Appellate tribunal orders physical verification to determine if two flats qualify as a single unit for tax deduction eligibility.

The appellate tribunal remitted the case to the assessing officer, directing a physical verification to ascertain if two flats could be considered a single unit for claiming a deduction under section 54F of the Income-tax Act, 1961. The tribunal allowed the appeal for statistical purposes, emphasizing the necessity of resolving the discrepancy regarding the combination of the flats.

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Issues:
1. Allowance of deduction under section 54F for investment in two flats as one residential house.
2. Interpretation of the provisions of section 54F regarding investment in multiple flats in the same residential complex.
3. Reliance on affidavit of builder and revised plan as evidence for combining two flats into one unit.
4. Discrepancy between the assessee's claim and the assessment authority's view on combining two flats into one unit.
5. Lack of physical verification by revenue authorities to confirm the combination of two flats.

Analysis:
1. The appeal was filed against the order of the Learned National Faceless Appeal Centre (NFAC) regarding the allowance of deduction under section 54F of the Income-tax Act, 1961 for Assessment Year 2021-22. The revenue contested the decision to treat investment in two flats as one residential house, arguing that the amended provision of section 54F only allows for investment in one residential flat. The assessee claimed exemption for investing in two adjoining residential flats in a project in Navi Mumbai, treating them as a single unit based on the agreement for sale prepared by the developers.

2. The case revolved around the interpretation of section 54F regarding the treatment of investments in multiple flats in the same residential complex. The amendment specified that such investments are not considered as a single flat from Assessment Year 2014-15 onwards. The substitution of words by the Finance Act in 2015 further clarified the requirement to invest in one residential house. The dispute arose from the assessee's claim to combine two separate flats into one unit for exemption under section 54F, which was rejected by the assessing officer.

3. The assessee relied on the affidavit of the builder and a revised plan submitted during the assessment proceedings to support the claim of combining two flats into one unit. The contention was that the two flats were adjacent and treated as a single unit by the developers. However, the assessing officer argued that the physical layout of the flats did not allow for their combination as claimed by the assessee.

4. The disagreement between the parties stemmed from the physical configuration of the flats, with the assessing officer maintaining that the two units were separate due to the absence of a common wall and an open-to-sky space between them. The appellate tribunal noted the lack of physical verification by revenue authorities to confirm the combination of the flats into a single unit. As a result, the matter was remitted to the assessing officer with a directive to conduct a physical verification to determine if the two flats could be considered as a single unit for the purpose of claiming deduction under section 54F.

5. Ultimately, the appellate tribunal allowed the appeal of the assessee for statistical purposes, emphasizing the need for physical verification to resolve the discrepancy regarding the combination of two flats into one unit for the purpose of claiming exemption under section 54F.

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