2021 (9) TMI 1138 - AT - Income Tax

Property with multiple units can be 'one residential house' for deduction under section 54F.

Sri Ramaiah Harish Versus ITO Ward-7 (2) (4) Bangalore

The Tribunal allowed the appellant's appeal, holding that the property constituted 'one residential house' for the purpose of claiming deduction under ... Deduction u/s 54F - Rejection of claim for Constructing more than one house - house property constructed by the assessee consisted of ground floor and 4 floors above it - As per AO the assessee has constructed more than one residential house and hence he would be entitled for deduction u/s 54F of the Act for construction of one residential house only - whether each floor of a single stand alone building should be considered as separate house? - HELD THAT:- An independent building can have a number of residential units and it will not lose the character of “one residential house”. Identical view has been expressed by another co-ordinate bench in the case of Shri Chandrashekar Veerabhadraiah [2020 (12) TMI 348 - ITAT BANGALORE] we are 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, we set aside the order passed by CIT(A) on this issue and hold that the house property received by the assessee is “one residential house” only within the meaning of sec.54F of the Act. Accordingly, we are of the view that the reasoning given by the AO to reject the claim for deduction u/s 54F is not justified. Appeal of the assessee is allowed. Issues:Claim for deduction u/s 54F of the Income-tax Act, 1961.Analysis:1. The appellant challenged the rejection of the claim for deduction u/s 54F of the Income-tax Act, 1961 by the Ld. CIT(A) in relation to the assessment year 2015-16. The appellant sold a property jointly held with his brother and claimed exemption u/s 54F for investments made in a capital gains account scheme and towards construction of a house. However, the AO and Ld. CIT(A) allowed deduction for only one residential unit due to the construction of more than one residential house on the property. The appellant contended that the construction should be considered as one residential house for the purpose of claiming the deduction u/s 54F.2. The Tribunal referred to a previous case where it was established that a single property with multiple units can still be considered as one residential house. The Tribunal emphasized that the physical structuring of the residential house, whether lateral or vertical, should not impede the allowance of deduction u/s 54F. The Tribunal concluded that each floor of an independent building with multiple residential units should not be treated as separate house properties. Relying on this interpretation, the Tribunal set aside the decision of the Ld. CIT(A) and held that the property received by the assessee constituted 'one residential house' within the meaning of sec.54F of the Act. Consequently, the AO's reasoning for rejecting the claim for deduction u/s 54F was deemed unjustified.3. The Tribunal also addressed a miscellaneous application filed by the revenue, which contended that the Tribunal's reliance on previous judgments was incorrect due to an amendment in the Finance Act, 2014, replacing 'a residential house' with 'one residential house.' However, the Tribunal found no mistake in its order, emphasizing that the property in question was one residential house despite having two door numbers. The Tribunal reaffirmed that the assessee had purchased only one property, in line with previous decisions supporting the interpretation that a single property with multiple units can still be considered as one residential house for the purpose of claiming deductions u/s 54F.4. Ultimately, the Tribunal allowed the appeal of the assessee, restoring the issue to the file of the AO for granting the deduction u/s 54F in accordance with the decision that the property constituted 'one residential house.' The judgment was pronounced on 24th Sept, 2021.