The Income Tax Appellate Tribunal (ITAT), Bangalore Bench allowed the deduction on account of long-term Capital Gain.
The assessee, Halesh K.C. along with other family members had sold an immovable property located at Bommanahalli, Bangalore. The assessee worked out a long term capital gain of Rs.1,50,20,000 and claimed deduction of the entire amount under section 54F of the Act.
The AO noticed that the assessee had received a building by way of gift and the said building consisted of ground floor, first floor and second floor. The AO also deputed his inspector to physically inspect the property. The Inspector reported that the Ground floor is having a garage and one residential unit; the first floor is having two 1BHK flats and the second floor is having 2 single (with bath) units.
The AO, accordingly, took the view that each of the units is a separate house. Since deduction under section 54F of the Act is not permitted, if the assessee is having more than one house property, the AO rejected the claim for deduction under section 54F of the Act.
The CIT(A) also confirmed the same and took support of the decision rendered by the Bangalore bench of Tribunal in the case of Ramaiah Harish.
The question was whether each floor of a single stand alone building should be considered as a separate house.
The coram consisting of Beena Pillai and B.R.Baskaran noted that an independent building can have a number of residential units and it will not lose the character of “one residential house”.
Therefore, the ITAT set aside the order passed by CIT(A) on this issue and held that the house property received by the assessee is “one residential house” only within the meaning of section 54F of the Act. Accordingly, the reasoning given by the AO to reject the claim for deduction under section 54F is not justified.
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