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Often for one reason or another house property is registered in joint names among the family members. For instance in Jayantkumar Javerilal Choksi case (infra) it is submitted by the assessee that in their caste/community it is considered auspicious to purchase property in the name of the female members of the family as they are considered as “laxmi”. Never does one realize that there can be stakes to such forms of ownership patterns.  For instance the gains resulting from sale of house property are exempted u/s 54 of the Income tax Act 1961 if the consideration realized from sale is reinvested into another house in India by the assessee. There is a usual dilemma in the mind of an individual whether to hold the new property in his name or in joint name with his wife or any other family member.

Likewise any gains resulting from sale of a long term capital assets other than a residential house can be reinvested into a residential house in India to avail exemption from capital gains u/s 54F of the Act. This is further subject to a key condition that such individual shall not own more than one house on the date of transfer. Thus besides the above dilemma on legal ownership there is another complex question whether ownership in a house in joint names would be considered in the count of ownership of residential house(s) on the date of transfer of the original asset.

In a recent development in the case of Ashok G. Chauhan v Asstt. CIT [2019] 105 taxmann.com 204 (Mumbai – Trib.) the AR of the assessee referred to the favorable coordinate Bench decision in the case of ITO v. Rasiklal N. Satra [2006] 98 ITD 335 (Mum) as well as the decision by the Chennai Tribunal in the case of Mrs. V. R. Usha v. ITO [2016] 70 taxmann.com 340/159 ITD 402 in the matter relating to claim for deduction u/s 54F.


The Assessing Officer in this case denied the exemption u/s 54F of the I.T. Act on the ground that assessee was owner of more than one residential house on the date of transfer of original asset. The assessee is found to be owner of two flats on the date of transfer of capital assets. One of such flats situated at Goa was actually purchased jointly in the name of assessee as well as his wife.

Thus the entire dispute in this case revolved around this jointly owned house. Whereas the AO took the stand that the word ‘Owns’ as occurring in the proviso to section 54F of the Income-tax Act, 1961 would include even jointly owned house the assessee on the other hand claimed that the word ‘owns’ appearing in section 54F includes only such residential house which is fully and wholly owned by one person and not a residential house owned by more than one person.


The case went in for resolve before the Income Tax Appellate Tribunal Mumbai bench which held in favour of the assessee. In their judgment the bench made reference to few decisions of the Courts on the subject of ownership in the context of other provisions under the Act. For instance   they referred to Supreme Court decision in the case of Seth Banarsi Dass Gupta v. CIT [1987] 166 ITR 783/32 Taxman 112A so to say that a fractional ownership is not sufficient for claiming even fraction depreciation under section 32 of the Act. To this reason the legislature had to amend the provisions of section 32 with effect from 1-4-1997 by using the expression ‘owned wholly or partly’ to enable an assessee to claim depreciation even on jointly held assets. On the basis of this decision the bench formed following analogy:


‘So, the word ‘own’ would not include a case where a residential house is partly owned by one person or partly owned by other person(s). After the judgment of Supreme Court in the case of Seth Banarsi Dass Gupta (supra), the legislature could also amend the provisions of section 54F so as to include part ownership. Since, the legislature has consciously not amended the provisions of section 54F, it has to be held that the word ‘own’ in section 54-F 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.’


In more than one case the Mumbai benches of the Income tax Appellate Tribunal have held that purchase of the new asset in the name of the assessee jointly with his wife or mother or father or son or daughter is sufficient compliance for availing exemption u/s. 54/54F.  For instance in the case of JCIT Vs . Smt. Armeda K . Bhaya , 95 lTD 313 (M um ), Hon’ble Mumbai Bench of ITAT held that the new asset in the name of the assessee jointly with his mother and father was sufficient compliance for availing exemption u/s. 54F. Also even when the property was registered in the name of assessee’s wife and daughter in law the deduction as claimed by the assessee u/s 54F is allowed by  ITAT Mumbai in ITO Vs. Shri Jayantkumar Javerilal Choksi in ITA No. 7280/M/2013 dated 11.11.2016. The bench more particularly after referring to the object and purpose of section 54F scheme inferred that asset need not be registered in the assessee’s name but should belong to the assessee.

Likewise section 54 deduction held allowed on the basis of who had contributed for the purchase of the house. As not even a single penny had been contributed by the wife in the purchase of the house the ownership in joint name with wife did make any difference in the matter of allowance of exemption under section 54F vide Delhi High Court in CIT v Ravinder Kr Arora(2012) 342ITR38. The Delhi High Court yet further in CIT v Kamal Wahal (2013) 351ITR 4 held that the new residential house need not be purchased by assessee in his own name or exclusively in his name. Likewise Deduction u/s 54F allowed to the assessee who purchased new house out of his money regardless of the fact that the assessee held the property in joint ownership along with other parties as per the purchase deed vide Ahmedabad bench in Jayanti Lal Dahyabhai Patel Vs. The DCIT, Circle-5 (3), Ahmedabad.

Principle of uniformity of construction

By this very analogy to grant exemption even where the new asset is registered in joint name there is no reason to exclude any such house from the number count of residential house owned by the assessee on the date of transfer of original asset, whether owned singly or in joint names so as to grant or deny exemption, as the case may be on the basis of the principle of uniformity of construction. The fair reading of the law would demand that all houses belonging to the assessee whether held in his name or held jointly with other family members would be considered for the purpose of count of residential houses owned on the date of transfer of the original asset. Therefore the pointer to the Supreme Court decision in Seth Banarsi Dass Gupta case (supra) and the 1997 amendment to section 32 by the Mumbai bench in Ashok G Chouhan case is a little off the corner and opaque.

Gopal Nathani


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