Tribunal Affirms Relief for Property Acquisition Timing, Limits Deduction to One Flat; Revenue's Appeal Partly Allowed.

Assistant Commissioner of Income-tax, 26 (1), Mumbai Versus Dr. PS. Pasricha

Assistant Commissioner of Income-tax, 26 (1), Mumbai Versus Dr. PS. Pasricha - [2008] 20 SOT 468 (MUM.) Issues:
1. Eligibility for relief under section 54(1) of the Income-tax Act.
2. Entitlement for relief in respect of multiple residential flats.

Analysis:

Issue 1: Eligibility for relief under section 54(1) of the Income-tax Act:
The appellant claimed relief under section 54(1) of the Act after selling a residential flat and purchasing commercial property and two residential flats. The Assessing Officer disallowed the claim citing non-full deployment of sale proceeds and purchase of two units. The CIT(A) allowed the deduction, emphasizing that the sale proceeds were fully utilized for purchasing both flats. The Tribunal noted the requirement of acquiring a residential house within the specified period, not mandating the same funds for purchase. The Tribunal upheld the CIT(A)'s decision, stating the source of funds is irrelevant as long as the residential property is acquired within the stipulated timeframe.

Issue 2: Entitlement for relief in respect of multiple residential flats:
The appellant purchased two adjoining residential flats, rented them out, and later sold them. The revenue contended that the flats were separate units and not intended for joint residential use, citing a Special Bench decision. The appellant argued for deduction for both flats, claiming intent to merge them. The Tribunal found that the appellant never intended to combine the flats for residential use, thus allowing deduction for only one flat. The matter was remanded to the Assessing Officer for allowing deduction for one of the flats as claimed by the appellant.

In conclusion, the Tribunal partly allowed the revenue's appeal for statistical purposes, affirming the eligibility for relief under section 54(1) of the Act with no requirement for the same funds to be used for purchase. However, deduction for multiple flats was disallowed as the appellant did not intend to merge them for residential purposes.