2001 (5) TMI 133 - AT - Income Tax

Summary

Issues: Consideration of deduction under section 54F for investment in residential house, interpretation of the proviso to section 54F(1) regarding ownership of residential house, applicability of a previous Tribunal decision in determining eligibility for deduction.

Analysis:

The appeals involved the consideration of common and identical points related to the deduction under section 54F for investment in residential houses. The assessee claimed the deduction based on utilizing sale proceeds of long-term capital assets for investment in a residential house. However, the Assessing Officer (AO) denied the deduction under section 54F, citing that the assessees were owners of a share in a property used for self-residence, as per the proviso to section 54F(1. The proviso states that if the assessee owns a residential house on the date of the transfer of the original asset, the income from which is chargeable under "Income from house property," then the deduction under section 54F is not applicable. The assessees argued that they had utilized the sale proceeds to purchase a share in the same residential property, making them eligible for the deduction. However, both the AO and the CIT(A) rejected this contention, leading to the appeals.

During the proceedings, the counsel for the assessees referred to a Tribunal decision from Bombay, which held that in order to exclude exemption under section 54F, the assessee must own an identifiable residential unit. The Tribunal decision emphasized that owning an interest in the same unit prior to the purchase does not preclude the assessee from claiming the deduction under section 54F. The decision highlighted the benevolent nature of section 54F, aiming to incentivize house building activities. The Departmental Representative acknowledged that the facts of the present cases aligned with the Bombay Tribunal decision, favoring the assessee. Consequently, the Tribunal held that the assessees were entitled to the deduction under section 54F based on the precedent set by the Bombay Tribunal decision.

In conclusion, the Tribunal allowed all the appeals, directing the AO to grant the deduction under section 54F to the assessees. The decision was based on the interpretation of the proviso to section 54F(1) and the application of the principles established in the previous Tribunal decision, ensuring that the assessees met the conditions for availing the benefit of section 54F.