Merely because a property is called a farmhouse it does not become a non-residential house property unless otherwise proved

FACTS
The assessee sold a property at Patparganj, Delhi for Rs. 3.10 crores on 20th October, 2010 and claimed exemption u/s 54F stating that he had purchased a new farmhouse at Sainik Farms, New Delhi in September, 2011. The A.O. denied exemption u/s 54F without disputing the fact of the transactions, but merely noting that the assessee has more than one house and is also owner of many residential houses. For this proposition, the A.O. noted the address of the assessee on the return of income, on the bank account, on the insurance receipts as well as on the other legal documents placed before him.
He noted that the assessee has many residential houses and therefore deduction u/s 54F cannot be claimed. Therefore, the A.O. was of the view that the assessee is not entitled to deduction u/s 54F. He held that it is not possible to collect the direct evidence to prove that the assessee owned more than one residential house on the date of transfer of the original asset. He further noted that after taking consideration of the totality of the facts and circumstances of the case, one could draw the inference that the assessee did not fulfil the conditions for exemption u/s 54F. Even otherwise, he held that the assessee has purchased a farmhouse and no deduction u/s 54F should be allowed on that as income from a farm is not taxable.

Aggrieved, the assessee preferred an appeal to the CIT(A) who allowed the appeal. But the Revenue felt aggrieved and preferred an appeal to the Tribunal.

HELD
The Tribunal observed that the DR could not show that the assessee has more than one property. It noted that the A.O. himself says that he could not prove whether the assessee has more than one property. The objection of the A.O., that the assessee has purchased a farmhouse and therefore it is not a residential house property, was devoid of any merit. It held that ‘Farmhouse can be residential house also’. It is not the case of the Revenue that the assessee has purchased excessive land and has constructed a small house thereon, thereby claiming deduction on the total value of the land and the small property constructed thereon. If that had been the case, perhaps the assessee would have been eligible for proportionate deduction to the extent of residential house property as well as land appurtenant thereto.

The Tribunal observed that there is no finding by the A.O. that the assessee has purchased excessive land which would be used as a farmland and has for name’s sake constructed a residential house property. It held that ‘Merely because a property is called a farmhouse, it does not become a non-residential house property unless otherwise proved.’This ground of appeal filed by the Revenue was dismissed.