PURCHASE OF TENANCY RIGHTS GIVING POSSESSION, CONTROL AND TRANSFERABLE RIGHT IN FLAT WOULD PROVIDE SEC. 54F RELIEF:-

PURCHASE OF TENANCY RIGHTS GIVING POSSESSION, CONTROL AND TRANSFERABLE RIGHT IN FLAT WOULD PROVIDE SEC. 54F RELIEF:-

Section 54F, of the Income-tax Act, 1961 – Capital gains – Exemption in case of investment in residential house:-

Where assessee had substantial rights over property which were almost identical to ownership of property, exemption under section 54F was to be allowed[2015] – ITAT MUMBAI -Archana Parasrampuria v. ITO Mumbai.

Facts:-

The assessee earned long-term capital gains on sale of shares. She claimed exemption from tax on the said amount under section 54F on the plea that she had purchased a residential flat.

The Assessing Officer noted from the transfer deed that the assessee had acquired “transferable tenancy rights” and not the “ownership” of the flat. He therefore disallowed the claim under section 54F.

On second appeal to ITAT, It was held that:-

The assessee has purchased rights in one of the flats from the developer, which under the agreement were allotted to him for selling to the intended purchasers. The assessee has paid a sum as consideration/premium to the developer for obtaining the tenancy rights in the flat in question.

Though under the agreement in question, the assessee has been made liable to pay a monthly rent of Rs. 4,000 to the owner, however, in view of the overall facts and circumstances of the case and the amount of rent being a meager amount when compared to the amount of rent otherwise payable on such a property in the area, it is apparent that the assessee is not the mere tenant in the house.

She has purchased substantial rights in the flat in question. A perusal of clause-7 of the agreement reveals that the assessee is entitled to carry out repairs and renovation in the said flat except the changes which could be detrimental to the basic structure of the building.

The owner is not entitled to terminate the tenancy of the assessee in the said flat on any ground, whatsoever, except for non-payment of rent. In the event of destruction of the said building or construction of a new building, the assessee/tenant is entitled to obtain tenancy in respect of the new flat having the same carpet area on the same floor without any payment or consideration or premium to the owner under the agreement.

The assessee has absolute rights to transfer or assign the tenancy rights in respect of the said flat in favour of any person of her choice and to charge such consideration/premium for such transfer/assignment and the tenant/assessee will not be required to obtain any permission from the owner and will not be required to pay any premium for consideration to the owner for such transfer/assignment of the tenancy rights.

The tenant is also entitled to create mortgage in respect of the tenancy rights in the said flat and also bequeath the tenancy rights in respect of any person.

The rights of the assessee in the flat are not the mere tenancy rights but are substantial rights giving the assessee dominion, possession and control over the property in question with transferable rights, which are almost identical to that of an owner of the property. There is no denial that the assessee has purchased the rights in the said flat for residential purposes.

No disallowance if employees’ contribution to PF was deposited by employer before due date of filing return:-

Even employees’ contribution towards provident fund made by assessee/employer on or before due date of filing return under section 139 would be eligible for deduction under section 43B(b).[2015] -High Court of Karnataka-Commissioner of Income-tax v. Magus Customers Dialog (P.)Ltd.

Section 43B of the Income-tax Act, 1961 – Business disallowance – Certain deductions to be allowed only on actual payment -Provident fund contribution CASE REVIEW:CIT v. Spectrum Consultants India (P.) Ltd. [2013] (para 3) followed.

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