Section 54F Benefit can avail only in respect of a Single Residential House: ITAT [Read Order]

In The Asst. Commissioner of Income Tax vs. N.S. Viswanathan, the Cochin Bench of the Income Tax Appellate Tribunal (ITAT) held that exemption under section 54F of the Income Tax Act, 1961 prior to the amendment made in the Finance Act 2014 can only be availed to a single residential house.

The assessee, N.S. Viswanathan, had sold his residential property and a part of the capital gains were used to buy two flats at two different locations. Thereafter, he claimed exemption under section 54 of the Income Tax Act, 1961 for both the flat purchased by him. The balance of the capital gains was offered for taxation. The Assessing Officer (A.O.) disallowed exemption on two flats and restricted the claim of exemption to one of the residential house. Aggrieved by the order of the A.O, the assesse appealed before CIT (A). Relying on the decisions of Karnataka High Court, the CIT (A) decided the issue in favour of the assessee.

The Revenue preferred an appeal before the ITAT. The Departmental Representative contended that the Special Bench of the Tribunal had considered the issue in the case of ITO vs. Ms. Sushila M. Jhaveri and has decided the issue in favour of the Revenue. In that case the Tribunal had in detail examined the expression ’a residential house’ used in Section 54F of the IT Act and held that exemption under the said section would be allowable in respect of one residential house only.

The Counsel for the Assessee strongly contended the case on the basis of the decisions of Karnataka High Court in CIT vs. K.G.Rukniniamma and CIT vs. Late Khoobchand M.Makhij. He submitted that as the facts of the case was similar to the above mentioned cases; the expression ‘a residential house’ should be treated as more than one residential house.

Reckoning the decision of the Special Bench of the Tribunal in ITO vs. Ms. Sushila M. Jhaveri, the bench comprising of Judicial Member George George K. and Accountant Member Chandra Poojari observed “As mentioned earlier, in the peculiar facts and circumstances considered by the Hon’ble Karnataka High Court, it was held by the Hon’ble High Court that the two houses was considered as a single residential house for the purpose of section 54 / 54F of the I.T.Act. Therefore, the judgment of the Hon’ble Karnataka High Court cannot be universally applied to all other cases as opined by their Lordships itself in the aforesaid judgment. For the aforesaid reasoning, we are of the view that the CIT (A) is not justified in directing the A.O. to grant exemption u/s 54 / 54F in respect of the second residential house.”