Section 54F – For the purposes of section 54F, the question whether the assessee owns more than one residential house other than the new asset is to be determined based on the actual user of the property and not on the basis of what is shown in municipal record and therefore, ownership of a flat which is shown as a residential house in municipal records but is actually used as an office is not to be regarded as ownership of a “residential house”.
FACTS
During the previous year relevant to the assessment year 2010-11, the assessee, a senior advocate, sold his rights in his Gurgaon Flat and earned long term capital gain of Rs. 1,48,23,645. This long term capital gain was invested in a residential property within the specified time and exemption claimed u/s. 54F of the Act. This claim for exemption u/s. 54F was denied by the Assessing Officer (AO) on the ground that the assessee was owner of more than one residential house.
The contention of the assessee that the property belonging to the assessee being property at E-575A, Ground floor, Gr. Kailash-II, New Delhi was used by the assessee as his office and therefore the same is not regarded as a residential house owned by the assessee for the purposes of section 54F of the Act was not accepted by the AO on the ground that as per the municipal records and the sale deed this property was a residential property.
Aggrieved, the assessee preferred an appeal to CIT(A) who upheld the action of the AO.
Aggrieved, the assessee preferred an appeal to the Tribunal.
HELD
The Tribunal noted that there was no dispute about the fact that the property E-575A, GK-II, New Delhi, owned by the assessee was being used by him as his office during the relevant period but the only dispute between the assessee and the Revenue remained on the entitlement of the deduction u/s. 54F of the Act on the basis of actual user of the property i.e. office use and not merely on the basis of the municipal record showing the property meant for residential use or in the sale deed shown as residential type.
The Tribunal noted that the ratio of the following decisions
(i) CIT vs. Geeta Duggal (357 ITR 153)(Del);
(ii) ITO vs. Ouseph Chacko (271 ITR 29 (Ker);
(iii) Smt. P. K. Vasanthi Rangarajan vs. CIT (23 taxmann. com 229)(Mad);
(iv) ITO vs.. Rasiklal & Satra (98 ITD 335)(Mum Trib); and
(v) ITO vs.. Smt. Rohini Reddy (122 TTJ 423)(Hyd.)
support the stand of the assessee that for availing the deduction u/s. 54F of the Act, the property though shown as residential on the record of the municipality but the test will be actual user of the premises by the assessee during the relevant period. It held that the actual user thereof by the assessee will be considered while adjudicating upon the eligibility of deduction u/s. 54F of the Act and the fact that the property has been shown as residential house on the record of the government authority does not make a difference.
The Tribunal held that the AO should not have considered the property E-575A, GK-II, New Delhi to be residential property on the basis of municipal record by ignoring the actual use thereof as office of the assessee. The authorities below were held to be not justified in denying the claim of deduction u/s. 54F on the basis that the assessee was owning more than one residential house by including the said house used as office to be a residential house.
The Tribunal allowed the appeal filed by the assessee.
