In a recent ruling, the Delhi High Court upheld the decision of the Income Tax Appellate Tribunal ( ITAT )  that the reference to a ‘makaan’ in the registered deed was not a residential house and disallowed exemption claimed under Section 54F of the Income Tax Act, 1961. In this case, the assessee has appealed against the order of the ITAT that denied the claim for exemption of a sum of Rs. 1,84,23,729 under Section 54F of the Income Tax Act, 1961. Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here The assessee, Himanshu Garg, sold certain land for Rs. 3,23,88,500, declaring long-term capital gains of Rs. 1,84,23,729 after deducting the cost of acquisition of Rs. 1,39,64,771.

He claimed exemption under Section 54F of the Income Tax Act, 1961, stating that he invested in a residential property jointly purchased for Rs. 5,41,36,367, with his share being 47.5/119 of the total area, including a 500 sq. ft. house described as ‘makaan’ in the sale deed. The Assessing Officer ( AO ) rejected the claim, observing that a brick kiln and not a residential house, existed on the property. The ITAT upheld the AO’s decision, denying the Section 54F benefit to the assessee. The ITAT observed that a brick kiln and sheds had been constructed on the land in question and the registered sale deed does not mention any other structure on the new property. Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here

The Delhi High Court noted the findings of the ITAT that the sale deed of the new property did not refer to the structure as ‘rihayasi makaan ‘, which is the literal translation of ‘a residential house’ The bench upheld the findings of ITAT  that the reference to a ‘makaan’ in the registered deed was not a residential house The Delhi High Court, comprising Justice Vibhu Bakhru and Justice Swarna Kanta Sharma, upheld ITAT’s decision and dismissed the appeal filed by the assessee.