Tribunal grants exemption under section 54F for second house unit

The Tribunal allowed the appeal, holding that the assessee was entitled to exemption u/s.54F for the second unit of the house purchased, consisting of two adjacent flats intended for use as a single dwelling unit. The Tribunal interpreted the provision favorably for the assessee, considering the two flats as one residential house. The order of the CIT(A) denying exemption for the second flat was set aside.

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Issues:
Denial of exemption u/s.54F for the second unit of the house purchased by the assessee.

Analysis:
The appeal was against the denial of exemption u/s.54F of the Income-tax Act, 1961 for the second unit of the house purchased by the assessee. The assessee had invested in two flats, 1101 and 1102 at Malad, Mumbai, claiming exemption u/s.54F for both. However, the Assessing Officer (AO) and the CIT(A) allowed exemption only for one flat, reducing the amount of exemption for the second flat. The main contention was whether exemption u/s.54F was available for both residential units or only one.

The Tribunal considered that the assessee had purchased two adjacent flats to be used as a single dwelling unit. Even though the provision was amended to state "constructed, one residential house" instead of "constructed, a residential house" from 01-04-2015, the Tribunal interpreted that the assessee acquired one residential house comprising of two flats. The Tribunal noted that the amended provision still applied in favor of the assessee as the two flats were meant for use as a single property. Therefore, the Tribunal held that the assessee deserved exemption u/s.54F for the second unit as well and set aside the order of the CIT(A) on this point.

In conclusion, the Tribunal allowed the appeal, stating that the assessee was entitled to exemption u/s.54F for the second unit of the house purchased. The order was pronounced in the Open Court on 01st February, 2022.

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