Section 54F and section 94(7) turn on substance, statutory conditions, and genuine factual verification of the transaction.

Section 54F relief depends on whether the acquired property is in substance one residential dwelling unit; separate deeds do not, by themselves, defeat the claim where the premises function as a single unit, and joint purchase in the wife's name is not fatal if the consideration is borne by the assessee. Section 94(7) can be applied only when its statutory conditions are cumulatively met, including the correct purchase date of the mutual fund units; a genuine transaction is not a colourable device merely because it produces a tax loss. The commentary therefore treats factual verification of the property's configuration and the statutory purchase date as decisive.

---

---

Issues: (i) whether the assessee's investment in two separately deeded row houses, including purchase in joint name with the wife, entitled him to exemption under section 54F; (ii) whether the redemption loss on mutual fund units was hit by section 94(7) and could be disallowed as a colourable device.

Issue (i): whether the assessee's investment in two separately deeded row houses, including purchase in joint name with the wife, entitled him to exemption under section 54F.

Analysis: The entitlement under section 54F depended on whether the property acquired was one residential unit or two independent units. The material showed separate deeds for House 16A and House 16B, but also indicated that House 16B formed the first and second floors of House 16A. The authority below had not carried out physical verification. The Tribunal also held that joint name of the wife, by itself, would not defeat the claim where the consideration had come from the assessee and the wife's name was added for convenience. The matter therefore required verification of whether the premises had a single municipal number and a common entrance.

Conclusion: The issue was restored to the Assessing Officer for verification. If the premises constituted a single dwelling unit, exemption under section 54F would be allowable, and joint ownership with the wife would not, by itself, bar the claim.

Issue (ii): whether the redemption loss on mutual fund units was hit by section 94(7) and could be disallowed as a colourable device.

Analysis: The decisive question was the date of purchase of the units. The Tribunal accepted the view that the date of tendering the cheque and allotment on time-stamp basis had to be treated as the purchase date. On that basis, the statutory conditions for invoking section 94(7) were not satisfied. The Tribunal also accepted that a transaction otherwise permissible in law could not be branded as a colourable device merely because it had tax consequences, and found no reason to disturb the appellate finding that the transaction was genuine.

Conclusion: Section 94(7) was held inapplicable and the disallowance of the short-term capital loss was rejected.

Final Conclusion: The assessee succeeded on the second issue and obtained a remand on the first issue, while the Revenue's challenge to the capital loss disallowance failed.

Ratio Decidendi: For section 54F, the substance of the acquisition and the actual use of the property as one dwelling unit are material, and joint name alone does not defeat the claim where the consideration is borne by the assessee; for section 94(7), the statutory conditions must be cumulatively satisfied before loss can be disallowed.

---