Long-term lease of a residential villa can satisfy section 54F ownership and residential-use conditions for exemption.

A 99-year lease of a villa with exclusive possession, enjoyment, maintenance obligations and residential-use restrictions may be treated as acquisition of a house for section 54F where the lease conveys practical dominion and control. Applying substance over form and the statutory treatment of long-term rights in immovable property, the leasehold interest satisfied the ownership requirement. The property was also held to be a residential house, not a commercial premises, because occupation certificates, electricity records, tax filings and the use-restriction clause showed actual residential character. On that basis, exemption under section 54F was available.

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Issues: (i) Whether a 99-year lease of a villa, coupled with extensive rights of possession and enjoyment, could be treated as acquisition of a residential house for purposes of deduction under section 54F; (ii) Whether the property acquired was a residential house and not a commercial premises.

Issue (i): Whether a 99-year lease of a villa, coupled with extensive rights of possession and enjoyment, could be treated as acquisition of a residential house for purposes of deduction under section 54F.

Analysis: The lease deed granted possession for 99 years at a nominal rent, with obligations on the lessee to maintain, insure, and use the property only for private residence, along with substantial rights of enjoyment and renewal. The statutory scheme under sections 27(iiib) and 269UA(f) treats certain long-term rights in a building as ownership for tax purposes. Applying the principle that substance prevails over form, the long-term lease conferred practical dominion and control over the villa.

Conclusion: The leasehold acquisition was treated as purchase of the villa, and the assessee satisfied the ownership requirement for section 54F.

Issue (ii): Whether the property acquired was a residential house and not a commercial premises.

Analysis: The material on record, including the occupation certificate, electricity records, and the assessee's own tax filings, showed the property as a residential bungalow/self-occupied house. The clause restricting use to private residence also supported the residential character. The mere description of the project by the revenue authorities did not alter the actual nature of the property.

Conclusion: The property was held to be a residential house, not a commercial premises, for section 54F.

Final Conclusion: The assessee was entitled to exemption under section 54F, and the appeal succeeded.

Ratio Decidendi: For section 54F, a long-term lease conferring substantial possession, enjoyment, and practical dominion over a residential property may be treated as acquisition of a house, and the true character of the property is determined by its actual residential use and controlling documents, not by its label.

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