Mumbai ITAT observes that the exemption u/s 54 cannot be restricted to 50% merely because the new residential property was jointly purchased by the Assessee and his wife and as the investment attributable to the Assessee in the new residential property exceeds the long term capital gains (LTCG), the Assessee is entitled to exemption u/s 54 in respect of entire amount of such LTCG;
ITAT observes that the approach adopted by CIT(A) is based on an incorrect understanding of the requirement of Section 54; ITAT opines that the provision does not mandate that the investment should be made by the Assessee, or the new residential property must stand exclusively in his name, nor does it prescribe that the deduction must necessarily be proportionately restricted merely because the name of the spouse is also included in the document of purchase; Tribunal remarks that “what assumes significance for determining the quantum of exemption is the investment made by the assessee in the eligible new asset”;
ITAT asserts that where the investment in the new residential property is made by the Assessee, the legitimate exemption cannot be proportionately curtailed merely because the spouse's name is additionally included in the purchase document;
Tribunal states that the mere fact that the new residential property is purchased jointly with the spouse does not, by itself, provide a basis for mechanically restricting the exemption u/s 54 to 50%; The “quantum of deduction has to be examined with reference to the investment actually made by the assessee in the new residential property”;
Tribunal opines that the “percentage of ownership mentioned in the purchase document cannot, in the absence of a statutory prescription to that effect, substitute the enquiry as to the source and extent of investment made by the assessee”’; Rejecting CIT(A)’s reasoning, ITAT comments that in the second round of proceedings the claim was required to be examined on merits pursuant to binding directions contained in the earlier order, and the fact that the claim was not originally made in the return could not again be employed to dilute the exemption after the Tribunal had expressly restored the matter for verification of that very claim; ITAT remarks that the restriction made by the AO is founded upon the joint names appearing in the purchase agreement rather than upon any finding regarding actual contribution of funds.