2022 (2) TMI 119 - AT - Income Tax

Denial of exemption u/s.54F - second unit of the house purchased by the assessee - As per revenue exemption was available only for one residential unit and not the two residential units purchased by the assessee - HELD THAT - The assessee purchased two flats to be used as a single dwelling unit. Since these two units are adjacent to each other and meant for use as a single property, mandate of the substituted provision, being, one residential house, is still also satisfied. The view point of the ld. CIT(A) that the amendment carried out to section 54F w.e.f. 01-04-2015 has changed the legal position, is albeit factually correct, but, in the given facts, even the amended provision comes to the rescue of the assessee inasmuch as the assessee acquired one residential house only comprising of two flats. The assessee deserves exemption u/s.54F on second unit as well. The impugned order is set-aside to this extent. - Decided in favour of assessee.

Summary

Issues:
Denial of exemption u/s.54F for the second unit of the house purchased by the assessee.

Analysis:
The appeal was against the denial of exemption u/s.54F of the Income-tax Act, 1961 for the second unit of the house purchased by the assessee. The assessee had invested in two flats, 1101 and 1102 at Malad, Mumbai, claiming exemption u/s.54F for both. However, the Assessing Officer (AO) and the CIT(A) allowed exemption only for one flat, reducing the amount of exemption for the second flat. The main contention was whether exemption u/s.54F was available for both residential units or only one.

The Tribunal considered that the assessee had purchased two adjacent flats to be used as a single dwelling unit. Even though the provision was amended to state "constructed, one residential house" instead of "constructed, a residential house" from 01-04-2015, the Tribunal interpreted that the assessee acquired one residential house comprising of two flats. The Tribunal noted that the amended provision still applied in favor of the assessee as the two flats were meant for use as a single property. Therefore, the Tribunal held that the assessee deserved exemption u/s.54F for the second unit as well and set aside the order of the CIT(A) on this point.

In conclusion, the Tribunal allowed the appeal, stating that the assessee was entitled to exemption u/s.54F for the second unit of the house purchased. The order was pronounced in the Open Court on 01st February, 2022.