Appeal granted for deduction under Section 54F of Income Tax Act

The Tribunal allowed the appeal of the assessee regarding the grant of deduction under Section 54F of the Income Tax Act, 1961. The Tribunal held that joint ownership of the property did not disqualify the assessee from claiming the exemption under Section 54F. It was determined that the property in question was under construction and possession was received after the relevant date, thus not meeting the conditions for taxation under "Income from house property." Consequently, the Tribunal directed the Assessing Officer to grant the consequential relief to the assessee.

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Issues Involved:
1. Grant of deduction under Section 54F of the Income Tax Act, 1961.
2. Ownership status of the residential properties held by the assessee.
3. Applicability of proviso (a)(i) and (a)(ii) to Section 54F.

Issue-wise Detailed Analysis:

1. Grant of Deduction under Section 54F:
The primary issue revolves around the assessee's claim for deduction under Section 54F of the Income Tax Act, 1961, in respect of the sale of land at Jambhe and the subsequent purchase of residential property from Indiabulls Properties Ltd. The assessee also claimed deduction under Section 54 on Long Term Capital Gain (LTCG) earned by selling a flat in Pune.

2. Ownership Status of the Residential Properties:
The facts of the case reveal that the assessee purchased multiple properties, including a flat from Indiabulls Properties Ltd. and another property in Pune. The assessing officer (AO) contested the assessee's claim on the grounds that the assessee owned more than one residential property at the time of the sale of the original asset, thus violating the conditions stipulated under Section 54F.

The AO noted that the assessee, along with his wife, signed an application form for the Indiabulls property, which explicitly stated that the application did not constitute a binding agreement to sell. Consequently, the AO rejected the claim that the Indiabulls property was purchased in 2009-10, asserting that the assessee owned two residential houses on the date of transfer of the original asset.

3. Applicability of Proviso (a)(i) and (a)(ii) to Section 54F:
The AO denied the deduction under Section 54F on the basis that the assessee owned more than one residential house on the date of transfer of the original asset, as stipulated by proviso (a)(i) and (a)(ii) to Section 54F. The AO further argued that joint ownership of the Indiabulls property with the assessee's wife does not qualify for the exemption under Section 54F, citing various judicial precedents.

The assessee, however, contended that the Indiabulls property was under construction and possession was handed over only on 28.12.2016. Therefore, the income from the said property was not chargeable under the head "Income from house property," and the condition stipulated in clause (b) of proviso to Section 54F (1) was not satisfied.

Tribunal's Decision:
The Tribunal considered the rival submissions and perused the materials placed on record. It referred to various judicial precedents, including the Delhi Bench of ITAT in the case of Amit Gupta v. Asstt. CIT and the Hon'ble Madras High Court in the case of Dr. Smt. P.K. Vasanthi Rangarajan v. CIT. These cases held that joint ownership is not a bar for claiming exemption under Section 54F.

The Tribunal found merit in the assessee's arguments and concluded that the Indiabulls property was under construction and possession was handed over only on 28.12.2016. Thus, the income from the said property was not chargeable under the head "Income from house property," and the conditions stipulated in clause (b) of proviso to Section 54F (1) were not met.

Conclusion:
The Tribunal allowed the appeal of the assessee and directed the AO to grant the consequential relief. The order was pronounced in the open court on 14/06/2022.

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