The Income Tax Appellate Tribunal (ITAT), Mumbai held that capital gain exemption u/s 54F cannot be denied on grounds of joint ownership in two residential flats.
The assessee, Manoj Tekriwal, is an individual and is engaged in the business of trading in shares and securities. During the year, the assessee has derived income from salary, house property, business, capital gains, and other sources. For the year under consideration, the assessee filed his return of income on 15/10/2010 declaring a total income of Rs. 39,15,433. During the course of assessment proceedings, the assessee was asked to file the details of immovable assets. In reply, the assessee submitted the details of owning 2 flats. As the assessee already has a residential property at Mumbai, therefore, the aforementioned properties were subjected to house property income by the Assessing Officer vide order dated 26/03/2013 passed under section 143(3) of the Act, and income from house property was computed at Rs.1,87,793, after adopting the annual value of the said property at 8% of capital cost.
In appeal, Commissioner of Income Tax (CIT(A)) vide impugned order upheld the annual value of the aforesaid 2 flats as determined by the Assessing Officer. Being aggrieved, the assessee is in appeal before the Tribunal.
For claiming the benefit under section 54F of the Act, in respect of capital gain arising from the transfer of any long-term capital asset, not being a residential house, the assessee (individual/HUF) is required to either purchase or construct a residential house, within the period prescribed under the section. The proviso further requires that such residential house, other than the residential house owned on the date of transfer of the original asset, is chargeable under the head ‘Income from House Property and that residential house is other than the new asset. As per section 54F, the expression ‘new asset’ refers to a residential house’ purchased or constructed by the assessee, within the prescribed period.
The bench consisting of Pramod Kumar, Vice President, and Sandeep Singh Karhail, Judicial Member held that “joint ownership of the assessee, in the present case, in 2 residential Flats, namely, Flat No. A–408 and B–504 on the date of transfer of original capital asset will not disentitle the assessee from claiming relief under section 54F of the Act. Further, as it is not disputed that the aforesaid properties were purchased by the assessee within the prescribed time, therefore, we are of the considered view that the assessee is entitled to claim benefit under section 54F of the Act.”
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