ITAT Allows Section 54F Exemption for Oral Gift of House to Daughter

Case Details: Income-tax Officer vs. Narasimha Reddy Duthala - [2025] 174 taxmann.com 1073 (Hyderabad-Trib.)

Judiciary and Counsel Details

• Manjunatha G., Accountant Member & Ravish Sood, Judicial Member
• Ms M. Narmada, CIT-DR, for the Appellant.
• Mohd. Afzal, Adv., for the Respondent.

Facts of the Case

The assessee sold unquoted shares for Rs. 92.49 crore and claimed Section 54F exemption by investing Rs. 43.83 crore in a house and Rs. 10.67 crore in a capital gains account. The Assessing Officer (AO) disallowed the exemption, citing that the assessee owns more than one residential house as on the date of transfer of original asset.

The assessee claimed that one residential house property was gifted to his daughter at the time of her marriage in 2015. However, AO disputed the gift of the property in the absence of a registered gift deed at the time of the gift. On appeal, the CIT(A) allowed the exemption. The matter reached the Tribunal.

ITAT Held

The Tribunal held that the assessee claimed to have gifted one residential house property as promised in favour of her daughter on the occasion of her marriage out of natural love and affection which was solemnised by executing a registered gift deed dated 25-6-2022 and further verified by the ‘Streedhan Agreement’ between the daughter of the assessee and her husband, as per which, both parties have agreed that the property has been gifted by her father in the year 2015.

Further, the assessee had also proved the gift of the property by filing the income tax return filed by the assessee’s daughter for the relevant assessment year, where she claimed her residential address from the above house property gifted by the assessee.

From the details filed by the assessee, there is no dispute with regard to the gift of property to her daughter in the year 2015 on the occasion of her marriage. In so far as reasoning of the AO that in absence of registered gift deed, proper gift cannot be executed because of provisions of section 123 of the Transfer of Property Act, 1882, it is viewed that there is no dispute with regard to the legal position that gift of immovable property can be given only by way of a registered instrument signed by donor and attested at least two witnesses.

However, going by Indian Customs and Traditions, the assessee’s argument that he made an oral gift to his daughter on the occasion of her marriage in the year 2015 needs to be accepted because it is common in Indian Hindu Society for property to be gifted to sons and daughters out of natural love and affection even without a registered document.

Therefore, the AO’s argument that a gift cannot be considered without a valid registered gift deed is devoid of merit and accepted.

List of Cases Reviewed

• Kishorbhai Harjibhai Patel v. ITO [2019] 107 taxmann.com 295 (Gujarat) (para 11)
• CIT v. Palemar Krishna [2012] 342 ITR 366 (Karnataka) (para 11)
• Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188 (SC) (para 11)
• Sanjeev Lal v. CIT & Anr. [2014] 365 ITR 389 (SC) (para 12)
• C. Aryama Sundaram v. CIT [2018] 107 ITR 1 (Mad.) (para 16.1) followed

List of Cases Referred to

• Bajaj Tempo Ltd. v. CIT [1992] 62 Taxman 480/196 ITR 188 (SC) (para 7 and 11)
• Sanjeev Lal v. CIT [2014] 46 taxmann.com 300/225 Taxman 239/365 ITR 389 (SC) (para 8)
• Kishorbhai Harjibhai Patel v. ITO [2019] 107 taxmann.com 295/266 Taxman 46/417 ITR 547 (Gujarat) (para 11)
• CIT v. J. Palemar Krishna [2012] 25 taxmann.com 109/342 ITR 366 (Karnataka) (para 11)
• CIT v. P.S.S. Investments (P.) Ltd. [1977] 107 ITR 1 (SC) (para 16.1).