Multiple residential units on adjacent plots qualify for tax deduction under section 54

The Tribunal upheld the Commissioner of Income Tax (Appeals)' decision, stating that constructing multiple residential units on adjacent plots, used as a single residential house, qualifies for deduction under section 54 of the Income Tax Act. The decision was supported by previous judgments, including the interpretation from the Delhi High Court that "a residential house" encompasses multiple units in the same building if they are contiguous and used as a single residential house.

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Issues:
1. Deduction under section 54 of the Income Tax Act.
2. Interpretation of the term "a house" in section 54 of the IT Act.
3. Whether constructing multiple houses on adjacent plots qualifies for deduction.

Issue 1: Deduction under section 54 of the Income Tax Act:
The case involved a non-resident Indian who sold a property and claimed exemption under section 54 of the Income Tax Act, 1961. The assessee invested in three plots in Gurgaon and constructed houses on them. The Assessing Officer (AO) restricted the deduction to one house, resulting in an addition to the income. The Commissioner of Income Tax (Appeals) allowed the deduction, emphasizing that the three houses were contiguous and used as a single residential house, as supported by photographs and the District Town Planner's certificate.

Issue 2: Interpretation of the term "a house" in section 54 of the IT Act:
The AO contended that each of the three constructed houses was independent, thus not qualifying as "one residential house" for deduction under section 54. However, the CIT(A) referred to the decision in the case of Gita Duggal by the Delhi High Court, which stated that the term "a residential house" does not restrict the construction to a single unit but includes multiple units in the same building, as long as they are contiguous and used as a single residential house.

Issue 3: Whether constructing multiple houses on adjacent plots qualifies for deduction:
The Revenue challenged the CIT(A)'s decision, arguing that the AO's interpretation was correct. The CIT(A) relied on previous judgments and held that constructing multiple residential units on adjacent plots, as long as they are contiguous and used as a single residential house, qualifies for deduction under section 54. The Tribunal agreed with the CIT(A) and dismissed the Revenue's appeal, emphasizing that the physical structuring of the new residential house should not hinder considering it as a residential house for the purpose of deduction under section 54.

In conclusion, the Tribunal upheld the CIT(A)'s decision, emphasizing that the construction of multiple residential units on adjacent plots, used as a single residential house, qualifies for deduction under section 54 of the Income Tax Act. The judgments referred to, especially the decision in the case of Gita Duggal by the Delhi High Court, supported the interpretation that the term "a residential house" includes multiple units in the same building, as long as they are contiguous and used as a single residential house.

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