2021 (9) TMI 994 - AT - Income Tax

Exemption of capital gain income u/s. 54 - investment in purchasing of three units of residential flats for total consideration - assessee had invested the sale consideration received on sale of immovable property in purchasing combined three adjacent flats as a residential house - scope amendment made in the section 54 of the act w.e.f. 1st April, 2015 - HELD THAT - Assessee had invested the sale consideration received on sale of immovable property in purchasing combined three adjacent flats as a residential house. As per sale deed dated 17th June, 2014 on 18th July, 2014 the builder has issued allotment letter for single combined residential flat to the assessee. With the support of documentary evidences, the assessee has demonstrated that all the three units were not independent as there was single entry and exit and stated that it was one residential house. The assessee has also enclosed copy of allotment letter dated 17th July, 2014 in the paper book wherein the developer has stated that tailor made combined flats on the same floor was specifically constructed for the allottee and there shall be single entry and exit for the allottee and maintenance as per the society rules would be applicable in singular manner on the built up area of 3045 square feet. We find that issues and facts raised before the Tribunal in the case of the assessee are similar to the facts and issue adjudicated by the Co-ordinate Bench of the ITAT Ahmedabad in the case of Mohmmedanif Sultanali Pradhan 2020 (1) TMI 1489 - ITAT AHMEDABAD as referred above. Therefore, it would not be appropriate for us to deviate from the view taken in the above case without pointing out any material change in facts and circumstances in the case of the assessee - Decided in favour of assessee.

Summary

Issues:
1. Exemption u/s 54 restricted by CIT (A).
2. Treatment of one residential house as three independent houses for exemption u/s 54.

Analysis:
1. The appeal pertained to the assessment year 2015-16 under section 143(3) r.w.s. 153A of the Income Tax Act, 1961. The assessee claimed exemption u/s 54 for investing in three units of residential flats after selling a house. The Assessing Officer disallowed part of the exemption based on an amendment effective from April 1, 2015, allowing exemption only for one residential house. The CIT (A) upheld this decision, leading to the appeal.

2. During the appellate proceedings, the assessee presented evidence showing that the three units were not independent but formed a single residential house. The documentation included a single sale agreement for all three units and an allotment letter confirming the combined flats as one residential unit. The counsel cited relevant judicial pronouncements, emphasizing that the physical structuring of the residential house should not impede the allowance of the exemption under section 54. The arguments were supported by decisions from various High Courts and ITAT Ahmedabad.

3. The Tribunal examined the facts and evidence presented by the assessee, noting that the issues raised were similar to a previous case adjudicated by ITAT Ahmedabad. Citing the principle of consistency, the Tribunal directed the Assessing Officer to allow the deduction claimed by the assessee. The decision was based on the understanding that the combined flats constituted a single residential house, meeting the requirements for exemption u/s 54. Consequently, the appeal of the assessee was allowed, and the order was pronounced on 21-09-2021.