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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, HONBLE & SHRI NARENDRA KUMAR BILLAIYA, HONBLE
ORDER \nPER NARENDRA KUMAR BILLAIYA, AM:\nThis appeal by the assessee is preferred against the order dated\n05/02/2025 by NFAC, Delhi [hereinafter “the ld. CIT(A)"] pertaining to\nAY 2022-23.\n2.\nThe grievance of the assessee reads as under:-\n“1. The order dated 05/02/2025 bearing No. ITBA/NFAC/S/250/2024-\n25/107295 1959[11 passed by the Honourable CIT[Appeal], NFAC, Delhi, is\nexcessive, unreasonable, arbitrary, against the provisions of Income Tax Act,\n1961 and therefore liable to be quashed.\n2.\nOn facts and circumstances of the case and in law, the Honourable\nC.I.T.(A) has erred in confirming the disallowance of claim of Rs.16,33,83,660/-\nin respect of exemption under Section 54F of Income Tax Act, 1961 ignoring the\nfact that, the Appellant had purchased two interconnected flats and necessary\ndocument /evidence in respect of the same was filed before the Assessing Officer.\n3. The appellant craves to alter, add, delete, substitute, or modify and other\ngrounds of appeal.\"\n3. Briefly stated, the facts of the case are that the assessee is an\nindividual and filed her return of income on 26/07/2022 declaring total\nincome of Rs.1,48,55,010/-. The return was selected for scrutiny\nassessment under CASS and accordingly statutorily notices were issued\nand served upon the assessee.\n4. During the year under consideration, the assessee has purchased a\nresidential home being duplex bearing 501 & 601 by way of a single deed\nof transfer and claimed the same as exempt u/s 54F of the Act from the\nlong-term capital gain earned by her.\n5. The AO was of the firm belief that the assessee should not have\npurchased another house property other than the new asset within one\nyear from the date of transfer of original asset and since the assessee\ninvested the capital gains on two separate immovable properties on the\nsame date, the claim of exemption u/s 54F of the Act was denied.\n6. The assessee carried the matter before the ld. CIT(A) but without\nany success.\n7. Before us, the ld. Counsel for the assessee vehemently contended\nthat the lower authorities have not understood the facts of the case in their\ntrue perspective inasmuch as, the assessee did not purchase two flats but\nit was a duplex interconnected with staircase and was one single unit as\nevidenced from the deed of transfer and from the municipal corporation\nreceipt and from the certification of Housing society.\n7.
Per contra, the ld. D/R could not bring any evidence on record to\nshow that the impugned property were two separate flats with differed\nidentification marks.\n8. We have carefully considered the facts of the case and find force in\nthe contention of the ld. Counsel for the assessee. Walkeshwar Om Vikas\nCo-op. Housing Society Ltd., by its letter dated 23/03/2024 has certified\nthat Flat No. 501-B & 601-B are internally connected and have an internal\nstaircase inside the premises. The flat is a duplex flat.\n8.
1. We find that the erstwhile owner vide agreement dated 17/10/1989\nhad purchased the impugned property as a duplex. All these facts were\nbefore the AO who mis-construed the impugned property as two\ndifferent flats.\n9. The Hon'ble High Court of Bombay in the case of CIT vs. Raman\nKumar Suri [2013] 29 taxmann.com 231 (Bombay HC), was interalia seized\nwith the following questions of law:-\n\"(e) Whether the Tribunal was justified in confirming the decision of Commissioner\nof Income Tax (Appeals) in allowing the exemption u/s.54 for investment in two new\nflats viz. 416A and 516A by treating the same as one single unit ignoring the fact that\nthe assessee purchased two different flats in the same society and converted them into\none duplex flat?\n(f) Whether the Tribunal was justified in treating the two flats viz. 416A and 516A\npurchased by the assessee as one singular unit for the purpose of deduction under\nSection 54 and not as two separate and distinct units?”\n9.
1. And held as under:-\n“6. (a) The respondent in his return of income for the assessment year 2006-07 had\nclaimed a deduction of Rs.3 crores under Section 54 of the Act being the investment\nmade for purchase of flat Nos.416A and 516A at Mittal Park, Juhu, Mumbai. The\nAssessing officer in his assessment order dated 22/12/2008 restricted the exemption\nunder Section 54 to only Rs.1.34 crores on the ground that the exemption is allowable\nonly in respect of investment in one residential house only. Further the fact that two\nflats had been joined and made into one flat would not be considered to be purchase of\none flat but would be purchase of two separate flats. Consequently, the Assessing officer\nrestricted the exemption to only Rs.1.45 crores as according to him Section 54 of the\nAct exempts investment in a residential house i.e. one residential house only.\n(b) In appeal, the Commissioner of Income Tax (Appeals) by his order dated 4/5/2009\nheld that the respondent herein is entitled to the benefit of exemption under Section 54\nof the Act to the extent of Rs.3 crores as claimed in the return of income. This was on\nthe basis that the respondent herein had produced a Certificate of Co-operative Society\nthat two flats were inter connected by internal stair case. The site plan was also\nsubmitted inter alia showing only one entrance gate and one kitchen. The duplex flat\nNos.416A and 516A was purchased on as is and where is basis and the assessee had\nnot joined the said two flat internally after acquiring the flats. The flats were inter\nconnected by the previous owner only and therefore, the fact that there were two\ndifferent flats was immaterial as Section 54 grants exemption to a residential house and\nunit. The Commissioner of Income Tax (Appeals) had reached a finding of fact was that\ntwo flats were joined into one single flat before the respondent became its owner and\nwas one residential house.\n(c) On an appeal filed by the revenue, the Tribunal by its order dated 30/4/2010 upheld\nthe findings of Commissioner of Income Tax (Appeals) dated 4/5/2009. The Tribunal\nalso followed the Special Bench decision of the Tribunal in the matter of ITO v. Ms.\nSushila M. Jhaveri [2007] 107 ITD 327 (Mum.) to hold that where two flats bearing\nNos.416A and 516A had only one entrance, one kitchen and common passage it has to\nbe considered as one residential house and the respondent was entitled to exemption for\nthe aggregate consideration of Rs.3 crores under Section 54 of the Act.\n(d) We find no fault with the order of the Tribunal which has upheld the finding of fact\nof the Commissioner of Income Tax (Appeals) to the effect though the respondent-\nassessee had purchased flat Nos.416A and 516A it was only purchase of one residential\nhouse. Further, the Tribunal held that two flats were joined together before the\nrespondent assessee became the owner of the two flats. The Certificate from the society\nalso established the fact that two flat Nos.416A and 516A were joined together and\nwere considered as one residential house. These concurrent findings of fact by the\nCommissioner of Income Tax (Appeals) and the Tribunal have not been shown to be\nperverse or arbitrary. Further, Section 54 of the Act exempts capital gain to the extent\nthe consideration is paid for the purpose of a residential house. Consequently, where\nrespondent-assessee has acquired one residential house consisting of two flats, it cannot\nbe said the respondent assessee had purchased two residential houses. In view of the\nabove, we find that question (e) and (f) also do not raise any substantial question of law.\nTherefore, the appeal is dismissed with regard to question (e) and (f) above.”\n10. This decision of the Hon'ble Bombay High Court was followed by\nthe Co-ordinate Bench in the case of Bhaskar Prataprai Shah vs. DCIT [2024]\n161 taxmann.com 412 (Mumbai -Trib.) and also in the case of Nakul Aggarwal\nvs. ACIT [2024] 167 taxmann.com 540 (Mumbai-Trib.).\n11. Considering the facts in totality, in light of the aforementioned\njudicial decisions, we set aside the findings of the ld. CIT(A) and direct\nthe AO to allow the exemption u/s 54F of the Act.\n12. In the result, appeal of the assessee is allowed.\nOrder pronounced in the Court on 14th May, 2025 at Mumbai.\nSd/-\n(SAKTIJIT DEY)\nVICE-PRESIDENT\nSd/-\n(NARENDRA KUMAR BILLAIYA)\nACCOUNTANT MEMBER\nMumbai, Dated 14/05/2025\n*SC SPS\nआदेश की प्रतिलिपि ग्रेषित/