Date:29/12/2008 URL: http://www.thehindu.com/2008/12/29/stories/2008122950061300.htm

Business

Reinvestment: should it be in the name of assessee?

You have indicated that reinvestment in joint names or in the name of the family member may qualify for relief under Sec. 54 or 54F or 54EC. There are some Tribunal decisions in favour of the assessee. May I draw your attention to the recent decision of the Bombay High Court in Prakash v ITO (2008) 173 Taxman 311 (Bom), where the High Court in the context of Sec. 54F wanted the purchase of the property to be in the name of the seller. The High Court took the view that relief is meant for the assessee so that the mere fact that reinvestment of sale proceeds eligible for relief is not enough. Kindly clarify.

The High Court in this case referred to two conflicting decisions on the subject. The AP High Court in Late Mir Gulam Ali Khan v CIT (1987) 165 ITR 228/ (1986) 28 Taxman 572 had held that the word “assessee” must be given a wide and liberal interpretation so as to include legal heirs so that investment in their joint names would not lose the benefit. In this case, the assessee who had sold the property had meanwhile died so that there is hardly any other means by which relief can be availed of, since investment cannot be made in the name of the dead person. Similar view in such circumstances was taken in CIT v C.V. Ramanathan (1980) 125 ITR 191 (Mad). The Bombay High Court in Prakash’s case (supra) referred by the reader, however, decided against the taxpayer requiring investment only in the name of seller-assessee.

In yet another case in Jai Narayan v ITO (2008) 306 ITR 335 (P&H), reinvestment out of the sale proceeds of the assessee’s property was made in the name of the assessee’s son and grandson was not considered eligible for relief dissenting from the decision of the High Court in CIT v V. Natarajan (2006) 287 ITR 271 (Mad), where investment in wife’s name was accepted because wife’s income was clubbed in his hands. It is safer to make such reinvestment in the name of the assessee himself to avoid this controversy.

S. RAJARATNAM