QUESTION: I have received a lump sum amount as my share of sale proceeds of our ancestral property. To avoid tax on capital gains, I want to invest the same on purchase of a property. Can I purchase the property in my wife's name? Kindly clarify.
ANSWER: Ancestral property for a Hindu would be assessable only in the hands of the karta as the income of the Hindu joint family, unless there had been effective partition as between the members prior to such sale. In fact, such partition would even be required to be formally recognised under Sec. 171 by the assessing officer, if the joint family had at any time been assessed to income tax.
As regards reinvestment benefit for capital gains under Sec. 54 or sale proceeds under Sec. 54F, though available for a Hindu Undivided Family (HUF), the investment should be in the name of the karta of such family. Even if the capital gains belong to the reader in his individual capacity with the sale having occurred after partition, the courts have not taken a uniform view as to whether investment is permissible in the name of the wife or any other family member or jointly with such other person. It is wise to make the investment in the name of the assessee in whose name capital gains is liable to be taxed to avoid any controversy.
