent sold his agricultural land for a sum of Rs.60,00,000/-. Out of the sale proceeds he invested only a sum of Rs.44,76,000/- towards the purchase of another agricultural plot. The balance consideration of Rs.16,84,000/- in respect of that plot was paid by the respondent's wife. It is not the respondent's case that it is actually he who paid the amount of Rs.16,84,700/- and that his wife's name was added benami and that the title thereof even to that extent vested in himself. We must, therefore, proceed on the basis that out of the sum of Rs.60,00,000/-, the appellant invested only Rs.44,76,000/- in the second property.

The Tribunal observed that it is settled now that an assessee can purchase a new asset or part thereof in the name of his wife and that there was sufficient justification for the same on considerations, such as, stamp duty rebate, social DINESH BANSAL 2026.08.14 12:30 integrity of this document Chandigarh

It is difficult to accept this view. Section 54B requires the assessee to purchase the property from out of the sale consideration of the capital asset. It does not entitle the assessee to the benefit conferred therein if the subsequent property is purchased by a person other than the assessee including a close relative even such as his wife or children. If the legislature intended conferring such a benefit, it would have provided for the same expressly. Indeed, an assessee can purchase an asset or a part thereof in the name of his wife but he would not be entitled then to the benefit of Section 54B. Moreover, it is not the case of the assessee that he purchased the asset benami in the name of his wife. We have proceeded on the basis that his wife invested the amount of Rs.16,84,700/- herself.

A Division Bench of this Court in Jai Narayan vs. Income- Tax Officer, [2008] 306 ITR 335 (P&H) held:

In interpreting the words contained in a statute, the court has not only to look at the words but also to look at the context and the object of such words relating to such matter and interpret the meaning intended to be conveyed by the use of the words under the circumstances. The word "assessee" occurring in section 54B must be interpreted in such a manner as to accord with the context and subject of its usage. A reading of section 54B of the Act nowhere suggests that the Legislature intended to advance the benefit of the said section to an assessee who purchased the agricultural land even in the name of a third person. Wherever the Legislature intended it to be so, it had specifically provided under the provision. The DINESH BANSAL 2026.08.14 12:30 integrity of this document Chandigarh

We may make a brief reference to the decision relied upon by counsel for the assessee. Learned counsel mainly relied upon the decision in V. Natarajan [2006] 287 ITR 271 (Mad), with reference to section 54 of the Act.

The Madras High Court in V. Natarajan's case [2006] 287 ITR 271 was dealing with a case relating to section 54 of the act wherein the assessee who after selling his residential house had purchased another residential house in his wife's name. the court had concluded that the assessee in such circumstances was entitled to exemption under section 54 of the Act. After giving our thoughtful consideration, we are unable to accept the view as laid down in V. Natarajan's case [2006] 287 ITR 271 (Mad)." Thus, even assuming that the assessee had invested the said amount of Rs.16,84,700/- in the name of his wife, it would have made no difference”.

In Kamal Kant Kamboj’s case (supra), another Division Bench of this Court has supported the afore view taken by us. Relevant portion of the judgment in Kamal Kant Kamboj’s case (supra) reads as under:- “4. The issue that arises for consideration in this appeal is whether the assessee is entitled for exemption under Section DINESH BANSAL 2026.08.14 12:30 integrity of this document Chandigarh

We may make a brief reference to the decision relied upon by counsel for the assessee. Learned counsel mainly relied upon the decision in V.Natarajan’s case (supra) with reference to section 54 of the Act. The Madras High Court in V.Natarajan’s case (supra) was dealing with a case relating to Section 54 of the Act wherein the assessee who after selling his residential house had purchased another residential house in his wife’s name. The court had concluded that the assessee in such circumstances was entitled to exemption under Section 54 of the Act. After giving our thoughtful consideration, we are unable to accept the view as laid down in V.Natarajan’s case (supra).”

In Dinesh Verma, (supra), the assessee sold the land by an DINESH BANSAL 2026.08.14 12:30 integrity of this document Chandigarh

In Gurnam Singh’s case (supra), the assessee out of the sale proceeds of the agricultural land sold by him had purchased some other piece of land in his name and in the name of his only son who was bachelor and dependent upon him for being used for agricultural purposes within the stipulated period. A pure finding had been recorded by the Tribunal that merely because in the sale deed, his only son was also shown as co- owner, it did not make any difference because the purchased land was being used by the assessee for agricultural purposes. Thus, on the basis of the finding recorded by the Tribunal, this court concluded that no substantial question of law arose and dismissed the appeal. The situation in the present case is different. In the present case, the land was purchased by the assessee in the name of his wife only.

In Kamal Wahal’s case (supra), it was held by the Delhi High Court that for the purpose of claiming deduction under Section 54F of the Act, the new residential house need not be purchased by the assessee in his own name nor is it necessary that it should be purchased exclusively in his name. A purposive construction is to be preferred as against a literal construction. In view of the binding precedents of this Court in the cases of DINESH BANSAL 2026.08.14 12:30 integrity of this document Chandigarh

Similar was the position in Natarajan’s case (supra). The said judgment was not accepted in Jai Naryan’s case (supra). The opinion in Mrs. Jennifer Bhide’s case expressed by Karnataka High Court being contrary to decisions of this Court in Jai Narayan and Dinesh Verma’s cases (supra), the assessee cannot derive any advantage from the said decision. In Vegetable Products Limited’s case (supra), it was held by the Apex Court that the duty of the court is to read the section, understand its language and give effect to the same. If the language is plain, the fact that the consequence of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the legislature to step in and remove the absurdity. On the other hand, if two reasonable constructions of a taxing provision are possible, then construction which favours the assessee must be adopted. There is no quarrel with the proposition. That was a case in respect of section 271(1)(a) (i) of the Act and the principle of law enunciated therein is well recognized. However, the situation in the present case being different, the assessee cannot derive any advantage from the said decision.

In the present case, the assessee alongwith his brother sold agricultural land in Village Ratoli, Yamuna Nagar for ` 72,00,000/- on 09.10.2006. Out of his half share, he purchased another agricultural land for ` 35,51,000/- in the name of his wife on 15.5.2007. As the value of the said land was more than that of the land sold, he did not disclose any long term capital gain and claimed exemption under Section 54B of the Act. Notice under Section 148 of the Act was issued to the assessee. Exemption under Section 54B of the Act was not allowed to the assessee on the ground that the land was not purchased by the DINESH BANSAL 2026.08.14 12:30 integrity of this document Chandigarh

Bahadur Singh’s case (supra), is another Division Bench judgment of this Court which decided a similar issue against the assessee by holding as follows:- “2. The case of the appellant is that he and his three brothers had sold jointly owned land and for his 1/4th share he purchased land in the name of his wife and claimed exemption under Section 54B of the Act. The authorities below declined the exemption in view of judgment of this Court in Commissioner of Income-Tax, Faridabad vs. Shri Dinesh Verma; ITA No. 381 of 2014, decided on 06.07.2015. 3. Learned counsel for the appellant states that in the afore- Gurnam Singh's case (supra), the appellant was entitled to exemption under Section 54B of the Act. 4-5. The contention raised by learned counsel for the appellant lacks merit.

It is an undisputed fact that after selling the agricultural land the appellant purchased a land worth his share, in the name of his wife. The issue is directly covered by the decision of this Court in Dinesh Verma's case (supra). The reliance of Gurnam Singh's case (supra) will not enhance the case of the DINESH BANSAL 2026.08.14 12:30 integrity of this document Chandigarh

The afore quoted judgment in Bahadur Singh’s case (supra), was challenged before the Supreme Court through filing of SLP (Civil) Diary No.31033 of 2022, which was dismissed on 29.08.2023, through the following order:- “1. Delay condoned.

We do not find any merit in the Special Leave Petition.

The Special Leave Petition is dismissed.

Pending application(s) shall stand disposed of”.

Thus, the questions of law raised by the appellant-assessee stand conclusively decided against him.

We shall now deal with the judgments cited by learned counsel for the appellant.

The judgment of the Delhi High Court in Kamal Wahal’s case (supra) was considered by the Division Bench of this Court in Kamal Kant Kamboj’s case and disagreed with. Having gone through both the afore referred judgments, we respectively agree with the view taken in Kamal Kant Kamboj’s case (supra).

Gurnam Singh’s case (supra), was also considered and distinguished in Kamal Kant Kamboj’s case (supra), which distinction, on facts, would also apply to the present appeal.

Jangpal Singh Tanwar’s case (supra), is a Division Bench judgment of this Court which is also distinguishable on facts because in the case in hand, the reinvestment of the capital gain is solely in the name of the DINESH BANSAL 2026.08.14 12:30 integrity of this document Chandigarh

In the light of the above discussion, the appeal is dismissed.

No costs. (DEEPAK SIBAL) JUDGE (RUPINDERJIT CHAHAL) 12.08.2026