ITAT allows tax payers owning multiple homes to claim benefits

The Mumbai bench of the Income-tax Appellate Tribunal (ITAT) has ruled that individuals who co-own multiple residential houses can still claim tax exemption on long-term capital gains. This decision, made in the context of Section 54F of the Income Tax Act, will benefit numerous taxpayers, particularly those from large families who make joint investments.

Under Section 54F, taxpayers can claim a tax exemption on long-term capital gains resulting from the sale of assets other than a house, such as jewellery or shares. If the entire net sale proceeds are reinvested within a specified period in purchasing or constructing a house property, no tax liability arises. In cases where only a portion of the sale proceeds are reinvested, the tax exemption is allowed proportionately.

One of the eligibility conditions under Section 54F is that the taxpayer should not own more than one residential house at the time of selling the long-term capital asset. In other words, the only house that can be owned is the one being acquired or constructed for which the exemption is being claimed.

In the case of Zainul Ghaswala, the taxpayer had made a significant exemption claim under this section, which the I-T official denied during adjudication by the ITAT. Ghaswala's father and five other family members had inherited a piece of land on which six flats were constructed. Ghaswala argued that each family member owned and occupied one flat, providing evidence such as electricity bills and confirmation letters from the owners of the other flats to establish that they had no rights or interests in each other's flats. However, the income tax officer disregarded these submissions, contending that since Ghaswala co-owned six residential properties, the conditions of Section 54F were not met.

The ITAT bench had to determine whether co-ownership of multiple residential properties would disqualify a taxpayer from claiming the tax benefit under Section 54F. Taking into account a similar ruling by the Madras High Court in the case of Dr. P. K. Vasanthi Rangarajan, which stated that joint ownership would not impede the claim for exemption under Section 54F, the ITAT bench relied on this precedent and rendered a verdict in favour of the taxpayer, as there were no adverse decisions by the Bombay High Court in the jurisdiction.

Established in January 1941, the Income Tax Appellate Tribunal (ITAT) is a quasi-judicial body specializing in hearing appeals related to direct tax acts. Its decisions are final, with further appeals possible only if a substantial question of law arises. Initially consisting of three benches in Delhi, Kolkata, and Mumbai, the number of benches has progressively grown, reaching 63 at 27 different locations across cities with high courts. ITAT's distinguishing feature lies in providing accessible, cost-effective justice devoid of technicalities.

Next (Sundaram Home Finance's Expansion: Venturing into Affordable Housing)

ITAT allows tax payers owning multiple homes to claim benefits

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