Appeal granted: Deduction approved for merging adjacent flats into one unit The Tribunal allowed the appeal, holding that the appellant could claim deduction under section 54F for the investment in two adjacent flats converted ...
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Appeal granted: Deduction approved for merging adjacent flats into one unit
The Tribunal allowed the appeal, holding that the appellant could claim deduction under section 54F for the investment in two adjacent flats converted into a single residential unit. The decision of the Commissioner of Income Tax (Appeals) denying the exemption was set aside, and the appellant's grounds were upheld based on the conversion of the separate flats into a single unit as supported by the Sale Deeds and relevant case law.
Issues: Whether the denial of exemption under section 54F of the Income Tax Act by the Commissioner of Income Tax (Appeals) is justified.
Analysis: The appellant, a Veterinary Doctor, sold a plot of land and invested the capital gain in two adjacent residential flats in Mumbai. The Assessing Officer (AO) denied the exemption under section 54F as the flats were separate and not converted into a single unit. The Commissioner of Income Tax (Appeals) upheld the AO's decision based on the building plan not supporting the conversion of flats into one unit.
The appellant argued that the two flats were converted into a single unit by opening a common door, citing specific conditions in the Sale Deeds and relevant case laws. The Department Representative opposed, emphasizing the separate Sale Deeds and property tax payments for each flat. The Special Bench of ITAT in a similar case allowed exemption for adjacent units converted into a single house for family residence.
Upon review, it was found that the flats had common areas and were converted into a single unit by the appellant. Referring to the decision of the Hon'ble High Court of Bombay, the Tribunal held that the appellant was entitled to claim deduction under section 54F for the entire investment in the two adjacent flats as a single unit. The CIT(A)'s decision was set aside, and the appellant's grounds were allowed.
In conclusion, the Tribunal allowed the appeal, stating that the appellant could claim deduction under section 54F for the investment in two adjacent flats converted into a single residential unit.
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