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of <h1>Perpetual lease qualifies as purchase under Section 54F, granting exemption. Assessee's appeal successful.</h1> <h3>Shri N. Ramaswamy Versus The Income Tax Officer, Non Corporate Ward 2 (3), Chennai</h3> Shri N. Ramaswamy Versus The Income Tax Officer, Non Corporate Ward 2 (3), Chennai - TMI Issues Involved:1. Eligibility for exemption under Section 54F of the Income-tax Act, 1961.2. Interpretation of 'purchase' under Section 54F in the context of a perpetual lease.3. Applicability of Sections 2(47)(vi) and 269UA(2)(iii)(f) of the Income-tax Act, 1961.Detailed Analysis:1. Eligibility for Exemption under Section 54F:The primary issue revolves around whether the assessee is eligible for exemption under Section 54F of the Income-tax Act, 1961. The Assessing Officer had allowed the exemption, but the Principal Commissioner of Income Tax (PCIT) challenged this decision, arguing that the property was acquired through a perpetual lease, not an outright purchase. Section 54F provides that capital gains from the transfer of a long-term capital asset shall not be charged if the assessee purchases or constructs a residential house within specified timeframes. The Tribunal examined whether a perpetual lease qualifies as a 'purchase' under this provision.2. Interpretation of 'Purchase' under Section 54F:The Tribunal scrutinized the language of Section 54F, which necessitates a purchase or construction of a residential house within certain periods. The assessee had entered into a perpetual lease agreement for an unlimited period, granting enduring rights to possess and enjoy the property. The Tribunal considered whether this arrangement could be construed as a purchase. The Tribunal noted that the perpetual lease allowed the assessee to transfer the lease/possession to others, thus providing significant ownership-like rights.3. Applicability of Sections 2(47)(vi) and 269UA(2)(iii)(f):To determine if the perpetual lease qualifies as a purchase, the Tribunal referred to Sections 2(47)(vi) and 269UA(2)(iii)(f) of the Income-tax Act. Section 2(47)(vi) includes transactions that enable the enjoyment of immovable property as 'transfers' of capital assets. Section 269UA(2)(iii)(f) considers leases for terms not less than twelve years as transfers. The Tribunal emphasized that the perpetual lease agreement, which exceeds twelve years, should be construed as a purchase. This interpretation aligns with the definitions provided in these sections, thereby supporting the assessee's claim for exemption under Section 54F.Conclusion:The Tribunal concluded that the perpetual lease agreement, granting the assessee enduring rights to the property, qualifies as a purchase under Section 54F. The Tribunal quashed the order of the Principal Commissioner, affirming the assessee's eligibility for exemption. The appeal filed by the assessee was allowed, and the order was pronounced on 6th December 2019 at Chennai.
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