2014 (7) TMI 173 - HC - Income Tax

Claim of deduction u/s 54 of the Act - Two flats acquired under different agreements though single kitchen and used as one single unit - Held that - The Tribunal noted that the map of the general layout plan as well as internal layout plan in regard to flat Nos.103 and 104 indicate that there is only one common kitchen for both the flats - The flats were constructed in such a way that adjacent units or flats can be combined into one - the flats were converted into one unit and for the purpose of residence of the Assessee - the acquisition of the flats may have been done independently but eventually they are a single unit and house for the purpose of residence Relying upon Income-tax Officer, Ward 19 (3) -4, Mumbai. Versus Ms. Sushila M. Jhaveri 2007 (4) TMI 289 - ITAT BOMBAY-I - so long as there is a residential unit or house, then the benefit or deduction cannot be denied - the unit was a single one - The flats were constructed in such a way that they could be combined into one unit thus, no substantial question of law arises for consideration Decided against Revenue.

Issues:
- Appeal against the order passed by the Income Tax Appellate Tribunal confirming the Commissioner of Income Tax (Appeals) decision regarding the deduction claim under section 54 of the Income Tax Act 1961 for Assessment Year 2007-08.

Analysis:
1. The main issue in this case is the challenge to the deduction claim under section 54 of the Income Tax Act 1961. The appellant argued that the claim was not tenable due to the acquisition of two flats under two distinct agreements and from different sellers, which, according to the appellant, goes against the legislative intent and plain language of the Act. The appellant contended that the Mumbai Bench of the Tribunal's decision in a previous case was applicable only for a single unit house purchase. However, the Tribunal and the Commissioner of Income Tax (Appeals) found that the flats acquired by the assessee could be combined into a single unit for residence, as evidenced by the common kitchen and layout plans. The Commissioner held that even though the flats were acquired independently, they eventually formed a single unit for residence, thus justifying the deduction claim under section 54.

2. The court examined the evidence presented before the Tribunal, which showed that the assessee and his wife jointly owned a bungalow that was sold, and from the proceeds, they acquired three flats. The Tribunal noted that the flats could be combined into one unit for residence, as they shared a common kitchen and were constructed in a way that allowed for their integration. The court found that the conclusion reached by the Tribunal and the Commissioner of Income Tax (Appeals) was not perverse, considering the factual finding that the flats were converted into a single unit for the assessee's residence. The court upheld the reliance on previous decisions and held that as long as there is a residential unit or house, the deduction cannot be denied. In this case, the flats were effectively a single unit for residence, as supported by the layout plans and common facilities, leading to the dismissal of the appeal for lack of merit.

3. The court emphasized that the factual findings regarding the integration of the flats into a single unit for residence were crucial in determining the eligibility for the deduction claim under section 54. The court concluded that the appellant's argument did not present a substantial question of law, as the evidence supported the assessee's entitlement to the deduction based on the conversion of the separate flats into a single residence unit. Therefore, the appeal was dismissed, and no costs were awarded in the matter.

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