CPT V24P7-Art1 (Content).pmd - Taxmann

ent free accommodation was not being added
in the income of the assessee due to
reimbursement of rent to employer, the same
reimbursement could not be treated as payment
of rent to the employer for the purpose of
working out exemption for HRA under section
10(13A) of the Income-tax Act, 1961.
Capital gains from sale of ‘multiple houses’
can be invested in new house for section
54 deduction
In Dy. CIT v. Ranjit Vithaldas [2012] 23
taxmann.com 226 (Mumbai - Trib.), the Tribunal
took up the issue as to whether capital gain
from sale of ‘multiple houses’ can be invested
in new house to claim section 54 deduction.
In this regard, the Tribunal held as follows:
(a) There is an inbuilt restriction that capital
gains exemption under section 54 is available
only in respect of investment in one
house;
(b) However, this provision does not restrict
the exemption if capital gain arising from
sale of more than one house property is
invested to purchase or to construct a
new house;
(c) Therefore, even if assessee sells more than
one house in a year and capital gains
arising on sale of multiple houses are reinvested
in a new residential house; the
exemption under section 54 cannot be
denied, subject to fulfilment of other
conditions; and
Further, even if two flats are sold in different
years and capital gains from both flats are
invested in one residential house, exemption
under section 54 will be available in respect
of capital gain accrued from sale of each flat
provided the time-limit for construction or
purchase of new house is satisfied in case of
each flat sold.
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Section 54F exemption to be denied
only if multiple houses are under ‘exclusive
ownership’ of assessee
In Dr. (Smt.) P. K. Vasanthi Rangarajan v.
CIT [2012] 23 taxmann.com 299 (Madras), the
assessee, owned a property along with her
husband which is used as a clinic at the ground
floor and for the purpose of residence at the
first floor. The assessee entered into a
development agreement for the joint development
of 8 apartments in another property owned by
the assessee. The development agreement
provided for retaining undivided share of 50%
by the assessee and the remaining in favour
of the developer. In addition, the developer
had to construct on the land entrusted to them,
a new building consisting residential apartments
and give the assessee 4 residential apartments
and ` 10 lakhs in exchange for the undivided
share of land in favour of developer. The
undivided share was sold by assessee. The AO
rejected the claim of the assessee with regard
to exemption under section 54F on the ground
that if more than one residential house was
owned by the assessee on the date of transfer,
exemption under section 54F was not allowable.
On appeal, CIT(A) upheld the order of AO.
On further appeal, the Tribunal also rejected
the claim of the assessee under section 54F
stating that although the assessee was the owner
of 50% and not 100% of the property, the
conditions of section 54F were not fully satisfied.
The High Court held in favour of assessee -
It was held that second proviso disentitled the
exemption contained in the parent provision
only when the assessee had the exclusive
ownership of a residential house as on the date
of transfer of the asset which was not there in
the case of assessee as she owned only 50%
share in the property. Therefore, on an analysis
of section 54F and its proviso it can be concluded
that exemption can be denied where the assessee
owns a residential house as an exclusive owner
and not in the case of a joint ownership. Therefore,
deduction was allowed to the assessee.
August 1 to 15, 2012 u TAXMANN’S CORPORATE PROFESSIONALS TODAY u Vol. 24 u 67
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