“Own” in S.54F of Income Tax Act means Absolute Ownership: ITAT Clarifies Jointly-Owned Properties Not a Bar to Exemption [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) recently deliberated an appeal relating to the applicability of exemption under Section 54F of the Income Tax Act, 1961, and the correctness of the indexed cost of acquisition claimed on certain share transactions.

The tribunal provided clarity on what constitutes "ownership" for exemption purposes and addressed intricate disputes regarding validity of family settlements and capital gain computation.

Ajay Goel, the appellant, filed his return for the Assessment Year (AY) 2020-21, declaring an income of ₹12,50,39,770. The case was selected for complete scrutiny. Ajay Goel sold shares of Tirupati Medicare Limited worth ₹17.5 crores, resulting in a long-term capital gain of ₹15,95,71,381.

He claimed deduction under Section 54F of the Income Tax Act, 1961, for the investment in a new residential property in Pune for ₹3,68,14,462. The Assessing Officer (AO) raised concerns about his eligibility for the exemption and questioned the evidence for the indexed cost of acquisition of shares.

Kanchan Kaushal, Advocate, representing the appellant contended that, following a family settlement, he was not the absolute owner of more than one residential property at the time of the transfer of shares. He submitted a notarized family settlement deed and various documents to demonstrate that several properties had either been transferred to other family members or were held jointly.

He explained that his investment in the Pune property qualifies for exemption under Section 54F due to lack of whole ownership in other residential houses. Regarding the indexation, he submitted detailed evidence, including company confirmations, demat accounts, and ledger statements to substantiate the cost of acquisition for the shares.

Rajesh Tiwari, Senior Departmental Representative, representing the Revenue, argued that Ajay Goel continued to show income from multiple house properties in his income tax return, and the property deeds transferring ownership were executed much later than the date of family settlement and share sale.

The department maintained that the exemption under Section 54F should be disallowed since, at the time of share transfer, Ajay Goel was deemed owner of more than one residential property. Additionally, the department asserted that the evidence furnished did not sufficiently prove the cost of acquisition of shares claimed for indexation purposes.

The Bench comprising Satbeer Singh Godara Judicial Member and S. Rifaur Rahman Accountant Member, upheld the deletion of additions made by the Department. On the question of Section 54F exemption, the bench cited legal precedents to assert that only whole and exclusive ownership counts, not joint ownership, for denying exemption.

The Tribunal noted that Ajay Goel was not the absolute owner of any house, since his interests were either transferred or held jointly. Regarding the indexed cost of acquisition, the tribunal accepted the detailed documentary evidence submitted by Ajay Goel and found no reason to interfere with the findings of the Commissioner of Income Tax (Appeals), who had allowed the claim.

The tribunal thus dismissed the Revenue’s appeal.

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