ITO Vs Sheriar Phirojsha Irani (ITAT Mumbai)
The Revenue appealed against the order dated 28 March 2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, for assessment year 2018–19. The dispute concerns the assessee’s eligibility to claim deduction under Section 54F of the Income Tax Act, 1961. The Revenue argued that the assessee owned multiple residential properties and therefore did not qualify for the deduction. It further contended that the CIT(A) failed to consider the Karnataka High Court’s ruling in CIT v. M.J. Siwani, which held that even joint ownership of more than one residential house disqualifies a taxpayer from Section 54F benefits. The Supreme Court had dismissed the special leave petition against that decision.
The assessee had sold two properties in Lonavala for a combined consideration of Rs. 3,67,50,000 and earned long-term capital gains of Rs. 3,23,18,002. During the year, the assessee purchased a new residential property, Mehta Villa, for Rs. 9 crore, with a personal share of Rs. 4.5 crore. He claimed that the entire consideration received from the sale was invested in this property and thus Section 54F deduction was allowable. The assessee submitted that he did not independently own any other residential property on the date of transfer and that his interests in four other properties were only fractional. He argued that fractional ownership does not amount to full ownership for the purpose of Section 54F. He also relied on various judicial decisions to support his claim.
