2013 (9) TMI 568 - AT - Income Tax

Exemption u/s. 54F - Joint ownership of new house property - More than one residential house - Held that - Exemption u/s. 54F has been granted to the assessee with a view to encourage construction of one residential house - The construction/purchase of a house other than one residential house was not covered by section 54F of the Act - The concession provided u/s. 54F w.e.f. 1.4.2001 would not be available in a case where the assessee already owns, on the date of transfer of the original assets, more than one residential house - Therefore, it was clear that emphasis had been given on owning more than one residential house by any assessee. The assessees, who already owns, on the date of transfer of the original asset, more than one residential house, were not eligible for the concession provided u/s 54F of the Act - Even if other residential house may be either owned by the assessee wholly or partially - Therefore, the concession had been given only to encourage that any assessee should have his own residential house - In other words, when any assessee who owns more than one residential in his/her own title exercising such dominion over the residential house as would enable other being excluded therefrom and having right to use and occupy the said house and/or to enjoy its usufruct in his/her own right should be deemed to be the owner of the residential house for the purpose of section 54F of the Act - The proviso to section 54F of the Act clearly provided that no deduction shall be allowed if the assessee owns on the date of transfer of the residential asset more than one residential house. - Decided in favour of Revenue.

Summary

Issues Involved:
1. Validity of the gift deed transferring property to a minor.
2. Eligibility for exemption under section 54F when owning more than one residential property.
3. Interpretation of joint ownership in the context of section 54F.

Detailed Analysis:

1. Validity of the Gift Deed Transferring Property to a Minor:
The assessee claimed a gift deed dated 2.4.2007 transferred property at 204, Meenakshi Royal Court, to her minor son. The Assessing Officer (AO) noted that the gift deed was unregistered and thus invalid. According to section 27, transferring property to a minor without adequate consideration does not change ownership. The AO concluded the gift deed was a device to claim exemption under section 54F. The CIT(A) agreed, noting the gift deed lacked legal sanctity due to non-registration and absence of proper attestation. The property was still in the assessee's possession and listed under her name in municipal records, indicating she remained the owner.

2. Eligibility for Exemption Under Section 54F When Owning More Than One Residential Property:
The AO observed that the assessee owned more than one house, disqualifying her from exemption under section 54F. The assessee argued that the property at "My Home Navadeep" was jointly owned with her husband and should not count as full ownership. The AO, however, cited that partial ownership still amounts to owning a residential property, referencing the case of Dr. P.K. Vasanthi Rangarajan vs. DCIT. The CIT(A) acknowledged differing judicial views but ultimately sided with the assessee, noting that joint ownership does not equate to full ownership for section 54F purposes, based on the Tribunal's decision in Rasiklal N. Satra.

3. Interpretation of Joint Ownership in the Context of Section 54F:
The CIT(A) examined whether joint ownership of the property at 301, My Home Navadeep, disqualified the assessee from section 54F exemption. The CIT(A) referred to the Tribunal's decision in Rasiklal N. Satra, which differentiated between ownership and absolute ownership, concluding that joint ownership does not constitute owning a residential house under section 54F. The CIT(A) found the assessee eligible for exemption, as she was not the sole owner of the second property.

Conclusion:
The Tribunal reversed the CIT(A)'s decision, emphasizing that section 54F's concession is not available if the assessee owns more than one residential house, wholly or partially. The Tribunal cited various cases, including Ravinder Kumar Arora vs. ACIT, where joint ownership was considered as full ownership. The Tribunal concluded that the assessee, owning both properties, did not qualify for section 54F exemption. Thus, the appeal by the Revenue was allowed, and the CIT(A)'s order was reversed.