•The assessee-HUF sold diamonds and the long-term capital gain arising from such sale was used to purchase a house property with three other coparceners of the HUF. The sale deed was executed in the name of the HUF.
•The assessee claimed exemption under section 54F on the ground that the sale proceeds of diamond were utilized by assessee for purchasing the property.
•The Assessing Officer disallowed the claim of exemption on the ground that the capital asset was purchased in the individual name of coparcener of HUF.
•The Hon’ble Tribunal, after considering the facts in assessee’s case, concluded that as regards the investment made in the individual capacity, even though HUF is an independent assessable unit under Income-tax Act, under the common law, HUF cannot be considered to be a legal entity. The HUF has to be represented through any one of the coparceners.
•Therefore, it was held by the Tribunal that when the assessee HUF invested the funds in the name of any one of the coparcener, it has to be construed that the investment was made in the name of HUF. It was further held that when the nucleus of the HUF fund was used for purchase of a property in the name of any one of the coparceners, the property belongs to the HUF, even though the property was registered in the individual name of one of the coparceners.
•The Hon’ble Tribunal, thus, concluded that the Assessing Officer was not justified in rejecting the claim of the assessee especially, when the investment was made in the name of Karta of the HUF.
For further reading, refer the attachment.
Further Reading