2015 (5) TMI 888 - AT - Income Tax

Exemption u/s.54F - investment in second residential house - previous residential property gifted to her husband - Held that - We find no provision in law for the assessee to continue to be regarded as the owner or even a part owner of the property (the Sion residential flat) gifted by her to her husband on 03.10.2008. Even if the same is for the purpose of enabling availing benefit under section 54F, we cannot by any score treat as not valid in the eyes of law. The gift deed, duly registered, has to be given its full legal effect, which is of a change in its ownership from the assessee to her husband, Shri Ashok Vishindas Ajwani. Pinning on some altruistic notion, as we observe the Revenue to, cannot entitle it to the read the law except in terms of its clear and unambiguous language, so that only what stands specifically provided is to be excluded. There is no stipulation in law with regard to the ownership pattern, or its quantification, i.e., of the assessee s other family members, including spouse, or even of the transferee/s. The same clearly provides for consideration of the ownership of residential house/s only of the assessee, and on a particular date. Thus no warrant in law and, accordingly, no merit in the Revenue s case for disregarding the gift of a house property by the assessee to her spouse prior to the transfer date (of the original asset) for the purpose of reckoning eligibility to exemption u/s.54F of the Act. We decide accordingly. - Decided in favour of assesse.

Summary

Issues:
Interpretation of provisions of section 54F of the Income Tax Act, 1961 regarding exemption for capital gains on transfer of residential property. Ownership consideration in the context of joint ownership and gift deeds. Applicability of section 27(i) for determining ownership of residential properties.

Analysis:

Issue 1: Interpretation of section 54F provisions
The case revolved around the interpretation of section 54F of the Income Tax Act, which provides for exemption of capital gains on the transfer of a residential property. The dispute arose due to the assessee's claim under section 54F for a residential flat purchase, which was contested by the authorities based on ownership considerations.

Issue 2: Ownership consideration in joint ownership and gift deeds
The core issue involved determining ownership in the context of joint ownership of residential properties and the effect of a gift deed transferring ownership. The assessee's claim was based on the argument that joint ownership should not be considered as owning multiple residential houses for the purpose of section 54F, even after a gift deed transferring ownership.

Issue 3: Applicability of section 27(i) for ownership determination
The application of section 27(i) of the Income Tax Act was crucial in determining ownership of residential properties, especially in cases involving gift deeds. The authorities relied on section 27(i) to disregard the gift deed and continue considering the assessee as the owner of the property, impacting the eligibility for exemption under section 54F.

The Tribunal analyzed the legal provisions, emphasizing the need for a clear interpretation of ownership in the context of tax laws. The decision highlighted that joint ownership does not equate to owning multiple residential houses, as the law focuses on absolute ownership. The Tribunal also clarified that the gift deed transferring ownership should be legally recognized, and the provisions of section 27(i) apply only for specific purposes related to income assessment.

Ultimately, the Tribunal ruled in favor of the assessee, allowing the appeal and rejecting the Revenue's argument to disregard the gift deed for determining eligibility under section 54F. The decision emphasized the importance of legal transactions and ownership rights in tax assessments, ensuring a fair application of the law in determining exemptions for capital gains on property transfers.