Ram Prakash Miyan Bazaz Vs DCIT (ITAT Jaipur)
In a significant ruling that provides clarity on the interpretation of Section 54F of the Income Tax Act, 1961, the Income Tax Appellate Tribunal (ITAT), Jaipur Bench, has held that merely booking a flat and making advance payments does not constitute ‘ownership’ of a residential house for the purpose of the restrictive conditions under the said section. The case of Ram Prakash Miyan Bazaz Vs DCIT hinged on the crucial distinction between having a ‘right to acquire’ a property and legally ‘owning’ it on the date of transfer of a capital asset.
The ruling is a significant relief for taxpayers seeking exemption on long-term capital gains by investing in a new residential property, as it distinguishes between the conditions for disqualification and the conditions for claiming the benefit.
The Core of the Dispute
The case revolved around Mr. Ram Prakash Miyan Bazaz (the assessee), who had earned a long-term capital gain of ₹2,04,37,654 following the sale of a plot of land on June 5, 2008. He sought to claim an exemption under Section 54F by investing in a new residential house being developed by Emaar-MGF in Gurgaon.
However, the Assessing Officer and subsequently the Commissioner of Income Tax (Appeals) [CIT(A)] denied this exemption. Their contention was based on the proviso to Section 54F(1), which disentitles an assessee from the benefit if they own more than one residential house (other than the new one) on the date of the transfer of the original asset.
