2007 (4) TMI 390 - AT - Income Tax

Summary

Issues involved:
The judgment involves the interpretation of exemption u/s 54F of the Income-tax Act, 1961 in relation to the possession of a property and the eligibility for claiming the exemption against capital gains.

Issue 1: Assessment Year 1997-98
The revenue appealed against the CIT(A)'s decision to grant exemption u/s 54F of Rs. 1,52,18,000 despite the assessee being in possession of a property, income from which was taxable as 'Income from house property' on the date of the original asset transfer. The assessee claimed that the property in question was a plot of land at Harnala, leased to Punjab State Electricity Board (PSEB) for staff quarters. The CIT(A) directed on-site verification, but the Assessing Officer rejected the claim in the second round without verification. The assessee produced a court order from 1977 showing that the property was leased when the assessee was a minor. The CIT(A) considered the evidence and concluded that the assessee was not the owner of any taxable property, thus eligible for the exemption u/s 54F.

Issue 2: Assessment Year 1998-99
Similar to the previous year, the revenue challenged the CIT(A)'s decision to grant exemption u/s 54F of Rs. 63,02,650 despite the possession of a property taxable as 'Income from house property'. The Assessing Officer rejected the claim without on-site verification, but the CIT(A) allowed it after considering the evidence presented by the assessee, including the lease agreement and letters from PSEB. The CIT(A) found that the property did not qualify as a residential house, and thus the assessee met the conditions for claiming the exemption u/s 54F.

In both cases, the Appellate Tribunal dismissed the revenue's appeals, holding that the assessee was entitled to the deduction under section 54F of the Income-tax Act based on the evidence presented and the lack of ownership of a taxable residential property.