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2 Apartments in Same Building is 1 Residential Unit, to Compute Capital Gain Deduction: Karnataka HC [Read Judgment]

Residential unit - Taxscan

The High Court of Karnataka, while quashing the ITAT held that assessee entitled to the benefit of exemption under Section 54F(1) of the Income Tax Act, 1961 as the assessee owns two apartments of 500 square feet in the same building and it has to be treated as one residential unit.

The assessee, Navin Jolly is an individual and is Director of M/s Aburge India Property Services Pvt. Ltd. The assessee filed his return of income for Assessment year, declaring income. The return filed by the assessee was selected for scrutiny and notice under Section 143(2) of the Act was issued.

The assessing officer vide order held that the assessee owns nine residential flats in his name and that he is deriving the income from the residential flats and declared the same under the head income from house property and is not eligible to claim exemption by invoking proviso (a)(i) and (b) to Section 54F(1) of the Income Tax Act, 1961.

On an appeal to the CIT(A) it was held that by virtue of proviso (a)(i) and (b) to Section 54F(1) of the Act, the assessee is ineligible to claim exemption.

The ITAT while dismissing the appeal by the assessee said, “it is immaterial as to how the assessee utilized the residential units and whether these residential units are used for commercial purposes or residential purposes, so long as these units were recognized as residential units. Therefore, it was held that the assessee cannot claim the benefit of exemption under Section 54F of the Act.”

The division bench of Justice Alok Aradhe and Justice M. Nagaprasanna in the light of the precedent it was held that assessee entitled to the benefit of exemption under Section 54F(1) of the Income Tax Act, 1961 as the assessee owns two apartments of 500 square feet in the same building and it has to be treated as one residential unit.

“A similar view was taken by Delhi High Court in case of Geeta Duggal wherein the issue whether a residential house which consists of several independent residential units would be entitled to exemption under Section 54F(1) of the Act was dealt with and the same was answered in the affirmative. The appeal against the aforesaid decision was dismissed by the Supreme Court,” the judgment said.

To Read the full text of the Order CLICK HERE
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