Joint ownership of multiple flats doesn't disqualify LTCG exemption under section 54F as fractional ownership differs from absolute ownership

ITAT Mumbai allowed assessee's appeal for LTCG exemption under section 54F. AO denied exemption claiming assessee owned 16.67% share in six flats, violating the condition of not owning more than one residential house. ITAT held that joint/fractional ownership differs from absolute ownership. Since section 54F uses "own" without qualifying words like "wholly or partly" (unlike section 32 post-1997 amendment), it requires complete ownership. Joint owners cannot claim absolute ownership of residential property as they can only sell their share while property remains with co-owners. Therefore, fractional ownership in six flats cannot disqualify assessee from section 54F benefits.

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Issues involved:
The judgment concerns the disallowance of exemption claimed under section 54F of the Income Tax Act for owning multiple residential properties.

Summary:

Issue 1: Disallowance of exemption under section 54F of the Act
The appellant, an individual, claimed exemption under section 54F for investing in a new residential property after selling a share of jointly owned land. The Assessing Officer denied the exemption, stating that the appellant owned 16.67% share in 6 flats, which did not fulfill the conditions of section 54F. The appellant argued that each flat was occupied by different family members, and relied on a Co-ordinate Bench decision supporting his claim. The Tribunal analyzed the definition of ownership in the context of joint ownership, citing relevant case laws. It concluded that joint ownership does not equate to absolute ownership, and the appellant should not be denied the exemption under section 54F based on joint ownership alone. The Tribunal directed the Assessing Officer to allow the exemption as claimed.

Conclusion:
The Tribunal allowed the appeal, holding that joint ownership of 16.67% in 6 flats does not disqualify the appellant from claiming exemption under section 54F of the Income Tax Act, as joint ownership does not constitute absolute ownership as required by the provision.

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