“Husband and Wife Are Distinct Legal Entities”: Punjab and Haryana High Court Denies Section 54 Exemption for House Purchased Solely in Wife’s Name

Case Name: Subh Karan Yadav v. Income Tax Officer, Rewari, Haryana

Date of Judgment: 12 August 2026

Citation: ITA No. 297 of 2026

Bench: Hon’ble Mr. Justice Deepak Sibal and Hon’ble Ms. Justice Rupinderjit Chahal

Held: The Punjab and Haryana High Court held that exemption under Section 54 of the Income Tax Act, 1961 can be claimed only when both the sale of the original residential property and the purchase or construction of the new residential property are undertaken by the same assessee. A husband and wife are distinct individuals and separate legal entities; therefore, the sale of a house by the husband and the purchase of a new house exclusively in the wife’s name cannot be combined for claiming the exemption, even where the husband allegedly provided the entire purchase consideration.

Summary: The assessee, a retired government employee, sold his residential house in Rewari for ₹22 lakh during Assessment Year 2011–12. He subsequently purchased a residential plot at Bawal exclusively in his wife’s name and constructed a house upon it. Claiming that the entire investment had been made from his funds, he sought exemption from capital gains tax under Section 54F of the Income Tax Act. The Assessing Officer denied the exemption and added ₹22 lakh to his taxable income. The CIT(A) and the Income Tax Appellate Tribunal affirmed the assessment.

The High Court initially clarified that Section 54F was inapplicable because both the original and the new assets were residential properties. The applicable provision was Section 54, a distinction that had not been noticed by the Assessing Officer, CIT(A), or ITAT. Interpreting Section 54, the Court held that the statutory benefit requires the same assessee who transferred the original residential asset to purchase or construct the new residential asset within the stipulated period.

Since the new property stood exclusively in the wife’s name, the assessee could not claim exemption merely by asserting that the consideration had originated from his funds. The Court distinguished cases where the replacement property had been purchased jointly in the assessee’s name along with family members and followed its earlier decisions holding that property purchased solely in the name of a spouse or another relative does not qualify for the exemption.

Decision: The High Court held that the questions of law raised by the assessee were conclusively covered against him by binding precedents of the Court. The income-tax appeal was accordingly dismissed.