2023 (6) TMI 663 - AT - Income Tax

Tribunal grants exemption under Section 54F Income Tax Act for sole property ownership

The Tribunal allowed the appeal filed by the assessee, granting the exemption under Section 54F of the Income Tax Act. The Tribunal held that joint ... Deduction under section 54F - Interpretation of 'residential house' for section 54F - Co-ownership and ownership for section 54F - Conflict of non jurisdictional High Court decisions - rule favouring the assesseeDeduction under section 54F - Interpretation of 'residential house' for section 54F - Co-ownership and ownership for section 54F - Assessee's entitlement to deduction under section 54F where assessee held a share in a residential property that formed part of a family building comprising separate flats occupied by different family members. - HELD THAT: - The Tribunal examined whether the assessee's fractional/co ownership of one flat in a family constructed building, and the absence of exclusive ownership of other flats, rendered the claim for deduction under section 54F ineligible. The Assessing Officer and the CIT(A) had relied on the view attributed to M.J. Siwani (Karnataka High Court/Supreme Court dismissal) that owning a residential house even jointly disqualifies the assessee from exemption under section 54F. The Tribunal noted conflicting authorities, including decisions of the Tribunal and the Madras High Court which treat joint or fractional ownership as not amounting to ownership of another residential house for the purposes of section 54F. Applying the established principle that, where non jurisdictional High Courts are in conflict, an interpretation favourable to the assessee should be followed, the Tribunal found the Madras High Court decision to be supportive of the assessee's position. In the absence of any adverse decision of the jurisdictional High Court, and given there was no material to show that the assessee was the exclusive owner of the other flats, the Tribunal held the conditions of section 54F were satisfied and the deduction should be allowed. [Paras 5, 6]Assessee entitled to deduction under section 54F; grounds of appeal allowed and addition/disallowance deleted.Final Conclusion: The Tribunal allowed the appeal, holding that in the factual matrix-where the assessee held fractional/co ownership of a flat in a family building and there was no material showing exclusive ownership of other flats-the claim for deduction under section 54F for AY 2016-17 is allowable, and the disallowance by the lower authorities is deleted. Issues Involved:1. Disallowance of exemption claimed under Section 54F of the Income Tax Act.2. Ownership and co-ownership of residential properties.3. Failure to produce documentation to establish ownership.4. Non-consideration of judicial pronouncements relied upon by the appellant.5. Reliance on the decision in the case of M.J. Siwani vs. CIT.6. Non-discussion of decisions relied upon by the appellant.Summary:Disallowance of Exemption under Section 54F:The Ld. Assessing Officer (AO) disallowed the exemption claimed by the assessee under Section 54F of the Income Tax Act, amounting to Rs. 2,60,00,000/-, on the grounds that the assessee owned interest in more than one residential property. This decision was upheld by the Ld. Commissioner of Income-tax (Appeals) [CIT(A)].Ownership and Co-ownership of Residential Properties:The AO held that the assessee was a co-owner of six residential flats, which disqualified him from claiming the exemption under Section 54F. The assessee contended that he was the owner of only one flat, inherited from his late father, and provided electricity bills and confirmation letters from other flat owners to substantiate his claim.Failure to Produce Documentation:The Ld. CIT(A) observed that the appellant failed to produce any documents or agreements to establish that he had purchased or acquired only one flat. The assessee argued that no such agreement existed because the property was self-constructed by his late father.Non-consideration of Judicial Pronouncements:The appellant argued that the Ld. CIT(A) did not consider various judicial pronouncements, including those from jurisdictional benches of the Hon'ble ITAT, which were binding.Reliance on M.J. Siwani vs. CIT:The Ld. CIT(A) relied on the decision in M.J. Siwani vs. CIT, which held that owning more than one residential house, even jointly, disqualifies an assessee from claiming exemption under Section 54F. The appellant contended that this decision did not attract the doctrine of merger and was not a declaration of law by the Supreme Court under Article 141 of the Constitution.Non-discussion of Decisions Relied Upon:The appellant claimed that the Ld. CIT(A) did not discuss or distinguish the various decisions relied upon by the appellant.Tribunal's Decision:The Tribunal found that the decision of the Hon'ble Madras High Court in Dr. P.K. Vasanthi Rangarajan v. CIT supported the assessee's claim that joint ownership of a property does not disqualify an assessee from claiming exemption under Section 54F. The Tribunal also noted that in case of conflicting decisions from non-jurisdictional High Courts, the view favorable to the assessee should be followed, as per the Supreme Court's decision in CIT v. Vegetable Products Ltd.Conclusion:The Tribunal allowed the appeal filed by the assessee, granting the exemption under Section 54F, as there was no material to show that the assessee was the exclusive owner of the other five residential properties. The grounds of appeal were accordingly allowed.