Jointly owned property not a bar; construction commenced prior to sale still eligible if completed within three years
Meetu Kumari | Feb 21, 2026 |
ITAT Allows Sec 54F Exemption of Rs. 26.77 Cr on Shares Sale; Joint Ownership Not a Bar
The assessee, Saroj Goenka, declared income of Rs. 1.87 crore for AY 2021-22. She sold 36 lakh shares of Emami Ltd on 13.07.2020, earning an LTCG of Rs. 26.77 crore, and claimed exemption under Section 54F after investing Rs. 53.86 crore in the construction of a residential property at Queens Park, Kolkata, which was completed within three years.
The Assessing Officer denied the exemption, alleging ownership of two other residential properties, construction commenced before sale, and sale proceeds were not directly used. The CIT(A)/NFAC upheld the disallowance and also termed the share transaction a colourable device.
Main Issue: Whether exemption under Section 54F was allowable despite joint ownership of one property, industrial nature of another property, pre-sale commencement of construction, and non-direct utilization of sale proceeds.
ITAT’s Order: The Tribunal allowed the appeal and held that the assessee was entitled to exemption under Section 54F. It found that the BT Road property was industrial land with a factory owned by the tenant and therefore not a residential house for the proviso to Section 54F. The Southern Avenue property was only jointly owned, and relying on Dr. (Smt.) P. K. Vasanthi Rangarajan, the Tribunal held that joint ownership does not amount to exclusive ownership so as to attract disqualification.
The Tribunal clarified that Section 54F requires completion within three years from transfer, not that construction must commence after sale; since the completion certificate was issued within time, the condition was satisfied. Following CIT v. Bharti Mishra, C. Aryama Sundaram v. CIT, and CIT v. Kapil Kumar Agarwal, it further held that direct utilisation of sale proceeds is not mandatory and the source of funds is irrelevant. The allegation of a colourable device was rejected for lack of evidence, and the Assessing Officer was directed to grant the exemption.
To Read Full Judgment, Download PDF Given Below
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