Tribunal grants exemption for combined residential units as one house under section 54

The Tribunal allowed the appeal, directing the Assessing Officer to grant the exemption claimed by the assessee under section 54. The Tribunal found that the three units of residential flats constituted a single residential house, meeting the criteria for exemption. This decision was based on evidence presented by the assessee, including a single sale agreement and an allotment letter confirming the units as one residential unit. The Tribunal emphasized the importance of the physical structure of the house not impeding the allowance of the exemption, citing relevant judicial precedents.

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Issues:
1. Exemption u/s 54 restricted by CIT (A).
2. Treatment of one residential house as three independent houses for exemption u/s 54.

Analysis:
1. The appeal pertained to the assessment year 2015-16 under section 143(3) r.w.s. 153A of the Income Tax Act, 1961. The assessee claimed exemption u/s 54 for investing in three units of residential flats after selling a house. The Assessing Officer disallowed part of the exemption based on an amendment effective from April 1, 2015, allowing exemption only for one residential house. The CIT (A) upheld this decision, leading to the appeal.

2. During the appellate proceedings, the assessee presented evidence showing that the three units were not independent but formed a single residential house. The documentation included a single sale agreement for all three units and an allotment letter confirming the combined flats as one residential unit. The counsel cited relevant judicial pronouncements, emphasizing that the physical structuring of the residential house should not impede the allowance of the exemption under section 54. The arguments were supported by decisions from various High Courts and ITAT Ahmedabad.

3. The Tribunal examined the facts and evidence presented by the assessee, noting that the issues raised were similar to a previous case adjudicated by ITAT Ahmedabad. Citing the principle of consistency, the Tribunal directed the Assessing Officer to allow the deduction claimed by the assessee. The decision was based on the understanding that the combined flats constituted a single residential house, meeting the requirements for exemption u/s 54. Consequently, the appeal of the assessee was allowed, and the order was pronounced on 21-09-2021.

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