2022 (7) TMI 161 - AT - Income Tax

Tribunal rules on tax exemption for combined residential units under section 54F

The Tribunal allowed the appeal in part, ruling that Flat Nos.201 & 202 constituted a single residential house, qualifying for exemption under section ... Exemption u/s 54F - Proof of acquiring single unit - determination of separate independent unit - HELD THAT:- Admittedly, the physical verification report, remand report clearly show that the assessee has acquired Flat Nos.201 & 202 as a single unit and Flat No.301 on the upper stair is not connected to Flat No.201 & 202 owned by the assessee. Consequently, as the assessee has constructed one residential house being the combination of both Flat Nos.201 & 202, the assessee is entitled to the benefit of exemption u/s.54F of the Act in respect of Flat Nos.201 & 202 to be considered as one. The assessee is not entitled to the benefit of exemption u/s. 54F of the Act in respect of Flat No.301. Appeal of the assessee is partly allowed for statistical purposes. Issues:- Interpretation of exemption u/s.54F of the Act for construction of multiple residential units on leased land.Detailed Analysis:1. Facts and Submission: The appellant, an assessee, entered into a collaboration agreement with a builder for constructing flats on a leased land. The builder provided three flats to the assessee in exchange for a proportionate undivided interest in the plot. The assessee claimed exemption u/s.54F of the Act for the cost of construction of all three flats. However, the Assessing Officer disallowed the claim as the flats were considered separate units.2. Remand Report: A remand report was sought for physical verification of the premises. The report indicated that Flat Nos.201 & 202 were designed as a single unit without any dividing wall, while Flat No.301 was a separate independent unit on the upper floor not linked to the other two flats.3. Arguments: The Revenue contended that since the assessee acquired multiple units, the exemption u/s.54F of the Act should not apply. The Revenue relied on the order of the CIT(A) dismissing the assessee's appeal.4. Decision: The Tribunal considered the physical verification report and remand report, concluding that Flat Nos.201 & 202 formed a single residential house, entitling the assessee to exemption u/s.54F for these flats. However, Flat No.301 was not connected to the other two flats and, therefore, the exemption was not applicable to it. The appeal was partly allowed for statistical purposes.5. Conclusion: The Tribunal's decision clarified that for the purpose of exemption u/s.54F of the Act, the combination of Flat Nos.201 & 202 was considered a single residential house, while Flat No.301 was deemed a separate unit. This judgment highlights the importance of physical verification and the configuration of residential units in determining eligibility for tax exemptions under the Income Tax Act.