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Reinvestment: should it be in the name of assessee?

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.

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