Hyderabad bench of Income Tax Appellate Tribunal (ITAT) has held that an assessee is entitled to claim exemption under section 54F of the Income Tax Act even if he holds more than one residential property.
Assessee in the recent case was an individual deriving income from pension, property, capital gains and other sources. Assessee has entered into a contract with a builder for development of the site into 15 apartments in 5 floors. During the course of assessment proceedings the Assessing Officer (AO) has noticed that the Long term capital gains arising out of the transfer of undivided share of land in respect of flats allotted to builder’s share and undivided share of land and short term capital gains arising out of sale of flat allotted to land owner’s share are chargeable to tax.
He also rejected the exemption claimed by the assesse under section 54F of the Act finding that as per the provision, if the assessee owns more than one residential house other than the new asset as on the date of transfer of the original asset he is not entitled to any exemption u/s. 54F of the Act.
The bench comprising of Accountant Member B.Ramakotaiah noted that the AO’s contention that assessee owns more than two residences was not correct since there is no dispute that the assesse held more than one building as on the date of transfer i.e., on 19-06-2001. “Subsequent acquisition of any number of houses will not prevent assessee claiming the deduction for transfer as on 19-06-2001. Therefore, the AO’s view can not be upheld. Assessee is entitled for deduction u/s. 54/54F.”
The bench, while accepting the contentions of the assessee, observed that section 54 read provides exemption to capital gains arising from transfer of a residential house property (being building or land appurtenant thereto), the income of which is chargeable under the head Income from house property. In this case the assessee fulfilled the conditions of the said section, hence he is entitled to claim exemption under section 54/54F of the Act.
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