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Halesh K. C, Bangalore vs. Income Tax Officer - (Income Tax Appellate Tribunal) (24 Feb 2021)

An independent building can have a number of residential units and it will not lose the character of one residential house


Direct Taxation

The appeal filed by the assessee is directed against the order passed by Learned Commissioner of Income Tax [CIT(A)], Bengaluru and it relates to the assessment year 2015-16. The solitary issue urged in present appeal is whether the learned CIT(A) was justified in rejecting the claim for deduction under Section 54F of the Income-Tax Act,1961 (IT Act).

The assessee along with other family members had sold an immovable property on 20th August, 2015. The assessee worked out long term capital gain of Rs.1,50,20,000 and claimed deduction of entire amount under Section 54F of the Act. The AO noticed that, the assessee had received a building by way of gift on 13th August, 2015 and the said building consisted of ground floor, first floor and second floor. The AO also deputed his inspector to physically inspect the property. The Inspector reported that, the Ground floor is having a garage and one residential unit; first floor is having two 1BHK flats and second floor is having 2 single units. The AO, accordingly, took the view that, each of the unit is separate house. Since deduction under Section 54F of the Act is not permitted, if the assessee is having more than one house property, the AO rejected the claim for deduction under Section 54F of the Act.

Identical view has been expressed by co-ordinate bench in the case of Shri Chandrashekar Veerabhadraiah vs. ITO that, an independent building can have a number of residential units and it will not lose the character of "one residential house. Accordingly, present Tribunal is 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, the order passed by Learned CIT(A) is set aside. Tribunal held that, the house property received by the assessee is "one residential house" only within the meaning of section 54F of the Act. Accordingly, the reasoning given by the AO to reject the claim for deduction under Section 54F is not justified. The appeal of the assessee is allowed.


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