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2022 (4) TMI 837 - AT - Income TaxExemption u/s 54F for investment made in only one residential house - Whether CIT(A) has erred in granting exemption u/sec 54F in respect of two residential flats irrespective of amendment which has come into effect from 01. 04. 2015 and is applicable to the assessee for investment in one residential house in India? - HELD THAT - We find that the CIT(A) has considered the facts provisions of law submissions and judicial decisions and observed that the assessee has invested in one residential property. Further the Ld. AR has substantiated with the copy of structural plan and the society letter dated 8-04-2019 that it is only one residential unit. Whereas the provisions of sec 54F of the Act are beneficial provisions and are to be construed liberally. DR could not controvert the finding of the CIT(A) with new cogent material information or evidence and the CIT(A) has passed a reasoned and logical order. Accordingly we do not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue.
Issues Involved:
1. Deduction under Section 54F for Long Term Capital Gains (LTCG) invested in two residential flats. 2. Interpretation of the amendment to Section 54F effective from 01.04.2015. 3. Classification of two adjacent flats as a single residential house. 4. Reliance on judicial decisions prior to the amendment of Section 54F. Detailed Analysis: 1. Deduction under Section 54F for Long Term Capital Gains (LTCG) invested in two residential flats: The primary issue was whether the assessee was entitled to a deduction under Section 54F for LTCG invested in two different residential flats. The revenue argued that post the amendment effective from 01.04.2015, the deduction should be limited to only one residential house. The Assessing Officer (AO) disallowed the exemption for the second flat, treating the investment as two separate properties. 2. Interpretation of the amendment to Section 54F effective from 01.04.2015: The amendment to Section 54F replaced the term "a residential house" with "one residential house in India," thereby restricting the deduction to one residential property. The AO and the revenue contended that this amendment should limit the assessee's exemption to one flat only. However, the CIT(A) and the Tribunal interpreted the amendment in the context of the assessee's claim that the two flats constituted a single residential unit. 3. Classification of two adjacent flats as a single residential house: The assessee argued that the two flats, numbered 801 and 802, were combined into a single residential unit with one common entrance, kitchen, electricity meter, and gas connection. The CIT(A) accepted this argument, citing that the flats were used as a single unit despite being purchased through two separate agreements. The Tribunal upheld this view, noting that the structural plan and the housing society's letter supported the claim that the flats were effectively one residential property. 4. Reliance on judicial decisions prior to the amendment of Section 54F: The revenue criticized the CIT(A) for relying on judicial decisions made before the amendment to Section 54F. However, the CIT(A) and the Tribunal referred to various judicial precedents that supported the interpretation of a single residential unit, even when purchased through multiple agreements. Notable cases included Sanjay B Pahariya vs. ACIT, Deepak S. Bheda vs. ACIT, and Sudha Gurtoo vs. ACIT, which were considered relevant despite being decided before the amendment. Conclusion: The Tribunal concluded that the CIT(A) correctly interpreted the facts and the law, considering the beneficial nature of Section 54F. The Tribunal upheld the CIT(A)'s decision that the two flats constituted a single residential house and allowed the assessee's claim for exemption under Section 54F. The revenue's appeal was dismissed, affirming that the assessee was entitled to the deduction for the entire investment in the combined residential unit. The Tribunal emphasized that the provisions of Section 54F should be construed liberally in favor of the assessee. Order: The appeal filed by the revenue was dismissed, and the order was pronounced in the open court on 25.02.2022.
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