a) The assessee sold his Gurgaon Flat and earned long term capital gains. He invested the same in a residential property and claimed deduction under section 54F.
b) The AO disallowed such claim as he was of the view that property of assessee (located at New Delhi) was a second residential property. The AR was of the view that such property was only used by assessee for his own profession.
c) The DR submitted that such premises was undisputedly a residential house as per the municipal corporation and thus it will not change the character.
d) The CIT(Appeals) upheld the order of the Assessing Officer.The aggrieved-assessee filed the instant appeal before Tribunal.
The Tribunal held in favour of assessee as under:

1) For availing deduction under sec. 54F, the property though shown as residential on the record of the municipality but the test will be actual user of the premises by the assessee. In other words, it does not make difference whether the property has been shown as residential house on the record of the government authority but actual user thereof by the assessee will be considered while adjudicating upon the eligibility of deduction under section 54F.
2) For denial of the deduction claimed under sec. 54F, the AO should not have considered the premises located at New Delhi as residential on the basis of municipal record ignoring the actual user thereof.
3) Thus, authorities were not justified in denying benefit of Sec. 54F on the basis that the assessee was owning more than one residential house on the date of transfer of the original assets. – [2016] 72 taxmann.com 147 (Delhi – Trib.)
source taxmann

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