The Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that the capital gain exemption under section 54 of the Income Tax Act, 1961 is available to purchase of two flats by the assessee to be used as a single dwelling unit.
The assessee, an individual, purchased two flats with total consideration of Rs.1.26 crore. Exemption u/s.54F was claimed for the said two flats. The AO held that the exemption was available only in respect of one flat. He, therefore, reduced the amount of exemption by Rs.11,79,975/- anent to the second flat. On appeal, the first appellate authority upheld the order.
The Tribunal Vice-President Mr. R S Syal observed that the Finance Act, 2014 substituted the relevant part of the provision by inserting the words: “constructed, one residential house” in place of “constructed, a residential house”. The effect of the amendment is that now exemption is available only in respect of one residential house.
Allowing the plea of the assessee, the Tribunal held that “I find that the assessee purchased two flats to be used as a single dwelling unit. Since these two units are adjacent to each other and meant for use as a single property, mandate of the substituted provision, being, one residential house, is still also satisfied. The view point of the ld. CIT(A) that the amendment carried out to section 54F w.e.f. 01-04-2015 has changed the legal position, is albeit factually correct, but, in the given facts, even the amended provision comes to the rescue of the assessee inasmuch as the assessee acquired one residential house only comprising of two flats. In view of the foregoing reasons, I am satisfied that the assessee deserves exemption u/s.54F on second unit as well. I order accordingly. The impugned order is set-aside to this extent.”
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