Ashok G. Chauhan vs. ACIT [2019] 105 204 (Mum) – Condition of not owning more than a residential house on the date of transfer of the original asset would mean absolute ownership.  It does not cover within its sweep a case where the assessee jointly owns residential house together with someone else


The assessee individual claimed deduction u/s. 54F of the tax Act in the return of income.  In the course of re-assessment proceedings, the AO observed that the assessee was owner of two residential houses, one of which was jointly held by him with his wife. The AO rejected the deduction u/s. 54F on the ground that the assessee owned two flats on the date of transfer of capital asset.  CIT(A) upheld the order passed by the AO.


The Tribunal observed that the Legislature has used the word ‘a’ before the words ‘residential house’ and held that what was meant was a complete residential house and not shared interest in a residential house.  The Tribunal held that joint ownership is different from absolute ownership and that ownership of residential house for the purpose of 54F means ownership to the exclusion of all others.

To support this view, the Tribunal relied on the decision of the SC in the case of Seth Banarasi Dass Gupta vs. CIT [(1987) 166 ITR 783] wherein it is held that a fractional ownership was not sufficient for claiming even fractional depreciation u/s. 32 of the Act.  The Tribunal noted that subsequently section 32 was amended by using the expression ‘owned wholly or partly’.  However, no amendment has been made to section 54F. The Tribunal therefore concluded that the word ‘own’ in section 54F would include only the case where a residential house is fully and wholly owned by the assessee and consequently would not include a residential house owned by more than one person.  The appeal of the Assessee was allowed.

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