2007 (4) TMI 719 - AT - Income Tax

Summary

Issues Involved:
1. Denial of relief u/s 54F of the Income Tax Act, 1961.
2. Ownership and possession of the Khar property.
3. Application of legal precedents and interpretation of "ownership" under the Income Tax Act.

Summary:

Issue 1: Denial of Relief u/s 54F
The assessee appealed against the CIT(A)'s order which upheld the assessing officer's decision to deny relief u/s 54F of the Income Tax Act, 1961. The assessee had claimed exemption on long-term capital gains from the sale of shares by investing in an additional share of a residential property. The assessing officer denied this claim, citing that the assessee already owned another residential property, which disqualified her from the exemption under the proviso to Section 54F.

Issue 2: Ownership and Possession of the Khar Property
The assessing officer noted that the assessee owned another residential property at Khar, which was purchased in the assessment year 1992-93 and was tenanted. Despite the conveyance deed being registered later in 1999, the assessee had been showing income from this property in her tax returns, indicating possession and ownership. The CIT(A) upheld this view, referencing the Supreme Court's judgments in CIT v. Podar Cement (P) Ltd. and Mysore Minerals Ltd. v. CIT, which emphasized possession and dominion over the property as determining factors for ownership.

Issue 3: Application of Legal Precedents and Interpretation of "Ownership"
The Tribunal considered the rival submissions and legal precedents. The assessee argued that the pre-amended provisions of Section 54F did not disqualify her as she only held a 1/4th share in the flat at the time of transfer and later increased her share. The Tribunal referenced the case of Smt. Varsha P. Thanawala, where similar facts led to the allowance of deduction under Section 54F. However, the Tribunal distinguished the present case due to the additional ownership of the Khar property, which was in possession since 1992-93 and generated rental income, thus establishing ownership despite the later conveyance deed.

Conclusion:
The Tribunal concluded that the assessee did not meet the conditions for exemption under Section 54F due to owning another residential property at Khar on the date of transfer of the original asset. The appeal was dismissed, confirming the CIT(A)'s order.