2024 (5) TMI 634 - AT - Income Tax

LTCG - exemption claimed u/s 54F - fractional ownership - AO denied the benefit for the reason that the assessee is owning 16.67% of six flats in another house property and therefore does not fulfill the condition u/s 54F - whether the joint ownership of 16.67% in 6 flats amounts to owning more than one residential house in assessee s case and that the assessee is the owner of the 6 flats jointly? - HELD THAT - It is an admitted fact that there is no clear demarcation with regard to the Flats jointly owned though as per the submissions of the assessee each flat is occupied by each of the joint owners. Therefore it cannot be said that one of the joint owners i.e. the assessee in this case is the absolute owner of the 6 flats and no individual person on his own can sell the entire property of all 6 flats. At best the joint owner can sell his share of interest in the property but the property would still continue to be owned by the rest of the co-owners. Joint ownership is therefore different from absolute ownership and in the case of residential unit which is jointly owned none of the co-owners can claim that he is the owner of residential house. Accordingly where a house is jointly owned by two or more persons none of them can be said to be the absolute owner of the house. So the word own would not include a case where a residential house is partly owned by one person or partly owned by other person(s). As decided in Seth Banarsi Dass Gupta case 1987 (4) TMI 7 - SUPREME COURT wherein it was held that a fractional ownership was not sufficient for claiming even fractional depreciation u/s 32 of the Act and as a consequence to this decision the Legislature had to amend the provisions of section 32 with effect from 1-4-1997 by using the expression owned wholly or partly . Since no such words are expressively mentioned in section 54F in our considered view the word own in section 54F would include only the case where a residential house is fully and wholly owned by assessee and consequently would not include a residential house partly owned by the assessee along with other persons. Thus we hold that the assessee cannot be denied the benefit of exemption u/s. 54F on the ground that he is jointly owning 16.67% in 6 flats since joint ownership/part ownership cannot be treated as absolute ownership in the absence of any specific words to that effect in section 54F - Appeal filed by the assessee is allowed.

Summary

Issues involved:
The judgment concerns the disallowance of exemption claimed under section 54F of the Income Tax Act for owning multiple residential properties.

Summary:

Issue 1: Disallowance of exemption under section 54F of the Act
The appellant, an individual, claimed exemption under section 54F for investing in a new residential property after selling a share of jointly owned land. The Assessing Officer denied the exemption, stating that the appellant owned 16.67% share in 6 flats, which did not fulfill the conditions of section 54F. The appellant argued that each flat was occupied by different family members, and relied on a Co-ordinate Bench decision supporting his claim. The Tribunal analyzed the definition of ownership in the context of joint ownership, citing relevant case laws. It concluded that joint ownership does not equate to absolute ownership, and the appellant should not be denied the exemption under section 54F based on joint ownership alone. The Tribunal directed the Assessing Officer to allow the exemption as claimed.

Conclusion:
The Tribunal allowed the appeal, holding that joint ownership of 16.67% in 6 flats does not disqualify the appellant from claiming exemption under section 54F of the Income Tax Act, as joint ownership does not constitute absolute ownership as required by the provision.