2017 (1) TMI 901 - AT - Income Tax

Eligibility to claim of deduction u/s 5F - treatment to one unit - Held that - The pent house purchased by the assessee in the form of duplex flat is a single residential house/single owned by the assessee at the time of transfer of original asset and the claim of the assessee under section 54F is allowable. Property not registered in the name of assessee himself - new asset was purchased in joint name of assessee s wife and daughter in law - Held that - Asset need not be registered in the assessee s name but should belong to the assessee. In the case on hand it is not disputed that the entire sale consideration has been passed through cheques which were given by the assessee. We also notice that the Revenue is assessing the rental income from the very same property in the hands of the assessee. In such circumstances, it cannot be denied that the assessee is not the real owner of the property. Therefore in view of various judicial pronouncements relied on by the assessee referred to in para 7 above we hold that even though the property was registered in the name of assessee s wife and daughter in law the deduction as claimed by the assessee under section 54F is to be allowed. - Decided in favour of assessee

Issues Involved:
1. Whether the duplex flat (Flat Nos. 2301-A and 2401-A) should be treated as a single residential unit for the purpose of Section 54F of the Income Tax Act.
2. Whether the assessee is eligible for deduction under Section 54F when the new asset is purchased in the names of the assessee's wife and daughter-in-law.

Detailed Analysis:

Issue 1: Treatment of Duplex Flat as a Single Residential Unit
The primary contention revolves around whether the duplex flat consisting of Flat Nos. 2301-A and 2401-A in Lokhandwala Residency Tower, Worli, should be treated as a single residential unit. The Assessing Officer (AO) denied the deduction under Section 54F, arguing that the duplex flat constitutes two separate residential houses. The assessee countered that the duplex flat is a single unit with a common kitchen, hall, and internal staircase, purchased through a single agreement.

The Commissioner of Income Tax (Appeals) [CIT(A)] accepted the assessee's argument, referencing the Special Bench decision of the Mumbai ITAT in the case of ITO vs. Sushila M. Jhaveri (107 ITD 327), which held that adjacent units converted into one house with common facilities should be considered a single residential house. The CIT(A) concluded that the duplex flat should be treated as a single unit, thus making the assessee eligible for deduction under Section 54F.

The Tribunal upheld the CIT(A)'s decision, citing various judicial precedents, including the jurisdictional High Court's approval in CIT vs. Ramkumar Suri [29 taxmann.com 231 (Bombay)], which supported the view that multiple adjacent units converted into a single residential house should be treated as one unit for the purpose of Section 54F.

Issue 2: Eligibility for Deduction When New Asset is in the Names of Wife and Daughter-in-Law
The second issue concerns whether the assessee can claim deduction under Section 54F when the new property is registered in the names of his wife and daughter-in-law. The AO denied the deduction, asserting that the property was not registered in the assessee's name.

The assessee argued that in their caste and community, it is considered auspicious to register property in the names of female family members. The entire sale consideration was paid by the assessee, and the wife and daughter-in-law had no financial contribution or ownership rights. The CIT(A) accepted this explanation, referencing multiple judicial decisions, such as CIT vs. Ravindra Kumar Arora [15 taxmann.com 307 (Delhi)] and CIT vs. Kamal Wahal [30 taxmann.com 34 (Delhi)], which held that the asset need not be registered in the assessee's name as long as the purchase consideration is paid by the assessee.

The Tribunal upheld the CIT(A)'s decision, noting that the Revenue was assessing rental income from the new property in the hands of the assessee, thereby acknowledging his ownership. The Tribunal concluded that the assessee is entitled to deduction under Section 54F even though the property is registered in the names of his wife and daughter-in-law.

Conclusion
The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order, allowing the assessee's claim for deduction under Section 54F of the Income Tax Act. The duplex flat was treated as a single residential unit, and the deduction was permitted despite the new property being registered in the names of the assessee's wife and daughter-in-law, as the entire consideration was paid by the assessee.

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