2021 (2) TMI 1031 - AT - Income Tax

Claim for deduction u/s 54F - assessee is having more than one house property thus the AO rejected the claim for deduction u/s 54F - Ground floor is having a garage and one residential unit; first floor is having two 1BHK flats and second floor is having 2 single (with bath) units - AO, accordingly, took the view that each of the unit is separate house - whether each floor of a single stand alone building should be considered as separate house? - HELD THAT - As decided in Shri Bhatkal Ramarao Prakash 2019 (2) TMI 1059 - ITAT BANGALORE an independent building can have a number of residential units and it will not lose the character of one residential house . Accordingly, we are unable to agree with the view taken by the tax authorities that each floor of the individual house/each portion in a floor is separate house property. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and hold that the house property received by the assessee is one residential house only within the meaning of sec.54F of the Act. Accordingly, we are of the view that the reasoning given by the AO to reject the claim for deduction u/s 54F is not justified. - Decided in favour of assessee.

Summary

Issues:
Whether the Ld CIT(A) was justified in rejecting the claim for deduction u/s 54F of the Income-tax Act,1961.

Analysis:
The appeal before the Appellate Tribunal ITAT Bangalore concerned the rejection of the claim for deduction u/s 54F of the Income-tax Act, 1961 by the Ld CIT(A) in relation to the assessment year 2015-16. The assessee had sold an immovable property and claimed the deduction of the entire amount u/s 54F. The Assessing Officer (AO) rejected the claim as the assessee had received a building as a gift, consisting of separate units on different floors. The AO considered each unit as a separate house, thereby disallowing the deduction u/s 54F. The Ld CIT(A) upheld this decision, relying on a Tribunal decision. However, it was noted that the Tribunal decision was an ex-parte order and later recalled, rendering the Ld CIT(A)'s reliance on it invalid.

The Tribunal analyzed a similar case where a single property with different door numbers was considered as one residential house. The Tribunal emphasized that the physical structuring of a residential house, whether with multiple independent units or floors, should not impede the allowance of deduction u/s 54F. The Tribunal further highlighted that the requirement is for the building to be residential in nature, not specifically constructed in a particular manner. The Tribunal concluded that the assessee was entitled to claim the deduction u/s 54F for the investment in the property with different door numbers but constituting one residential house.

The Tribunal also addressed a miscellaneous application filed by the revenue, contending that the Tribunal's reliance on previous decisions was incorrect post-amendment in the Act. However, the Tribunal reaffirmed its decision that the property constituted one residential house despite having different door numbers for different floors. The Tribunal emphasized that the property was one single unit, and previous decisions supported this interpretation. The Tribunal clarified that the physical structuring of the property should not hinder the allowance of the deduction u/s 54F.

In conclusion, the Appellate Tribunal set aside the Ld CIT(A)'s decision and held that the house property received by the assessee constituted "one residential house" within the meaning of sec. 54F of the Act. The Tribunal directed the issue to be restored to the AO for allowing the deduction u/s 54F in compliance with its decision, ultimately allowing the appeal of the assessee.