I settled a house on my wife years ago. The Assessing Officer says section 27(i) makes me its deemed owner, so I own more than one residential house and cannot have section 54F. Does section 27 reach outside the house property head?
No. The Madras High Court held that section 27(i) is a deeming provision applicable only for sections 22 to 26, in computing the annual value of property, and that the deeming fiction cannot be extended to deny an exemption under section 54F, which applies as an independent provision. The Revenue's appeal was dismissed at the admission stage.
Decided by the High Court (S. Manikumar J and D. Krishnakumar J) on 2016-08-30, reported as Tax Case Appeal No. 497 of 2016 (Madras High Court), assessment year 2012-13. It bears on section 27, section 27(i), section 22, section 26, section 54F, section 64(1)(iv), section 260A of the Income Tax Act 1961, in House Property and Capital Gains matters.
Section 27 opens with the words 'For the purposes of sections 22 to 26', and that opening limits everything that follows: clauses (i) transfer to a spouse or minor child, (ii) the holder of an impartible estate, (iii) a member of a co-operative society, company or association under a house building scheme, (iiia) a person allowed possession in part performance under section 53A of the Transfer of Property Act, and (iiib) a person holding rights under a lease of not less than twelve years. So a person can be a deemed owner for the purposes of computing house property income and at the same time not be the owner for a provision elsewhere in the Act. That boundary is worth money in both directions: it defeats the Department where it borrows section 27 to disqualify a taxpayer under sections 54, 54F or Chapter VI-A, and it defeats a taxpayer who tries to convert a long lease or a possession under section 53A into ownership for those same provisions. The Court also distinguished Podar Cement and Mysore Minerals as decisions about the meaning of owner in the context of section 22 and of section 32 respectively, and not authority for extending section 27 generally.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee filed his return for assessment year 2012-13 declaring total income of Rs 78,57,110. He had settled the house property at No. 24, Vijaya Raghavachari Road, T. Nagar, Chennai on his wife Mrs. Shanthi Thomas by settlement deed dated 24 February 2003. In 2011 he sold vacant land of 11,881 sq. ft. at Sholinganallur, realising a long-term capital gain of Rs 2,47,52,000, and purchased a flat in Midland Apartments, Turn Bulls Road, Chennai for about Rs 2,88,85,100, claiming exemption under section 54F. The Assessing Officer, completing the assessment under section 143(3) on 28 November 2014, held that the assessee held both the T. Nagar house and a residential house at Kodaikanal, so that he owned more than one residential house other than the new asset on the date of transfer, and, relying on section 27(i), withdrew the section 54F exemption of Rs 2,47,52,000. The Commissioner (Appeals) held that the T. Nagar property stood in the wife's name so the assessee had only the Kodaikanal property and allowed the appeal. The Tribunal, by order dated 6 November 2015 in ITA No. 1453/Mds/2015, dismissed the Revenue's appeal, holding that section 27(i) is a deeming provision applicable for sections 22 to 26 and cannot be read with section 54F. The Revenue appealed under section 260A on three substantial questions, including whether relief under section 54F could be granted when income from the property transferred to the wife is assessable in the assessee's hands under section 64(1)(iv) read with section 27(i) as deemed owner.
The appeal was dismissed at the stage of admission itself, with no order as to costs, and the substantial questions of law were answered against the Revenue (paragraphs 12 and 13). Section 27(i) is a deeming provision applicable only for sections 22 to 26, in computing the annual value of the property, and cannot be extended to deny the exemption under section 54F; section 54F applies as an independent provision (paragraphs 11 and 12).
The Court identified the issue as whether section 27(i) could be read along with section 54F for the purpose of ownership of house property (paragraph 9). It set out section 54F(1) with its proviso and clauses, and section 27 with its opening words 'For the purposes of sections 22 to 26' and clause (i), which deems an individual who transfers house property otherwise than for adequate consideration to his or her spouse, not being a transfer in connection with an agreement to live apart, or to a minor child not being a married daughter, to be the owner of the property so transferred (paragraphs 8 and 9). It observed that the provision falls in the Chapter dealing with the charge under the head income from house property and with fixing the annual value of property (paragraph 9). It examined the Revenue's reliance on Mysore Minerals Ltd. v. CIT [239 ITR 775], where the meaning of 'owned' in section 32(1) was given a wider meaning by drawing on Podar Cement, and on CIT v. Podar Cement Pvt. Ltd. [226 ITR 625], where owner was construed in the context of section 22 as the person entitled to receive income from the property in his own right; it held that both decisions were concerned with determining the annual value of property under sections 22 and 27 and did not apply to the present facts (paragraphs 10 and 11). It accordingly held that the Commissioner (Appeals) and the Tribunal were right that section 27(i) is a deeming provision applicable only for sections 22 to 26 and cannot be extended to deny the section 54F exemption, and that section 54F applies as an independent provision (paragraphs 11 and 12).
the Commissioner of Income Tax (Appeal) and the Income Tax Appellate Tribunal have rightly come to the conclusion that Section 27(i) of the Act is not applicable to the facts of the present case.
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Handle my notice → Ask a CA on WhatsAppNo. The Madras High Court held that section 27(i) is a deeming provision applicable only for sections 22 to 26, in computing the annual value of property, and that the deeming fiction cannot be extended to deny an exemption under section 54F, which applies as an independent provision. The Revenue's appeal was dismissed at the admission stage. This was decided by the High Court (S. Manikumar J and D. Krishnakumar J) and bears on section 27, section 27(i), section 22, section 26, section 54F, section 64(1)(iv), section 260A of the Income Tax Act 1961. It is reported as Tax Case Appeal No. 497 of 2016 (Madras High Court), assessment year 2012-13. Section 27 opens with the words 'For the purposes of sections 22 to 26', and that opening limits everything that follows: clauses (i) transfer to a spouse or minor child, (ii) the holder of an impartible estate, (iii) a member of a co-operative society, company or association under a house building scheme, (iiia) a person allowed possession in part performance under section 53A of the Transfer of Property Act, and (iiib) a person holding rights under a lease of not less than twelve years. So a person can be a deemed owner for the purposes of computing house property income and at the same time not be the owner for a provision elsewhere in the Act. That boundary is worth money in both directions: it defeats the Department where it borrows section 27 to disqualify a taxpayer under sections 54, 54F or Chapter VI-A, and it defeats a taxpayer who tries to convert a long lease or a possession under section 53A into ownership for those same provisions. The Court also distinguished Podar Cement and Mysore Minerals as decisions about the meaning of owner in the context of section 22 and of section 32 respectively, and not authority for extending section 27 generally. If it applies to you, the first step is this: Start by reading the opening words of section 27 aloud in the reply: 'For the purposes of sections 22 to 26'. That is the whole answer to a section 27 argument used outside those sections.
The assessee filed his return for assessment year 2012-13 declaring total income of Rs 78,57,110. He had settled the house property at No. 24, Vijaya Raghavachari Road, T. Nagar, Chennai on his wife Mrs. Shanthi Thomas by settlement deed dated 24 February 2003. In 2011 he sold vacant land of 11,881 sq. ft. at Sholinganallur, realising a long-term capital gain of Rs 2,47,52,000, and purchased a flat in Midland Apartments, Turn Bulls Road, Chennai for about Rs 2,88,85,100, claiming exemption under section 54F. The Assessing Officer, completing the assessment under section 143(3) on 28 November 2014, held that the assessee held both the T. Nagar house and a residential house at Kodaikanal, so that he owned more than one residential house other than the new asset on the date of transfer, and, relying on section 27(i), withdrew the section 54F exemption of Rs 2,47,52,000. The Commissioner (Appeals) held that the T. Nagar property stood in the wife's name so the assessee had only the Kodaikanal property and allowed the appeal. The Tribunal, by order dated 6 November 2015 in ITA No. 1453/Mds/2015, dismissed the Revenue's appeal, holding that section 27(i) is a deeming provision applicable for sections 22 to 26 and cannot be read with section 54F. The Revenue appealed under section 260A on three substantial questions, including whether relief under section 54F could be granted when income from the property transferred to the wife is assessable in the assessee's hands under section 64(1)(iv) read with section 27(i) as deemed owner. The matter was decided on 2016-08-30 by the High Court (S. Manikumar J and D. Krishnakumar J). On those facts the High Court held as follows. The appeal was dismissed at the stage of admission itself, with no order as to costs, and the substantial questions of law were answered against the Revenue (paragraphs 12 and 13). Section 27(i) is a deeming provision applicable only for sections 22 to 26, in computing the annual value of the property, and cannot be extended to deny the exemption under section 54F; section 54F applies as an independent provision (paragraphs 11 and 12).
The Court identified the issue as whether section 27(i) could be read along with section 54F for the purpose of ownership of house property (paragraph 9). It set out section 54F(1) with its proviso and clauses, and section 27 with its opening words 'For the purposes of sections 22 to 26' and clause (i), which deems an individual who transfers house property otherwise than for adequate consideration to his or her spouse, not being a transfer in connection with an agreement to live apart, or to a minor child not being a married daughter, to be the owner of the property so transferred (paragraphs 8 and 9). It observed that the provision falls in the Chapter dealing with the charge under the head income from house property and with fixing the annual value of property (paragraph 9). It examined the Revenue's reliance on Mysore Minerals Ltd. v. CIT [239 ITR 775], where the meaning of 'owned' in section 32(1) was given a wider meaning by drawing on Podar Cement, and on CIT v. Podar Cement Pvt. Ltd. [226 ITR 625], where owner was construed in the context of section 22 as the person entitled to receive income from the property in his own right; it held that both decisions were concerned with determining the annual value of property under sections 22 and 27 and did not apply to the present facts (paragraphs 10 and 11). It accordingly held that the Commissioner (Appeals) and the Tribunal were right that section 27(i) is a deeming provision applicable only for sections 22 to 26 and cannot be extended to deny the section 54F exemption, and that section 54F applies as an independent provision (paragraphs 11 and 12). In the words reproduced by the source cited on this page: "the Commissioner of Income Tax (Appeal) and the Income Tax Appellate Tribunal have rightly come to the conclusion that Section 27(i) of the Act is not applicable to the facts of the present case." The decision followed or applied CIT v. Podar Cement Pvt. Ltd. [226 ITR 625 (SC)] — distinguished as construing owner for section 22; Mysore Minerals Ltd. v. CIT [239 ITR 775 (SC)] — distinguished as construing owned for section 32(1).
It was decided by the High Court on 2016-08-30 and is reported as Tax Case Appeal No. 497 of 2016 (Madras High Court), assessment year 2012-13. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 27, section 27(i), section 22, section 26, section 54F, section 64(1)(iv), section 260A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was dismissed at the stage of admission itself, with no order as to costs, and the substantial questions of law were answered against the Revenue (paragraphs 12 and 13). Section 27(i) is a deeming provision applicable only for sections 22 to 26, in computing the annual value of the property, and cannot be extended to deny the exemption under section 54F; section 54F applies as an independent provision (paragraphs 11 and 12). It arises in House Property and Capital Gains matters, on section 27, section 27(i), section 22, section 26, section 54F, section 64(1)(iv), section 260A of the Income Tax Act 1961, and was decided by S. Manikumar J and D. Krishnakumar J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where the Department relies on section 64(1)(iv) as well, keep the two separate: clubbing of income arising from a transferred asset is one question, deemed ownership of the asset for a different provision is another. Do not let the Department use Podar Cement or Mysore Minerals as general authority on ownership; both were construing a particular section, section 22 and section 32 respectively. Conversely, if you are advising a client who is a deemed owner under section 27(iiia) or 27(iiib), do not assume that status will carry into section 54 or 54F; it will not. For property standing in a spouse's name, be ready with the transfer document and general law of property, which is what the Commissioner (Appeals) relied on here.
Still good law. Three later decisions cite this judgment, all from the Tribunal; no Supreme Court or High Court decision cites it, so there is no higher affirmance and no traceable pending challenge. The Pune Tribunal applied it as the ground of its own decision in John Thomas v ITO, Ward-13(5), Pune (26 August 2022): having taken up 'the decision of Hon'ble Madras High Court in the case of CIT Vs. Ajit Thomas in Tax Case Appeal No. 497 of 2016' at para 3, the Bench concluded 'placing reliance on the aforestated decision and the facts of this case we do not find any reason why the assessee should not be granted exemption u/s 54F of the Act', allowed the appeal and granted the exemption the Assessing Officer had denied. The Chennai Tribunal took the same course in K. Shanthikumar v DCIT (8 September 2021), treating the jurisdictional High Court as having 'decided the single issue in favour of the Assessee'. The proposition that the deemed-ownership fiction in section 27(i) is confined to sections 22 to 26 and cannot be carried into section 54F therefore has a working following. Nothing overruling, doubting or confining it was found. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment has 13 numbered paragraphs and is internally uneven. Paragraph 9 sets out section 27(i) and then says the assessee's exemption 'is not available, since the assessee owns more than one residential house, other than the new asset, on the date of transfer of the original asset', which is the Revenue's premise and the opposite of what the Court goes on to decide; the operative reasoning and conclusion are at paragraphs 11 and 12 and the disposal at paragraph 13. The report spells Podar Cement as 'Poder Cement' and, at paragraph 11, describes it as having considered the meaning of owner 'under the context of Section 22 and 27 of the Indian Income Tax, 1922', whereas Podar Cement was decided under the Income-tax Act, 1961. Paragraph 11 also writes 'Section 27(1)' where the provision is section 27(i). No counsel is recorded for the respondent-assessee; the appeal was dismissed at the admission stage. Much of paragraphs 3 to 5 reproduces the grounds taken before the Commissioner (Appeals) and the Tribunal, so the proposition about sections 22 to 26 appears there in the assessee's own words before the Court adopts it at paragraphs 11 and 12. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed at the stage of admission itself, with no order as to costs, and the substantial questions of law were answered against the Revenue (paragraphs 12 and 13). Section 27(i) is a deeming provision applicable only for sections 22 to 26, in computing the annual value of the property, and cannot be extended to deny the exemption under section 54F; section 54F applies as an independent provision (paragraphs 11 and 12).
TaxSphere, “CIT v Ajit Thomas”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-ajit-thomas-27-i-deemed-owner-confined-to-22-to-26/ (validity last checked 2026-09-08)
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