Sec 54 Exemption is allowable even When Assessee Invested more than the Sale Proceeds of the Industrial Gala for purchase of Two Flats: ITAT [Read Order]

The Mumbai bench of Income Tax Appellate Tribunal recently said that the exemption under Section 54 of the Income Tax Act is allowable even when assessee has invested more than the sale proceeds of the industrial gala for purchase of two flats.

In the case of Mr. George Britto Jesudas vs. ITO – 2 (3) were decided so while considering the appeal filed by the assessee against the order of CIT(A) for A.Y.2012-13 in the matter of order passed under section 143(3) of the IT Act.

In instant appeal assessee claimed an exemption under section 54F on the ground that assessee has purchased more than one residential house out of the sale proceeds of capital gain.

However, AO declined assessee’s claim of exemption under section 54F and aggrieved assessee carried the matter before the CIT (A) and restored the decision of AO.

CIT (A) observed the matter as no such provision since section 54F was available in respect of one residential property and not multiple residential units as claimed by the appellant.

Further aggrieved assessee approached tribunal for getting the exemption and argued that object of buying a house property for the family bought two residential properties, deduction under section 54F would still be allowable.

The counsel for assessee further argued that the flats were either adjacent or in the same or one building, though on different floors, so as to constitute a residential house and relied on various  tribunals decisions which is in favour of assessee’s contention.

The Tribunal while pronouncement relied on decision of Karnataka High Court in the case of CIT vs. Late Khoobchand M. Makhija wherein held that acquisition of two residential houses by the assessee out of the capital gains falls within the phrase “residential house” and accordingly, the assessee is entitled to the benefit conferred under Section 54(1) of the Act.

By following the said decision the tribunal declared that exemption under section 54 is available even in respect of two house property / flats being acquired out of the sale proceeds of long term capital gain.