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2015 (11) TMI 1847 - AT - Income TaxExemption claimed u/s 54F - reinvestment made in purchase of house property - Real ownership - possession of two residential houses on the date of transfer of property thus denied the exemption - one house is in the name of the assessee's wife - AO Rejected the claim of the assessee because as per Section 27(i) of the Income Tax Act ownership of the property lies with the assessee - HELD THAT - It is a well recognized rule of interpretation endorsed by various higher judiciaries that a fiction created by any provisions of the Act cannot be super imposed on another provisions of the Act which has a fiction. Section.54F of the Act is a provision granting deduction to the assessee and therefore, it has a fiction. Hence, while interpreting the provision 54F of the Act, any other provision of the Act, which has a fiction, cannot be super imposed. Hence, in the given case before us, for the purpose of Section.54F of the Act, it has to be construed that the assessee is not the owner of the residential house at 24, Vijayaraghavachari Road, T Nagar, Chennai-17 and therefore he has only one house, accordingly he is the entitled to claim of exemption U/s.54F of the Act as held by the Ld. CIT (A). Hence, we do not find it necessary to interfere with the order of the Ld. CIT (A). - Decided against revenue.
Issues:
1. Disallowance of exemption under Section 54F of the Income Tax Act. 2. Interpretation of ownership of property under Section 27(i) of the Income Tax Act. 3. Application of deeming provisions in tax laws. Issue 1: Disallowance of exemption under Section 54F: The Revenue filed an appeal challenging the order of the Commissioner of Income Tax(A) allowing a deduction under Section 54F amounting to Rs. 2,47,52,000. The Assessing Officer disallowed the claim as the assessee was deemed to own more than one residential property. The assessee argued that the second property was settled in favor of his spouse and, therefore, he was eligible for the deduction. The Commissioner (A) upheld the claim, noting that the assessee had only one property at the time of the sale, supported by relevant documents. The Tribunal concurred, emphasizing that the provision of Section 54F grants a deduction to the assessee and should not be affected by other provisions with deeming provisions, thereby dismissing the Revenue's appeal. Issue 2: Interpretation of ownership under Section 27(i): The Assessing Officer relied on Section 27(i) of the Income Tax Act to assert that ownership of the property lies with the assessee, despite the settlement deed transferring the property to the spouse. The Commissioner (A) observed that the deeming provision of Section 27(i) should not be extended to deny the exemption under Section 54F, emphasizing that it is applicable only for computing annual property value. The Tribunal agreed, highlighting that for the purpose of Section 54F, the assessee should not be considered the owner of the transferred property, as established by the settlement deed, and thus entitled to the exemption. Issue 3: Application of deeming provisions in tax laws: The Tribunal emphasized that a fiction created by one provision of the Act should not be imposed on another provision with a fiction, especially when interpreting provisions granting deductions like Section 54F. It clarified that the assessee's ownership status for the purpose of claiming the exemption under Section 54F should not be influenced by deeming provisions like Section 27(i). Therefore, the Tribunal upheld the Commissioner (A)'s decision, stating that the assessee, having only one residential property at the time of sale, was eligible for the deduction under Section 54F. The appeal of the Revenue was consequently dismissed.
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