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Facts
The assessee sold a Long Term Capital Asset in FY 2015-16 and subsequently purchased two flats for Rs. 30 lakhs and Rs. 37 lakhs. She claimed deduction under Section 54 for both properties, but the Assessing Officer and CIT(A) restricted the exemption to only one flat, disallowing the claim for the second flat.
Held
The Tribunal held that as per the amended provisions of Section 54, benefit is allowed for only one residential house, and the assessee failed to establish how two flats on different floors could be treated as a single residential unit. Distinguishing the relied-upon case of 'Anita Mahindrakumar Oberai' (where adjacent flats were considered a single unit), the Tribunal dismissed the appeal.
Key Issues
Eligibility for deduction under Section 54 of the Income Tax Act for purchasing two flats on different floors of the same building, claimed as a single residential unit.
Sections Cited
Section 54, Income Tax Act, 1961, Finance (No.2) Act, 2014, Section 54F
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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, DELHI
Before: SHRI VIKAS AWASTHY
बनाम Vs. Income Tax Officer, Ward-41(3), ..... �ितवादी/Respondent Civic Centre, Delhi 110002 अपीलाथ� �ारा/ Appellant by : Shri Mukul Gupta, Advocate �ितवादी�ारा/Respondent by : Ms. Shivani Bansal , Sr. DR सुनवाई क� ितिथ/ Date of hearing : 10/09/2024 घोषणा क� ितिथ/ Date of pronouncement : : 29/11/2024 आदेश/ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as 'the CIT(A)') dated 13.02.2024, for assessment year 2016-17.
The solitary issue in appeal is against disallowance of deduction amounting to Rs.34,58,099/- u/s. 54 of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’). The facts of the case in brief are as under: The assessee had sold Long Term Capital Asset during the Financial Year 2015-16, relevant to assessment year 2016-17 for a total sale consideration of Rs.1,39,50,000/-. Immediately thereafter, the assessee purchased two flats in the Financial Year 2015-16 for consideration of Rs.30,00,000/- and Rs.37,00,000/-, respectively and claimed benefit of exemption u/s. 54 of the Act on both the flats. The Assessing Officer (AO) granted benefit of exemption u/s. 54 of the Act on one flat purchased for Rs.37,00,000/-. The assessee carried the issue in appeal before the CIT(A) to claim exemption u/s. 54 of the Act on second flat. The CIT(A) vide impugned order rejected assessee’s claim. Hence, the present appeal by the assessee.
Shri Mukul Gupta, appearing on behalf of the assessee submitted that the assessee had purchased two flats in the same building i.e. 1st Floor and 2nd Floor, Plot No. 102, Block A-4, Paschim Vihar, New Delhi. Since, two flats purchased by the assessee are together, the assessee is eligible to claim benefit of exemption u/s. 54 of the Act. In support of his contention, he placed reliance on the decision in the case of Ms. Anita Mahindrakumar Oberai vs. ITO in for AY 2015-16 decided on 01.02.2022.
Per contra, Ms. Shivani Bansal representing the department vehemently defending the impugned order submits that the assessee had purchased three properties after the sale of Long Term Capital Asset during the relevant period. The assessee claimed benefit of exemption u/s. 54 of the Act on two properties i.e. Flat situated on 1st and 2nd floor, Block A-4, Paschim Vihar, New Delhi. Both flats were purchased separately on two different dates. The provisions of section 54 of the Act were amended by the Finance (No.2) Act, 2014 w.e.f 01.04.2015. As per amended provisions, benefit of section 54F of the Act is allowed only on one residential house in India. The AO and the CIT(A) have thus granted benefit of section 54 of the Act to the assessee on a flat having higher purchase cost.
Both sides heard, orders of the authorities below examined. It is an undisputed fact that the assessee after sale of capital assets has invested capital gains in purchase of two flats on 1st and 2nd floor Block A-4, Paschim Vihar, New Delhi. The assessee claimed benefit of exemption u/s. 54 of the Act on purchase of both flats. The contention of the assessee is that since both flats are in the same building on two consecutive floors, the assessee is eligible for the benefit of exemption u/s. 54 of the Act on both flats, even after amendment of the provision of section 54 of the Act by Finance (No. 2) Act, 2014. The assessee is entitled to claim benefit of section 54 of the Act, if the assessee within a period of one year before or two years after the date on which the transfer took place purchase or within a period of three years after that date constructed one residential house in India. Thus, on plain reading of provisions of section 54 of the Act it is unambiguously clear that the benefit is allowed on purchase of only one residential house. In the instant case, the assessee has purchased two flats on two different floors of the same building. The assessee has not been able to substantiate as to how these two flats are interconnected to be used as a single residential unit. The assessee has placed reliance on the decision rendered in the case of Anita Mahindrakumar Oberai (supra), wherein the assessee was granted benefit of section 54 of the Act on two flats. I find that the facts of the said case are distinguishable. In the said case, two adjacent flats were purchased to be used as a single dwelling unit. Hence, the Tribunal granted benefit of section 54 of the Act to the assessee. In the present case as pointed earlier the flats are on different floors. The assessee has failed to show as to how the two flats on two different floors can be used as a single dwelling unit; hence the ratio laid down in said case cannot be applied in the facts of the instant case. I find no infirmity in the impugned order; hence, appeal of the assessee is dismissed.