NEW DELHI: The Delhi High Court has ruled that owning multiple floors or portions of a residential property does not disqualify taxpayers from claiming deductions under Section 54F of the Income Tax Act, 1961, in a landmark judgment favoring the assessee. The decision, delivered by a bench of Justices Vibhu Bakhru and Tejas Karia, clarifies that such ownership configurations constitute “one residential house,” reinforcing precedents on capital gains exemptions.
Section 54F of the IT Act allows an exemption on capital gain from the sale of any property other than a residential house, if the amount from the sale of the asset is invested in purchase of a new residential house.
The case revolved around assessee Lata Goel’s claim of a ₹90 crore deduction under Section 54F for the Assessment Year 2011-12. She had sold shares of FIITJEE Ltd., an unlisted company, and invested the proceeds in a residential property. Initially, the Assessing Officer (AO) restricted the deduction to ₹30 crore, citing irregularities in fund routing. However, the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT) ruled in Goel’s favor.
Subsequently, the AO reopened assessments in 2017, alleging Goel owned “more than one residential house” on the transfer date—specifically, portions of another property co-owned with family members across the basement, second floor, and other floors. The AO disallowed the entire deduction, arguing these floors were separate units.
The High Court rejected this interpretation, citing judicial precedents. It noted that multiple floors or units in a single building, even with independent entries, qualify as one house if used cohesively. “Different floors of a house are not multiple residential houses,” the bench stated, dismissing the Revenue’s appeal.
The court also invalidated the reassessment proceedings, noting Goel had fully disclosed property details in her returns. Reassessments beyond four years require proof of taxpayer non-disclosure, which the AO failed to establish.
This ruling reinforces flexibility in interpreting residential property ownership for tax exemptions. Tax experts highlight its significance for families co-owning multi-floor properties. “The judgment recognises practical ownership structures and prevents undue denial of deductions,” said a tax analyst.
The decision ends a 14-year litigation saga, providing clarity on Section 54F’s scope and reassessment limitations.