Section 54F Allowed Even if Property Bought in Sister’s Name | ITAT

Case Details: Deputy Commissioner of Income-tax (International Taxation) vs. Revanth Challagalla - [2026] 184 taxmann.com 335 (Hyderabad-Trib.)

Judiciary and Counsel Details

• Vijay Pal Rao, Vice President & Manjunatha G, Accountant Member
• Dr Sachin Kumar, Sr. A.R. for the Appellant.
• V. Naga Prasad and Budda M. Rao Varada, CAs for the Respondent.

Facts of the Case

The assessee, an individual NRI residing in the United Kingdom, had earlier purchased agricultural land, which he gave for joint development in FY 2015-16, receiving 12 villas as his share. He sold 5 villas in FY 2021-22 for about Rs. 5.26 crores, computed long-term capital gains, and claimed a deduction under Section 54F of about Rs. 2.80 crores on investment in a new residential house from a developer. The new property was registered in his sister’s name because he was unable to travel to India.

During scrutiny, the AO examined the Section 54F claim. The assessee explained the background of the JDA and the sale of villas, and that the new house was registered in his sister’s name because he was abroad. The AO computed long-term capital gains but disallowed the Section 54F claim on the ground that the new residential house was not purchased in the assessee’s own name. On appeal, the CIT(A) accepted the facts and directed the deletion of the disallowance under Section 54F. Aggrieved by the order, the AO filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal held that the assessee had sold five villas and computed long-term capital gains. He claimed deduction under Section 54F on the purchase of a new residential house from M/S. Aqua Space Developers Private Limited. The property was registered in the name of his sister, Smt. Shreya Challagalla. The assessee had furnished a copy of the Memorandum of Understanding between himself and Smt. Shreya Challagalla, along with the confirmation letter.

In the confirmation letter, the sister stated that she was not the absolute owner of the property and that it was registered in her name solely for convenience and to facilitate completion of the registration due to her brother’s absence. A subsequent gift deed between Smt followed this. Shreya Challagalla and the assessee, dated 20.01.2025, in which the property was finally gifted in favour of the assessee, and the relevant khata was registered in the assessee’s name. This was evident from the relevant municipal tax receipts furnished by the assessee. It was very clear that the assessee intended to purchase a new residential house property out of the sale proceeds received from the transfer of five villas, to claim a deduction under Section 54F. Due to his personal employment commitments outside India, he was unable to travel to India at the relevant time. As a result, the property was registered in his sister’s name.

Further, the property was finally transferred in the assessee’s name by way of a gift deed. Once the property has been purchased out of sale consideration received from the transfer of the original asset, and the assessee has satisfied other conditions provided under Section 54F, the AO ought to have allowed the deduction claimed under Section 54F.

List of Cases Referred to

• Jobanji Thakor v. ITO [2025] 175 taxmann.com 62 (Ahmedabad – Trib.) (para 8)
• Colathur N. Ram v. ACIT [2024] 168 taxmann.com 565 (Mumbai – Trib.) (para 8)
• Ganta Vijaya Lakshmi v. ITO [2015] 54 taxmann.com 301/229 Taxman 594 (Andhra Pradesh) (para 8)
• Rajesh Narendrabhai Patel v. ITO [2025] 179 taxmann.com 262/215 ITD 282 (Ahmedabad – Trib.) (para 8)
• Girish Dharod v. Asstt. CIT [2013] 40 taxmann.com 282/[2014] 61 SOT 99 (Hyderabad – Trib.) (para 8).