SUNIL INDRAVADAN SHAH,MUMBAI vs. ITO WD 19(3)(1), INCOME TAX DEPARTMENT

PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 16.09.2025 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi for assessment year 2021-22, raising following grounds:

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different floors of the same building, which, according to the different floors of the same building, which, according to the different floors of the same building, which, according to the assessee, constitute one residential house for the purposes of the assessee, constitute one residential house for the purposes of the assessee, constitute one residential house for the purposes of the said provision.

3.1 During assessment proceedings the Assessing Officer noticed During assessment proceedings the Assessing Officer noticed During assessment proceedings the Assessing Officer noticed that the assessee sold six commercial units situated at the assessee sold six commercial units situated at the assessee sold six commercial units situated at Solitaire Chambers, Kalbadevi Road, Mumbai, during the period from , during the period from Chambers, Kalbadevi Road, M 13.06.2019 to 05.07.2019 for a net consideration of Rs.5.32 crore, 13.06.2019 to 05.07.2019 for a net consideration of 13.06.2019 to 05.07.2019 for a net consideration of giving rise to Long-Term Capital Gain of Term Capital Gain of Rs.4,97,90,808/ Rs.4,97,90,808/-. Against the said capital gain, the assessee claimed deduction under section the said capital gain, the assessee claimed deduction under section the said capital gain, the assessee claimed deduction under section 54F amounting to Rs. 4,9 54F amounting to Rs. 4,97,90,808/-. For availing the said For availing the said deduction, the assessee purchased two residential flats in the , the assessee purchased two residential flats in the , the assessee purchased two residential flats in the building known as “22 Dholera” “22 Dholera”, Parel, Mumbai, from M/s Safal , Parel, Mumbai, from M/s Safal Realtors & Developers Pvt. Ltd., under two agreements executed on Realtors & Developers Pvt. Ltd., under two agreements executed on Realtors & Developers Pvt. Ltd., under two agreements executed on 29.09.2020. Both flats are sit . Both flats are situated in Wing-A of the same building, of the same building, bearing Flat Nos. A A-601 and A-1801. Each flat admeasures . Each flat admeasures 1,334.19 sq. ft. and the consideration for each was and the consideration for each was and the consideration for each was Rs.2.65 crore. Both agreements were registered on the same date. Both agreements were registered on the same date.

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3.2 The Assessing Officer accepted the elig The Assessing Officer accepted the eligibility of the assessee ibility of the assessee for deduction under section 54F in respect of one residential flat for deduction under section 54F in respect of one residential flat for deduction under section 54F in respect of one residential flat but denied the claim in respect of the second flat, holding that but denied the claim in respect of the second flat, holding that but denied the claim in respect of the second flat, holding that section 54F contemplated investment in only one residential house. section 54F contemplated investment in only one residential house. section 54F contemplated investment in only one residential house. Consequently, deduction of Consequently, deduction of Rs.2,51,31,621/- attributable to the attributable to the second flat was disallowed. The learned CIT(A) affirmed the second flat was disallowed. The learned CIT(A) affirmed the second flat was disallowed. The learned CIT(A) affirmed the disallowance, principally on the ground that the two flats were disallowance, principally on the ground that the two flats were disallowance, principally on the ground that the two flats were separate units, situated on different floors, having separate separate units, situated on different floors, having separate separate units, situated on different floors, having separate entrances and separately subjected to stamp duty. The relevant entrances and separately subjected to stamp duty. entrances and separately subjected to stamp duty. finding of ld CIT(A) is reproduced as under: finding of ld CIT(A) is reproduced as under:

“ 5.4 The appellant has given reasoning for purchasing two residential flats that 5.4 The appellant has given reasoning for purchasing two residential flats that 5.4 The appellant has given reasoning for purchasing two residential flats that as compared to the demand for houses, the space available for construction is as compared to the demand for houses, the space available for construction is as compared to the demand for houses, the space available for construction is extremely limited and the buyer is extremely limited and the buyer is dependent on the builders who construct the dependent on the builders who construct the flats as per their convenience and as per approved plans by the competent flats as per their convenience and as per approved plans by the competent flats as per their convenience and as per approved plans by the competent authorities. It is quite realistic in Mumbai for an assessee to buy more than one authorities. It is quite realistic in Mumbai for an assessee to buy more than one authorities. It is quite realistic in Mumbai for an assessee to buy more than one unit in a building, maybe even on different floors, and unit in a building, maybe even on different floors, and yet use both the units as yet use both the units as one house for the family as the lifts can be conveniently used to move from one one house for the family as the lifts can be conveniently used to move from one one house for the family as the lifts can be conveniently used to move from one floor to the other floor, and structure of the family is not disrupted on account of other floor, and structure of the family is not disrupted on account of other floor, and structure of the family is not disrupted on account of flats being on different floors. Under the circumstances, it would be unwarranted flats being on different floors. Under the circumstances, it woul flats being on different floors. Under the circumstances, it woul to adopt a narrow approach and stick to the view that both the units should be to adopt a narrow approach and stick to the view that both the units should be to adopt a narrow approach and stick to the view that both the units should be adjacent to each other so as to constitute one house, especially considering the adjacent to each other so as to constitute one house, especially considering the adjacent to each other so as to constitute one house, especially considering the ground realities and scarcity of houses in Mumbai. The appellant highlighted the ground realities and scarcity of houses in Mumbai. The appellant highlighted th ground realities and scarcity of houses in Mumbai. The appellant highlighted th fact that in Mumbai, a buyer can buy two flats on different floors of the same fact that in Mumbai, a buyer can buy two flats on different floors of the same fact that in Mumbai, a buyer can buy two flats on different floors of the same building for residential use of his family. In other words, this would not result in building for residential use of his family. In other words, this would not result in building for residential use of his family. In other words, this would not result in disruption of the family structure, and therefore the two flats would for all intents disruption of the family structure, and therefore the two flats would for all intents disruption of the family structure, and therefore the two flats would for all intents and purposes constitute one house only. The appellant submitted before the AU purposes constitute one house only. The appellant submitted before the AU purposes constitute one house only. The appellant submitted before the AU that due to circumstances beyond his control, the appellant had to buy two units that due to circumstances beyond his control, the appellant had to buy two units that due to circumstances beyond his control, the appellant had to buy two units on different floors in the same building, since option of buying two adjacent flats on different floors in the same building, since option of buying two adjacent flats on different floors in the same building, since option of buying two adjacent flats was not available. Further, in view of the geographical situation of Mumbai City, . Further, in view of the geographical situation of Mumbai City, . Further, in view of the geographical situation of Mumbai City, real estate is in scarcity and options available for a suitable accommodation in a real estate is in scarcity and options available for a suitable accommodation in a real estate is in scarcity and options available for a suitable accommodation in a proper location for the family are limited. Therefore; it would be logical to allow proper location for the family are limited. Therefore; it would be logical to allow proper location for the family are limited. Therefore; it would be logical to allow exemption u/s 54F by tre exemption u/s 54F by treating the two independent units existing in the same ating the two independent units existing in the same Wing-A of the building '22 Dhuleva" as one residential house for use of the A of the building '22 Dhuleva" as one residential house for use of the A of the building '22 Dhuleva" as one residential house for use of the assessee's family. Moreover, as both the flats acquired by the appellant are assessee's family. Moreover, as both the flats acquired by the appellant are assessee's family. Moreover, as both the flats acquired by the appellant are located in the same Wing located in the same Wing-A of the building which are connected through a re connected through a common lift, there is a unity of structure. common lift, there is a unity of structure.

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5.5 Here, it would be relevant to go through the relevant section of 54F of the Act 5.5 Here, it would be relevant to go through the relevant section of 54F of the Act 5.5 Here, it would be relevant to go through the relevant section of 54F of the Act under which the appellant has claimed deduction as under: under which the appellant has claimed deduction as under: Section 54F(1) in the Income Tax Act, 1961 Section 54F(1) in the Income Tax Act, 1961 (1)[Subject to the provisions of sub Subject to the provisions of sub-section (4), where, in the case of an assessee section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the being an individual or a Hindu undivided family], the capital gain arises from the being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long- -term capital asset, not being a residential house (hereafter in term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a tion referred to as the original asset), and the assessee has, within a tion referred to as the original asset), and the assessee has, within a period of one year before or [two years] after the date on which the transfer took period of one year before or [two years] after the date on which the transfer took period of one year before or [two years] after the date on which the transfer took place purchased, or has within a period of three years after that date place purchased, or has within a period of three years after that date place purchased, or has within a period of three years after that date constructed, a residential hou constructed, a residential house (hereafter in this section referred to as the new section referred to as the new asset), the capital gain shall be dealt within accordance with the following asset), the capital gain shall be dealt within accordance with the following asset), the capital gain shall be dealt within accordance with the following provisions of this section, that is to say, provisions of this section, that is to say,- (a) if the cost of the new asset is not less than the net consideration in respect of (a) if the cost of the new asset is not less than the net consideration in respec (a) if the cost of the new asset is not less than the net consideration in respec the original asset, the whole of such capital gain shall not be charged under the original asset, the whole of such capital gain shall not be charged under the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the net consideration in respect of the (b) if the cost of the new asset is less than the net consideration in respect of the (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital original asset, so much of the capital gain as bears to the whole of the ca original asset, so much of the capital gain as bears to the whole of the ca gain the same proportion as the cost of the new asset bears to the net gain the same proportion as the cost of the new asset bears to the net gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: consideration, shall not be charged under section 45: [Provided that nothing contained in this sub [Provided that nothing contained in this sub-section shall apply where section shall apply where- (a)the assessee,- (i)owns more than one residential h (i)owns more than one residential house, other than the new asset, on the date of ouse, other than the new asset, on the date of transfer of the original asset; or transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of (ii) purchases any residential house, other than the new asset, within a period of (ii) purchases any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; or three years after the date of transfer of the original asset; or (iii)constructs any resid (iii)constructs any residential house, other than the new asset, within a period of ential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and three years after the date of transfer of the original asset; and three years after the date of transfer of the original asset; and (b)the income from such residential house, other than the one residential house (b)the income from such residential house, other than the one residential house (b)the income from such residential house, other than the one residential house owned on the date of transfer of the original owned on the date of transfer of the original asset, is chargeable under the head asset, is chargeable under the head "Income from house property.] "Income from house property.] 5.6 After going through the above provision, it is established beyond doubt that 5.6 After going through the above provision, it is established beyond doubt that 5.6 After going through the above provision, it is established beyond doubt that on the capital gain arises from the transfer of any long on the capital gain arises from the transfer of any long-term capital asset, not term capital asset, not being a residential house, t being a residential house, the assessee is eligible for deduction u/s 54F of the Act he assessee is eligible for deduction u/s 54F of the Act only if the assessee has within a period of one year before or two years after the only if the assessee has within a period of one year before or two years after the only if the assessee has within a period of one year before or two years after the date on which the transfer took date on which the transfer took place purchased, or has within a period of three place purchased, or has within a period of three years after that date constructed, years after that date constructed, a residential house. However, the said a residential house. However, the said deduction shall not be allowed if the assessee owns more than one residential deduction shall not be allowed if the assessee owns more than one residential deduction shall not be allowed if the assessee owns more than one residential

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house, other than the new asset, on the date of transfer of the original asset; or house, other than the new asset, on the date of transfer of the original asset; or house, other than the new asset, on the date of transfer of the original asset; or purchases any residential house, other than the new asse purchases any residential house, other than the new asset, within a period of t, within a period of three years after the date of transfer of the original asset; or constructs any three years after the date of transfer of the original asset; or constructs any three years after the date of transfer of the original asset; or constructs any residential house, other than the new asset, within a period of three years after residential house, other than the new asset, within a period of three years after residential house, other than the new asset, within a period of three years after the date of transfer of the original asset. Hence, it is an established fact from the the date of transfer of the original asset. Hence, it is an established the date of transfer of the original asset. Hence, it is an established plain reading of the Income Tax Act, 1961, that deduction u/s 54F is not allowed plain reading of the Income Tax Act, 1961, that deduction u/s 54F is not allowed plain reading of the Income Tax Act, 1961, that deduction u/s 54F is not allowed if the assessee owns more than one residential house, other than the new asset, if the assessee owns more than one residential house, other than the new asset, if the assessee owns more than one residential house, other than the new asset, on the date of transfer of the original asset. Section 54F of Income Tax Act clearly on the date of transfer of the original asset. Section 54F of Income Tax Act clea on the date of transfer of the original asset. Section 54F of Income Tax Act clea states that exemption can be claimed in respect of only one residential house states that exemption can be claimed in respect of only one residential house states that exemption can be claimed in respect of only one residential house property purchased/constructed in India. Therefore, as per the Act, the appellant property purchased/constructed in India. Therefore, as per the Act, the appellant property purchased/constructed in India. Therefore, as per the Act, the appellant is not eligible for deduction u/s 54F claimed on second house property. is not eligible for deduction u/s 54F claimed on second house property. is not eligible for deduction u/s 54F claimed on second house property. 5.7 Further, after g 5.7 Further, after going through the submission of the appellant and other oing through the submission of the appellant and other material it is found that for availing deduction u/s 54F, the appellant has material it is found that for availing deduction u/s 54F, the appellant has material it is found that for availing deduction u/s 54F, the appellant has purchased two residential flats/units on 29.09.2020, in the building known as purchased two residential flats/units on 29.09.2020, in the building known as purchased two residential flats/units on 29.09.2020, in the building known as "22 Dhuleva", G. D. Ambekar Marg, Parel, Mumbai "22 Dhuleva", G. D. Ambekar Marg, Parel, Mumbai- 400 012 from the builder and 400 012 from the builder and developer M/s Safal Realtors and Developers Pvt. Ltd. for total consideration of developer M/s Safal Realtors and Developers Pvt. Ltd. for total consideration of developer M/s Safal Realtors and Developers Pvt. Ltd. for total consideration of Rs.5,67,93,320/-. Both the flats, being flat no. A . Both the flats, being flat no. A-601 and flat No. A 601 and flat No. A-1801, are located in the same Wing located in the same Wing-A of the building, i.e., "22 Dhuleva", A of the building, i.e., "22 Dhuleva", G. D. Ambekar Marg, Parel, Mumbai Marg, Parel, Mumbai-400012. It is an undisputed fact that the appellant has 400012. It is an undisputed fact that the appellant has purchased two different flats who is on different floors with separate entries. purchased two different flats who is on different floors with separate entries. purchased two different flats who is on different floors with separate entries. Further, the appellant has paid Stamp duty separately for both the flats. And just Further, the appellant has paid Stamp duty separately for both the flats. And just Further, the appellant has paid Stamp duty separately for both the flats. And just because these two different properties are connected with common lift, does not ause these two different properties are connected with common lift, does not ause these two different properties are connected with common lift, does not change its character that they are two different properties. The appellant has change its character that they are two different properties. The appellant has change its character that they are two different properties. The appellant has claimed deduction as per his requirement and understanding. The Govt. Of India claimed deduction as per his requirement and understanding. The Govt. Of India claimed deduction as per his requirement and understanding. The Govt. Of India provide multiple dedu provide multiple deductions to different categories of assessee considering the ctions to different categories of assessee considering the benefits of the assessee and the development of the nation and these deductions benefits of the assessee and the development of the nation and these deductions benefits of the assessee and the development of the nation and these deductions can be claimed by the assessee at the time of filing of return of income. However, can be claimed by the assessee at the time of filing of return of income. can be claimed by the assessee at the time of filing of return of income. the government also specifies some the government also specifies some pre-conditions that needs to be fulfilled by the conditions that needs to be fulfilled by the assessee and only after that the assessee becomes eligible to claim such assessee and only after that the assessee becomes eligible to claim such assessee and only after that the assessee becomes eligible to claim such deductions. Here, the conditions necessary for claiming deduction u/s 54F of the deductions. Here, the conditions necessary for claiming deduction u/s 54F of the deductions. Here, the conditions necessary for claiming deduction u/s 54F of the Act are not fulfilled by the appellant. Act are not fulfilled by the appellant. 5.8 In view of the foregoing discussion I find no infirmity in the addition made by of the foregoing discussion I find no infirmity in the addition made by of the foregoing discussion I find no infirmity in the addition made by the Assessing Officer. The appellant has failed to submit anything substantive in the Assessing Officer. The appellant has failed to submit anything substantive in the Assessing Officer. The appellant has failed to submit anything substantive in his support. Considering all these facts discussed above, it is found that the AO his support. Considering all these facts discussed above, it is found that the AO his support. Considering all these facts discussed above, it is found that the AO was right in making was right in making additions/disallowance of Rs.2,51,31,621/ additions/disallowance of Rs.2,51,31,621/- claimed u/s 54F by the appellant on the second house property. Hence, the ground nos. 1 to 3 54F by the appellant on the second house property. Hence, the ground nos. 1 to 3 54F by the appellant on the second house property. Hence, the ground nos. 1 to 3 of appeal raised by the appellant is dismissed. of appeal raised by the appellant is dismissed. 5.9 Ground no. 4 and 5 of the appeal is relating to initiating penalty. In this 5.9 Ground no. 4 and 5 of the appeal is relating to initiating penalty. 5.9 Ground no. 4 and 5 of the appeal is relating to initiating penalty. regard, it is informed that initiating penalty is consequential in nature. Hence, regard, it is informed that initiating penalty is consequential in nature. Hence, regard, it is informed that initiating penalty is consequential in nature. Hence, these grounds of appeal are dismissed. these grounds of appeal are dismissed. 4. Before us, the learned counsel submitted that the two flats Before us, the learned counsel submitted that the two flats Before us, the learned counsel submitted that the two flats were acquired as a single residential accommodation for the were acquired as a single residential accommodation for the were acquired as a single residential accommodation for the

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assessee's family. The learned counsel submitted that assessee and assessee's family. The learned counsel submitted that assessee and assessee's family. The learned counsel submitted that assessee and his wife were ageing and facing health issues, especially with wife his wife were ageing and facing health issues, especially with wife his wife were ageing and facing health issues, especially with wife being obese, weighing 116 kg with restricted movement, so staying being obese, weighing 116 kg with restricted movement, so staying being obese, weighing 116 kg with restricted movement, so staying of the family together was crucial. It was submitted that the of the family together was crucial. It was submitted th of the family together was crucial. It was submitted th assessee had intended to acquire adjacent flats capable of being assessee had intended to acquire adjacent flats capable of being assessee had intended to acquire adjacent flats capable of being interconnected, but such flats were not available in the building. He interconnected, but such flats were not available in the building. He interconnected, but such flats were not available in the building. He submitted that ground realities of the real estate in Mumbai were submitted that ground realities of the real estate in Mumbai were submitted that ground realities of the real estate in Mumbai were explained to the Assessing Officer where there i explained to the Assessing Officer where there is high dependency s high dependency on the builders to construct properties as per the approved plans. on the builders to construct properties as per the approved plans. on the builders to construct properties as per the approved plans. He submitted that in absence of adjacent flats, the family members He submitted that in absence of adjacent flats, the family members He submitted that in absence of adjacent flats, the family members decided to purchase two units even on different floors of the same decided to purchase two units even on different floors of the same decided to purchase two units even on different floors of the same wing to accommodate all members of th wing to accommodate all members of the family so as to maintain e family so as to maintain the family structure and, therefore, two units were purchased in the the family structure and, therefore, two units were purchased in the the family structure and, therefore, two units were purchased in the same wing, though situated on different floors. same wing, though situated on different floors.

4.1 The learned counsel submitted that before the learned CIT(A), The learned counsel submitted that before the learned CIT(A), The learned counsel submitted that before the learned CIT(A), the assessee relied on the decision of the Ho the assessee relied on the decision of the Hon'ble Delhi High Court n'ble Delhi High Court in CIT vs. Gita Duggal ( CIT vs. Gita Duggal (2013] 357 ITR 153 (Delhi) ), decision of the Coordinate Bench of the Ahmedabad Tribunal in the case of Mohd. Coordinate Bench of the Ahmedabad Tribunal in the case of Coordinate Bench of the Ahmedabad Tribunal in the case of Hanif Sultan Ali Pradhan vs. DCIT in ITA No. 1797/AHD/2018 Hanif Sultan Ali Pradhan vs. DCIT in ITA No. 1797/AHD/2018 Hanif Sultan Ali Pradhan vs. DCIT in ITA No. 1797/AHD/2018 (AY 2015-16), and the assessee also placed and the assessee also placed reliance on the decision reliance on the decision of Coordinate Bench of Tribunal in the case of Naveen Jolly vs. Naveen Jolly vs. of Coordinate Bench of Tribunal in the case of ITO in ITA No. 320 of 2011 ITO in ITA No. 320 of 2011. The learned counsel referred to the . The learned counsel referred to the decision of the Hon'ble Delhi High Court in the case of Principal decision of the Hon'ble Delhi High Court in the case of decision of the Hon'ble Delhi High Court in the case of Commissioner of Income Tax (Central Commissioner of Income Tax (Central-1) vs. Lata Goel in ITA ) vs. Lata Goel in ITA

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127/2025 & CM No. 25518/2025, 127/2025 & CM No. 25518/2025, wherein the Hon'ble High wherein the Hon'ble High Court referred to the decision of Gita Duggal Court referred to the decision of Gita Duggal (supra) and ) and decision of Hon'ble Madras High Court in the case of Hon'ble Madras High Court in the case of CIT vs. V.R. Gumanmal CIT vs. V.R. Gumanmal Jain (supra). The learned counsel submitted t . The learned counsel submitted t . The learned counsel submitted that in those decisions, even the flats in separate tower decisions, even the flats in separate towers have been have been considered as one residential house, whereas case of the assessee is on better one residential house, whereas case of the assessee is on better one residential house, whereas case of the assessee is on better footing where both the flats are in same tower. footing where both the flats are in same tower.

5.1 The expression The expression “a residential house” occurring in section occurring in section 54F has been judiciall 54F has been judicially understood in a manner which does not y understood in a manner which does not make the eligibility of the deduction depend upon the artificial make the eligibility of the deduction depend upon the artificial make the eligibility of the deduction depend upon the artificial circumstance that the residential accommodation must necessarily circumstance that the residential accommodation must necessarily circumstance that the residential accommodation must necessarily comprise a single physical unit or be situated on a single floor. comprise a single physical unit or be situated on a single floor. comprise a single physical unit or be situated on a single floor. What is relevant is the the substance and functional character of the substance and functional character of the residential accommodation residential accommodation and whether the units, in the facts of and whether the units, in the facts of

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the case, constitute one residential house. In the case, constitute one residential house. In CIT v. Gita Duggal CIT v. Gita Duggal, (supra), the Hon'ble Delhi High Court considered the expression “a , the Hon'ble Delhi High Court considered the expression “a , the Hon'ble Delhi High Court considered the expression “a residential house” and held, in substance, that the fact that the house” and held, in substance, that the fact that the house” and held, in substance, that the fact that the residential accommodation consisted of more than one unit did not, residential accommodation consisted of more than one unit did not, residential accommodation consisted of more than one unit did not, by itself, disentitle the assessee from claiming the benefit of section by itself, disentitle the assessee from claiming the benefit of section by itself, disentitle the assessee from claiming the benefit of section 54F, where the units constituted one residential house. The 54F, where the units constituted one residential house. The 54F, where the units constituted one residential house. The emphasis was on the character and use of the accommodation phasis was on the character and use of the accommodation phasis was on the character and use of the accommodation rather than on a hyper rather than on a hyper-technical construction of the expression. technical construction of the expression.

We have considered the facts and taken note of the rival submission. To complete We have considered the facts and taken note of the rival submission. To complete We have considered the facts and taken note of the rival submission. To complete the narration of facts, it needs to be noticed that the narration of facts, it needs to be noticed that the assessee was the owner of the assessee was the owner of property at A/22, Westend Colony, New Delhi comprising of the basement, property at A/22, Westend Colony, New Delhi comprising of the basement, property at A/22, Westend Colony, New Delhi comprising of the basement, ground floor, first floor and ground floor, first floor and second floor. She was deriving rental income from the second floor. She was deriving rental income from the property. On 08.05.2006 she entered into a collaboration agreement with M/s property. On 08.05.2006 she entered into a collaboration agreement wit property. On 08.05.2006 she entered into a collaboration agreement wit Thapar Homes Ltd. for developing the property. According to its terms, the Thapar Homes Ltd. for developing the property. According to its terms, the Thapar Homes Ltd. for developing the property. According to its terms, the assessee being desirous of getting the property redeveloped/reconstructed and assessee being desirous of getting the property redeveloped/reconstructed and assessee being desirous of getting the property redeveloped/reconstructed and not being possessed of sufficient finance and lacking in experience in not being possessed of sufficient finance and lacking in experience in not being possessed of sufficient finance and lacking in experience in construction, approached t construction, approached the builder to develop the property for and on behalf of he builder to develop the property for and on behalf of the owner at the cost of the builder. The builder was to ing StruCOURT OF the owner at the cost of the builder. The builder was to ing StruCOURT OF the owner at the cost of the builder. The builder was to ing StruCOURT OF demolish the existing structure on the plot of land and and develop, construct, demolish the existing structure on the plot of land and and develop, construct, demolish the existing structure on the plot of land and and develop, construct, and/or put up a building consisting of basemen and/or put up a building consisting of basement, ground floor, first floor, a t, ground floor, first floor, a building second floor and third floor with terrace at its own costs and expenses. building second floor and third floor with terrace at its own costs and expenses. building second floor and third floor with terrace at its own costs and expenses. In addition to the cost of construction incurred by the builder on development of In addition to the cost of construction incurred by the builder on development of In addition to the cost of construction incurred by the builder on development of the property, a further payment of four crores was payable to the assessee as the property, a further payment of four crores was payable t the property, a further payment of four crores was payable t consideration against the rights of the assessee. The builder was to get the third consideration against the rights of the assessee. The builder was to get the third consideration against the rights of the assessee. The builder was to get the third floor. The assessee accordingly handed over vacant physical possession of the floor. The assessee accordingly handed over vacant physical possession of the floor. The assessee accordingly handed over vacant physical possession of the entire property along with 22.5% undivided interest over the land. The handing entire property along with 22.5% undivided interest over the land. The handin entire property along with 22.5% undivided interest over the land. The handin over of possession of the entire property was however only for the limited purpose over of possession of the entire property was however only for the limited purpose over of possession of the entire property was however only for the limited purpose of development; the undivided interest in the land stood transferred to the of development; the undivided interest in the land stood transferred to the of development; the undivided interest in the land stood transferred to the developer/builder only to the extent of 22.5% for his exclusive enjoyment. It was developer/builder only to the extent of 22.5% for his exclusive developer/builder only to the extent of 22.5% for his exclusive on these facts that the assessing officer first took the view that the sale s that the assessing officer first took the view that the sale s that the assessing officer first took the view that the sale consideration for the transfer of the capital asset should be taken not merely at consideration for the transfer of the capital asset should be taken not merely at consideration for the transfer of the capital asset should be taken not merely at four crores which was the cash amount received by the assessee, but the cost of four crores which was the cash amount received by the assessee, but the cost of four crores which was the cash amount received by the assessee, but the cost of construction incurred by the de construction incurred by the developer on the development of the property veloper on the development of the property amounting to ₹3,43,72,529/ 3,43,72,529/- should also be added to the sale consideration. T should also be added to the sale consideration. The assessee thereupon claimed that if the cost of construction incurred on incurred assessee thereupon claimed that if the cost of construction incurred on incurred assessee thereupon claimed that if the cost of construction incurred on incurred by the builde rred by the builder is to be added to by the builde rred by the builder is to be added to the sale price, then the same the sale price, then the same should also be correspondingly taken to have ne should also be correspor the should also be correspondingly taken to have ne should also be correspor the should also be correspondingly taken to have ne should also be correspor the residential been invested in the residential house namely the two floors which the residential been invested in the residential house namely the two floors which the residential been invested in the residential house namely the two floors which the assessee was to get in addition to the cash amount under the agreement with the assessee was to get in addition to the cash amount under the agree assessee was to get in addition to the cash amount under the agree

ITA 7276/MUM/2025 10 Sunil Indravadan Shah

builder, and the amount so spent on the construction should be allowed as builder, and the amount so spent on the construction should be allowed as builder, and the amount so spent on the construction should be allowed as deduction under Section 54 of the Act. It was at this stage that the assessing deduction under Section 54 of the Act. It was at this stage that the assessing deduction under Section 54 of the Act. It was at this stage that the assessing officer rejected the claim for deduction under Section 54 on the footing that the officer rejected the claim for deduction under Section 54 on the footing that the officer rejected the claim for deduction under Section 54 on the footing that the two floors obtained by the assessee contained two separate residential units ors obtained by the assessee contained two separate residential units ors obtained by the assessee contained two separate residential units having separate entrances and cannot qualify as a single residential unit. He having separate entrances and cannot qualify as a single residential unit. He having separate entrances and cannot qualify as a single residential unit. He agreed that the assessee was eligible for the relief under Section 54F in respect of agreed that the assessee was eligible for the relief under Section 54F in respect of agreed that the assessee was eligible for the relief under Section 54F in respect of the cost of constructio the cost of construction incurred on one unit. He noted that the assessee has n incurred on one unit. He noted that the assessee has retained the ground floor and the basement. He therefore, apportioned the retained the ground floor and the basement. He therefore, apportioned the retained the ground floor and the basement. He therefore, apportioned the construction cost of 3,43,72,529/ 3,43,72,529/- to have been incurred on the basement, ground to have been incurred on the basement, ground floor, first floor and second floor in the ratio of 1:1:1:0.5 for second floor, first floor, first floor and second floor in the ratio of 1:1:1:0.5 for second floor, first floor, first floor and second floor in the ratio of 1:1:1:0.5 for second floor, first floor, ground floor, basement respectively. Since he was allowing the relief under floor, ground floor, basement respectively. Since he was allowing the relief under floor, ground floor, basement respectively. Since he was allowing the relief under Section 54F of the Act only Section 54F of the Act only in respect of one unit, he added *98,20,722/ in respect of one unit, he added *98,20,722/- which is the figure arrived at by dividing the total cost of construction of ₹3,43,72,529/- by the figure arrived at by dividing the total cost of construction of the figure arrived at by dividing the total cost of construction of 3.5. This is how the assessment was made. What in effect the assessing officer 3.5. This is how the assessment was made. What in effect the assessing of 3.5. This is how the assessment was made. What in effect the assessing of had done was to reject the assessee had done was to reject the assessee's claim for deduction under Section 54/54F 's claim for deduction under Section 54/54F of the Act in respect COURT OF of the house/units in the first and second floors of the Act in respect COURT OF of the house/units in the first and second floors of the Act in respect COURT OF of the house/units in the first and second floors holding that they were separate and independent residential units having holding that they were separate and independent residential units having holding that they were separate and independent residential units having separate entrances and cannot be considered as one unit to separate entrances and cannot be considered as one unit to enable the assessee to claim the deduction. This was disapproved by the CIT(Appeals) on the basis of to claim the deduction. This was disapproved by the CIT(Appeals) on the basis of to claim the deduction. This was disapproved by the CIT(Appeals) on the basis of the judgment of the Karnataka High Court (supra) and his decision was approved the judgment of the Karnataka High Court (supra) and his decision was approved the judgment of the Karnataka High Court (supra) and his decision was approved by the Tribunal. The Tribunal expressed the view that the words "a residential by the Tribunal. The Tribunal expressed the view that the words "a resident by the Tribunal. The Tribunal expressed the view that the words "a resident house" appearing in Section 54/54F of the Act cannot be construed to mean a house" appearing in Section 54/54F of the Act cannot be construed to mean a house" appearing in Section 54/54F of the Act cannot be construed to mean a single residential house since under Section 13(2) of the General Clauses Act, a single residential house since under Section 13(2) of the General Clauses Act, a single residential house since under Section 13(2) of the General Clauses Act, a singular includes plural. singular includes plural. 8. It is the correctness of the above view that is questioned by the revenue and it 8. It is the correctness of the above view that is questioned by the 8. It is the correctness of the above view that is questioned by the is contended that the interpretation placed by the Tribunal gives rise to a is contended that the interpretation placed by the Tribunal is contended that the interpretation placed by the Tribunal substantial question of law. The assessee strongly relies upon the judgment of substantial question of law. The assessee strongly relies upon the judgment of substantial question of law. The assessee strongly relies upon the judgment of the Karnataka High Court (supra) which, it is stated, has become final, the the Karnataka High Court (supra) which, it is stated, has become final, the the Karnataka High Court (supra) which, it is stated, has become final, the special leave petition filed by the revenue against the said decision having been ave petition filed by the revenue against the said decision having been ave petition filed by the revenue against the said decision having been dismissed by the Supreme Court as reported in the annual digest of Taxman dismissed by the Supreme Court as reported in the annual digest of Taxman dismissed by the Supreme Court as reported in the annual digest of Taxman publication. The judgment of the Karnataka High Court supports the contention of publication. The judgment of the Karnataka High Court supports the contention of publication. The judgment of the Karnataka High Court supports the contention of the assessee. An identical co the assessee. An identical contention raised by the revenue F the revenue before ntention raised by the revenue F the revenue before that Court was rejected that Court was rejected in the following terms: "A plain reading of the provision of section 54(1) of the Income "A plain reading of the provision of section 54(1) of the Income "A plain reading of the provision of section 54(1) of the Income-tax Act discloses that when an individual discloses that when an individual-assessee or Hindu undivided family assessee or Hindu undivided family- assessee sells a residential building or lands appurtenant thereto, he can ls a residential building or lands appurtenant thereto, he can ls a residential building or lands appurtenant thereto, he can invest capital gains for purchase of residential building to seek exemption invest capital gains for purchase of residential building to seek exemption invest capital gains for purchase of residential building to seek exemption of the capital gains tax. Section 13 of the General Clauses Act declares of the capital gains tax. Section 13 of the General Clauses Act declares of the capital gains tax. Section 13 of the General Clauses Act declares that whenever the singular is used for a wor that whenever the singular is used for a word, it is permissible to include d, it is permissible to include the plural. The contention of the Revenue is that the phrase "a" The contention of the Revenue is that the phrase "a" The contention of the Revenue is that the phrase "a" residential house would mean one residential house and it does not appear to the correct would mean one residential house and it does not appear to the correct would mean one residential house and it does not appear to the correct understanding. The expression "a" residential house should be understo understanding. The expression "a" residential house should be understo understanding. The expression "a" residential house should be understood in a sense that building should be of residential in nature and "a" should in a sense that building should be of residential in nature and "a" should in a sense that building should be of residential in nature and "a" should

ITA 7276/MUM/2025 11 Sunil Indravadan Shah

not be understood to indicate a singular number. The combined reading of not be understood to indicate a singular number. The combined reading of not be understood to indicate a singular number. The combined reading of sections 54(1) and 54F of the Income sections 54(1) and 54F of the Income-tax Act discloses that, a non tax Act discloses that, a non residential building can be sold, the residential building can be sold, the capital gain of which can be invested capital gain of which can be invested in a residential building to seek exemption of capital gain tax. However, in a residential building to seek exemption of capital gain tax. However, in a residential building to seek exemption of capital gain tax. However, the proviso to section 54 of the Income the proviso to section 54 of the Income-tax Act, lays down that if the tax Act, lays down that if the assessee has already one residential building, he is not entitled to assessee has already one residential building, he is not entitled to assessee has already one residential building, he is not entitled to exemption of capital gains tax, when he invests ption of capital gains tax, when he invests the capital gain in purchase of additional residential building." purchase of additional residential building." This judgment was followed by the same High Court in the decision in CIT Vs. This judgment was followed by the same High Court in the decision in CIT Vs. This judgment was followed by the same High Court in the decision in CIT Vs. Smt. K G Rukminiamma in ITA No.783/2008 dated 27.08.2010. Smt. K G Rukminiamma in ITA No.783/2008 dated 27.08.2010. Smt. K G Rukminiamma in ITA No.783/2008 dated 27.08.2010. 8. There could also be another angle. Section 54/54F uses the expression "a uld also be another angle. Section 54/54F uses the expression "a uld also be another angle. Section 54/54F uses the expression "a residential house". The expression used is not "a residential unit". This is a new residential house". The expression used is not "a residential unit". This is a new residential house". The expression used is not "a residential unit". This is a new concept introduced by the assessing officer into the section. Section 54/54F concept introduced by the assessing officer into the section. Section 54/54F concept introduced by the assessing officer into the section. Section 54/54F requires the assessee to acquir requires the assessee to acquire a SCOURT OF "residential house" and so long g e a SCOURT OF "residential house" and so long g gas the assessee acquires a building, which may be constructed, for the sake of gas the assessee acquires a building, which may be constructed, for the sake of gas the assessee acquires a building, which may be constructed, for the sake of convenience, in such a manner as to consist of several units which can, if the convenience, in such a manner as to consist of several units which can, if the convenience, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently us need arises, be conveniently and independently used as an independent ed as an independent residence, the requirement of the Section should be taken to have been satisfied. residence, the requirement of the Section should be taken to have been satisfied. residence, the requirement of the Section should be taken to have been satisfied. There is nothing in these sections which require the residential house to be There is nothing in these sections which require the residential house to be There is nothing in these sections which require the residential house to be constructed in a particular manner. The only requirement is that it should be for constructed in a particular manner. The only requirement is that it should b constructed in a particular manner. The only requirement is that it should b the residential use and not for commercial use. If there is nothing in the section the residential use and not for commercial use. If there is nothing in the section the residential use and not for commercial use. If there is nothing in the section which requires that the residential house should be built in a particular manner, which requires that the residential house should be built in a particular manner, which requires that the residential house should be built in a particular manner, it seems to us that the income tax authorities cannot insist upon that requirement. it seems to us that the income tax authorities cannot insist upon that requirement. it seems to us that the income tax authorities cannot insist upon that requirement. A person may construct a house according person may construct a house according to his plans and requirements. Most to his plans and requirements. Most of the houses are constructed according to the needs and requirements and even of the houses are constructed according to the needs and requirements and even of the houses are constructed according to the needs and requirements and even compulsions. For instance, a person may construct a residential house in such a compulsions. For instance, a person may construct a residential house in such a compulsions. For instance, a person may construct a residential house in such a manner that he may u manner that he may use the ground floor for his own residence and let out the se the ground floor for his own residence and let out the first floor having an independent entry so that his income is augmented. It is quite first floor having an independent entry so that his income is augmented. It is quite first floor having an independent entry so that his income is augmented. It is quite common to find such arrangements, particularly post common to find such arrangements, particularly post-retirement. One may build a retirement. One may build a house consisting of four bedroom house consisting of four bedrooms (all in the same or different (all in the same or differentent floors) in such a manner that an independent residential unit consisting of two or three bedrooms manner that an independent residential unit consisting of two or three bedrooms manner that an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may may be carved out with an independent entrance so that it can be let out. He may may be carved out with an independent entrance so that it can be let out. He may even arrange for his children and family to even arrange for his children and family to stay there, so that they are nearby, an stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence arrangement which can be mutually supportive. He may construct his residence arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a in such a manner that in case of a future need he may be able to dispose of a in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. There may be several such considerations part thereof as an independent house. There may be several s part thereof as an independent house. There may be several s for a person while constructing a residential house. We are therefore, unable to for a person while constructing a residential house. We are therefore, unable to for a person while constructing a residential house. We are therefore, unable to see how or why the physical structuring of the new residential house, whether it see how or why the physical structuring of the new residential house, whether it see how or why the physical structuring of the new residential house, whether it is lateral or vertical, should come in the way of considering the building as a is lateral or vertical, should come in the way of considering the building is lateral or vertical, should come in the way of considering the building residential house. We do not think that the fact that the residential house consists residential house. We do not think that the fact that the residential house consists residential house. We do not think that the fact that the residential house consists of several independent of several independent units can be permitted to act as an impediment to the units can be permitted to act as an impediment to the allowance of the deduction under Section 54/54F. It is neither expressly nor by allowance of the deduction under Section 54/54F. It is neither expressly nor by allowance of the deduction under Section 54/54F. It is neither expressly nor by necessary implication prohibited. implication prohibited.

ITA 7276/MUM/2025 12 Sunil Indravadan Shah

For the above reasons we are of the view that the Tribunal took the correct view. For the above reasons we are of the view that the Tribunal took the correct view. For the above reasons we are of the view that the Tribunal took the correct view. No substantial question of law arises for our consideration. The appeal is No substantial question of law arises for our consideration. The appeal is No substantial question of law arises for our consideration. The appeal is accordingly dismissed with no order as to costs. accordingly dismissed with no order as to costs. 5.2 The same principle h The same principle has been reiterated by the Hon'ble Delhi as been reiterated by the Hon'ble Delhi High Court in Pr. CIT v. Lata Goel, ( Pr. CIT v. Lata Goel, (supra). The principle emerging . The principle emerging from these decisions is that the mere fact that residential units are from these decisions is that the mere fact that residential units are from these decisions is that the mere fact that residential units are separately identifiable does not conclude the matter; the factual separately identifiable does not conclude the matter; the factual separately identifiable does not conclude the matter; the factual question is whether, viewed in substance, the units constitute one whether, viewed in substance, the units constitute one whether, viewed in substance, the units constitute one residential accommodation. residential accommodation.

5.3 Applying the aforesaid principle to the facts before us, the case Applying the aforesaid principle to the facts before us, the case Applying the aforesaid principle to the facts before us, the case of the assessee stands on a materially stronger footing. Both flats of the assessee stands on a materially stronger footing. Both flats of the assessee stands on a materially stronger footing. Both flats were acquired on the same date, from on the same date, from the same developer, in the the same developer, in the same building and in the same Wing-A, with identical area and same building and in the same Wing with identical area and identical purchase consideration. The only distinguishing feature is identical purchase consideration. The only distinguishing feature is identical purchase consideration. The only distinguishing feature is that they are situated on different floors. The common location that they are situated on different floors. The common location that they are situated on different floors. The common location within the same building and wing within the same building and wing, coupled with the simultaneous , coupled with the simultaneous acquisition and the assessee's stated intention to use the two units acquisition and the assessee's stated intention to use the two units acquisition and the assessee's stated intention to use the two units as a single residential accommodation, cannot be disregarded as a single residential accommodation, cannot be disregarded as a single residential accommodation, cannot be disregarded merely because the flats have separate identification and entrances. merely because the flats have separate identification and entrances. merely because the flats have separate identification and entrances.

ITA 7276/MUM/2025 13 Sunil Indravadan Shah

must necessarily be evidenced by a single registered instrument or must necessarily be evidenced by a single registered instrument or must necessarily be evidenced by a single registered instrument or must comprise one undivided physical unit. must comprise one undivided physical unit.

5.5 We, therefore, find that the facts of the present case, We, therefore, find that the facts of the present case, We, therefore, find that the facts of the present case, considered in the light of the ratio laid down by the Hon'ble Delhi in the light of the ratio laid down by the Hon'ble Delhi in the light of the ratio laid down by the Hon'ble Delhi High Court in Gita Duggal Gita Duggal (supra) and Lata Goel (supra), justify treating the two residential flats as constituting one residential treating the two residential flats as constituting treating the two residential flats as constituting house for the purposes of section 54F. The disallowance made in for the purposes of section 54F. The disallowance made in for the purposes of section 54F. The disallowance made in respect of the second flat is, accordingly, not sustainable. pect of the second flat is, accordingly, not sustainable. pect of the second flat is, accordingly, not sustainable.

5.6 We, therefore, set aside the order of the learned CIT(A) and We, therefore, set aside the order of the learned CIT(A) and We, therefore, set aside the order of the learned CIT(A) and direct the Assessing Officer to allow the deduction under section direct the Assessing Officer to allow the deduction under section direct the Assessing Officer to allow the deduction under section 54F in accordance with law. The ground raised by the assessee is 54F in accordance with law. The ground raised by the assessee is 54F in accordance with law. The ground raised by the assessee is accordingly allowed.

Order pronounced in the open Court on ounced in the open Court on 24/ /08/2026.

Sd/- Sd/- (PAWAN SINGH PAWAN SINGH) (OM PRAKASH KANT) (OM PRAKASH KANT JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 24/08/2026 /2026 Kunal Kr. P.S.

ITA 7276/MUM/2025 14 Sunil Indravadan Shah

Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai