Capital Gain Exemption can’t be Denied merely on ground that Assessee has a Partial or Fractional Ownership of Residential House: ITAT [Read Order]

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In DIT v. Dawood Abdulhussain, Mumbai bench of Income Tax Appellate Tribunal (ITAT) recently ruled that capital gain exemption under section 54F of the Income Tax Act cannot be denied to the Assessee even though he has only a partial or fractional ownership in the residential house.

Assessee in the present case, is an individual duly filed his return of income for the relevant assessment year and declared total income at Rs. 5,96,947 and processed under section 143(1) of the Act. During the relevant year, he purchased a house property and claimed exemption regarding the capital gain arising from the house property under section 54F of the Income Tax Act 1961.

During the assessment proceedings, the Assessing Officer (AO) noticed that the Assessee had received an amount of Rs. 1,00,00,000 on surrender of tenancy rights in respect of a flat and the investment made by the Assessee towards the purchase of the new residential house was in excess of the amount received on surrender of the aforesaid tenancy rights. He was of the view that the Assessee owned more than one house property at the time of purchase of the new residential property and he also observed that the Assessee has only partial or fractional ownership of the property therefore he cannot be considered as the absolute owner of the said properties. Accordingly he denied the claim of the Assessee under section 54F of the Act.

On appeal the CIT(A) granted relief to the Assessee and held that the Assessee is entitled for claim of the deduction under Section 54F as raised by him in his return of income. Aggrieved by the order of the authority, the Revenue approached the Tribunal on appeal.

After analyzing the above narrated facts and circumstances, the Tribunal bench consists of Judicial Member Ravish Sood and Accountant Member Rajendra observed that the sole issue in the present case is whether the Assessee is entitled to get deduction under section 54F of the Act or not. The division bench further observed that the Assessee in the present case is only a co-owner having fractional ownership in the said respective properties, therefore, the precondition of being the owner of more than one residential house, other than the new asset, on the date of transfer of the original asset was not satisfied.

While concluding the issue in favour of the assessee, the bench held that nevertheless the Assessee still has partial or fractional ownership of the property. Therefore, the Assessee is entitled to get capital gain exemption under the said section.

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