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Issues:
1. Whether the assessee is eligible for exemption from capital gains under section 54 of the Income-tax Act, 1961. 2. Whether ownership of the property for two years is a prerequisite for availing the exemption under section 54. Analysis: 1. The case involved the assessee who occupied a flat on a leave and license basis and later purchased the property. The assessee claimed exemption from capital gains upon selling the property under section 54. The Income Tax Officer (ITO) denied relief, stating the assessee was not the owner for more than two years. The Appellate Assistant Commissioner (AAC) allowed the claim, leading to a departmental appeal. 2. The department argued that ownership is essential for claiming relief under section 54, emphasizing the requirement of the property's income being chargeable under 'Income from house property.' The assessee contended that all conditions, including property ownership, were met, citing relevant case law and provisions of section 54. 3. Section 54 specifies conditions for exemption, focusing on the use of the property for residence and the ownership aspect. The absence of explicit mention of ownership does not negate its importance, as ownership is fundamental for liability to capital gains. The ambiguity lies in whether ownership should extend to the two-year residence period or merely the sale date, lacking clear judicial guidance. 4. Previous tribunal decisions and High Court rulings highlighted the significance of continuous residence for two years preceding the sale to qualify for section 54 relief. The Madras High Court cases emphasized the necessity of continuous occupation for the specified period to avail the exemption. 5. The tribunal concluded that ownership for the residence period is implied for availing the exemption under section 54. The analogy drawn from previous cases underscores the importance of ownership during the residency period. The property's ownership by the assessee is crucial for tax liability and exemption eligibility, aligning with the purpose of the legislation to incentivize property reinvestment for residential purposes. 6. The tribunal held that the assessee, having been a tenant before purchasing the property, did not meet the ownership requirement for the specified residence period. Granting exemption without ownership continuity would defeat the legislative intent behind section 54. Therefore, the tribunal allowed the departmental appeal, denying the assessee's claim for exemption from capital gains under section 54 of the Income-tax Act, 1961.
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