Capital Gain Exemption - Fractional Ownership

[Ethirajan Parthasarathy]

There are few judgments Eg:- CIT v/s Narendra N Chahan2001 (10) TMI 14 - GUJARAT HIGH COURT wherein it was held that the assessee is eligible for capital gain exemption u/s 54/54F even if he acquires fraction of residential property. I would like to know the views of expert whether such judgment still hold good even after amendment by the Finance Act 2014 substituting the words “a” residential house with “one” residential house.

There is a condition for claiming exemption provided u/s 54F that the assess should not own more than one residential house on the date of transfer of non-residential property. While dealing with the disputes for exemption claim under this section courts have held that the person owns 100% share in one residential property & fractional share in another residential property at the time of sell of non-residential property. The exemption cannot be denied for the reason fraction cannot be considered as “one” (Zainul Abedin Ghaswala Versus CIT(A) 2023 (6) TMI 663 - ITAT MUMBAI)

Experts may also give their opinion whether there can be two different interpretations for fractional ownership, one for section 54 & one for 54F

AI Summary

Capital gain exemption and fractional ownership: fractional shares may not defeat residential house eligibility for exemption. Whether fractional ownership of residential property disqualifies an assessee from claiming the capital gain exemption under sections 54/54F after Finance Act 2014 replaced 'a residential house' with 'one residential house'; tribunals and some courts have allowed exemption where the assessee had full ownership in one house and only fractional interest in another, suggesting fractional shares may not be treated as owning an additional house for eligibility purposes.