Wednesday, July 16, 2014

Even joint ownership in second house at the time of sale of capital assets would lead to denial of sec. 54F benefits

Where assessee owns a residential house even jointly with another person, on date of sale of long-term capital asset, his claim for deduction under Section 54F would be rejected.


a)During relevant assessment year, assessee had sold his undivided interest in land. He claimed deduction under 54F in respect of long-term capital gain arising from sale of land.

b)The revenue authorities rejected assessee's claim for deduction under sections 54F on the ground that assessee was having two residential houses having one half share each therein on date of sale of land.

c)The Tribunal, however, allowed assessee's claim under Section 54F on the ground that 'a residential house' means complete residential house and would not include shared interest in a residential house. The aggrieved revenue filed the instant appeal.

The High Court held in favour of revenue as under:

1)Section 54F provides that if the assessee has a residential house he cannot seek the benefit of long-term capital gains. Under this provision, merely because the words residential house were preceded by word 'a' would not exclude a house shared with any other person.

2)Even if assessee shared the residential house, his right and ownership in the house, to whatever extent, was exclusive and nobody could take away his right in the house without due process of law.

3)Even if right of assessee, was one half in the residential house, it could not be taken away without due process of law or it would continue till there was a partition of such residential house. 4)Thus, the view expressed by the Tribunal on this issue could not be accepted. Hence, the assessee was not eligible to claim Section 54F benefit.- CIT V. M.J. SIWANI [2014] 46 170 (Karnataka)