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2016 (10) TMI 635 - HC - Income TaxDeduction under Section 54F - whether the assessee owns more than one residential house other than the new asset on the date of transfer of the original asset? - Held that - Any stock in trade by profession is excluded from the definition of capital asset and in these circumstances the contention of the Revenue is that stock in trade is also included for applicability of Section 54F of the Act, in our view, cannot be accepted. We may also add that under the heading of Capital gains, Section 45 of the Act provides that any profits or gains arising from the transfer of capital asset can be considered as capital gain. Therefore, when one considers the gain or exclusion from the set off of the gain it should be related to the capital assets. When the property was not shown as capital assets but was shown as stock in trade, naturally the view taken by the Tribunal cannot be said to be erroneous. No substantial questions of law .
Issues Involved:
1. Interpretation of Section 54F for deduction eligibility with multiple residential properties. 2. Consideration of owning multiple flats and claiming Section 54F deduction. 3. Granting relief based on residential properties held as stock in trade. 4. Justification for allowing Section 54F deduction without specifying ownership nature. Analysis: Issue 1: Interpretation of Section 54F for deduction eligibility with multiple residential properties: The Assessing Officer initially questioned the availability of Section 54F benefits due to the assessee owning more than one residential house. The contention was that the criterion of not owning more than one residential house should disqualify the deduction. However, the CIT (Appeals) and the Tribunal analyzed the proviso to Section 54F, emphasizing the conditions for exemption. The Tribunal highlighted the absence of a defined term for "residential house" in the Act and concluded that the flats owned by the assessee as stock-in-trade did not qualify as residential houses for the purpose of Section 54F. This interpretation led to the direction for the AO to grant the deduction claimed by the assessee. Issue 2: Consideration of owning multiple flats and claiming Section 54F deduction: The Tribunal's decision was based on the treatment of the flats as stock-in-trade for business purposes, not as residential houses owned by the assessee. Despite the Revenue's argument that stock-in-trade should also be included for Section 54F applicability, the Court disagreed. It was clarified that stock-in-trade, being excluded from the definition of capital asset under Section 2(14)(a) of the Act, cannot be considered for the provisions of Section 54F. The Tribunal's stance on the eligibility of the assessee for Section 54F benefit was upheld. Issue 3: Granting relief based on residential properties held as stock in trade: The Tribunal's analysis focused on the treatment of income from the flats as per the provisions of the Income Tax Act. The flats were considered stock-in-trade, and the income was taxed under the head "income from house property." This treatment, coupled with the absence of evidence showing the flats as residential houses owned by the assessee, led to the Tribunal's decision to allow the deduction under Section 54F. The Tribunal emphasized that the denial of the claim by the Revenue was unfounded, given the nature of the properties in question. Issue 4: Justification for allowing Section 54F deduction without specifying ownership nature: The Tribunal's decision to grant the deduction under Section 54F was based on the clear distinction between capital assets and stock-in-trade. As the property in question was treated as stock-in-trade and not as a capital asset, the Tribunal found no error in allowing the deduction claimed by the assessee. The Court dismissed the appeal by the Revenue, affirming that the gain or exclusion for set off should be related to capital assets, and the Tribunal's decision was in line with this principle. In conclusion, the Court dismissed the appeal by the Revenue, upholding the Tribunal's decision to grant the deduction under Section 54F to the assessee based on the interpretation of the provisions and the nature of the properties involved.
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