Assessee's Capital Gains Upheld, Deduction Allowed under Section 54F

The ITAT upheld the CIT(A)'s decision in the case, affirming that the income received on the transfer of property was rightly assessed as capital gains due to the assessee's valid interest in the property. Additionally, the ITAT agreed with the CIT(A)'s findings that the assessee's investment in interconnected residential units qualified for deduction under section 54F, dismissing the Revenue's appeal on both issues.

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Issues:
1. Assessment of amount received on transfer of property as capital gains or income from other sources.
2. Eligibility of deduction u/s 54F for investment in multiple residential units.

Issue 1:
The Revenue challenged the assessment of a sum received by the assessee on the transfer of a bungalow as capital gains instead of income from other sources. The AO contended that the assessee was not the sole owner of the property, therefore, the excess consideration received was not capital gain. The CIT(A) analyzed the evidence, including the wills of the father and mother of the assessee, and noted that the property devolved upon the assessee after the relinquishment of rights by his sisters and mother. The CIT(A) held that the income was rightfully assessed as capital gains, as the assessee had a valid interest in the property at the time of transfer. The ITAT upheld the CIT(A)'s decision, stating that the assessee had the right and interest in the bungalow, making the income received for its transfer eligible for capital gains assessment.

Issue 2:
Regarding the claim of deduction u/s 54F, the AO argued that the assessee purchased three residential units, making him eligible for exemption for only one unit under section 54F. However, the CIT(A) examined the facts and found that the three flats were used as a single unit by the assessee. Despite three separate agreements, the flats were interconnected and used as one dwelling unit. The CIT(A) determined that the assessee had effectively purchased one single unit, entitling him to claim benefits under section 54F. The ITAT agreed with the CIT(A)'s analysis, dismissing the revenue's appeal and upholding the decision that the assessee was eligible for the deduction under section 54F for the investment in the interconnected residential units.

In conclusion, the ITAT dismissed the Revenue's appeal, affirming the assessments made by the CIT(A) regarding the classification of income received on property transfer and the eligibility of deduction under section 54F for the investment in interconnected residential units.

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