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Issues involved: Interpretation of deduction u/s 54F of the IT Act, 1961 for the sale of shares and purchase of residential property.
Summary: The appeal challenged the CIT(A)'s decision disallowing a deduction of Rs. 20,00,000 u/s 54F of the IT Act, 1961 for the sale of shares. The Revenue authorities questioned the nexus between the sale of shares and the purchase of a residential house, arguing that the assessee did not own an identifiable residential unit at the time of purchase. The AO disallowed the claim, stating that the assessee did not purchase the flat but acquired a share in it. The CIT(A) upheld this decision, noting that the assessee already had a share in the same property, which was not chargeable to tax. The assessee originally owned a share in a flat jointly with family members, and later acquired a share in the same flat after her husband's demise. The Revenue disallowed the claim based on the proviso to s. 54F(1), which restricts the benefit if the assessee already owns or acquires a residential property. Citing the case law of CIT vs. Aravinda Reddy, the Tribunal emphasized the common meaning of "purchase" and ruled in favor of the assessee. Referring to Shiv Narayan Chaudhari vs. CWT, it was argued that the assessee's purchase of a share in the flat did not preclude her from claiming the deduction u/s 54F. The Tribunal highlighted the benevolent intent of s. 54F to promote house building activity and directed the AO to allow the deduction, stating that the conditions for availing the benefit existed in this case. In conclusion, the Tribunal allowed the appeal to the extent of granting the deduction u/s 54F to the assessee, without commenting on other issues raised in the appeal.
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