Exemption under Section 54F allowed for multiple flats if located at same address

Assessee allowed to claim exemption u/s 54F for multiple flats if located at same address

In the Case of CIT Vs Shri Gumanmal Jain (Madras High Court), the assessee an individual filed his Income Tax return on 01.07.2013 for AY 12-13 declaring an income of 2,49,980. The filed return was selected for scrutiny U/s 143(2) and notice U/s 142(1) was issued and served on the assessee. The Point being whether the assessee can avail benefit under section 54F while purchasing different flat units in same building?

The assessee has two sons and jointly owns certain contiguous extents of land. The aforesaid lands were aggregated; the total extent of land was available 24,840 square feet. The assessee and his sons jointly entered into an agreement for the Joint Development of the aggregated land with a builder. The said land was to be developed by constructing 16 flats with a built up area of 56,945 square feet. The Assessee agreed to share in a ratio of 70:30 between them (between the assessee and the builder). However, there is no dispute that the superstructure and the said land are located in one location/door number and the same is ‘Rain Forest’, Old No.57, New No.26, Taylors Road, Rems Street, Kilpauk, Chennai 600 010.

Whether Investment in multiple Units located in same flats can construe as one property for purposes of section 54F of Income Tax Act?

After the scrutiny, the A.O. passed an assessment order alia holding long-term capital gain of Rs.2,31,56,430 and raised the demand. The said order of the A.O. came up with the interpretation of Section 54F of Income Tax Act. The A.O. continued on the basis that the assessee has got more than ‘a residential house’. Aggrieved by the Assessing Officer’s order, the assessee filed an appeal to the CIT(Appeals).

Commissioner of Income-Tax allowed the assessee’s appeal. The CIT order also turned principally on the interpretation of Section 54F of Income Tax Act. The Commissioner of Income-Tax relied upon a judgment of  Division Bench the High Court in V.R.Karpagam’s case, which had understood the phrase ‘a residential house’ arising in Section 54F of Income Tax Act.

The Revenue Department aggrieved by the said order filed an appeal before the ITAT. However, the said appeal of the Income Tax Department was dismissed by ITAT. Since the ITAT also had relied on the facts of V.R.Karpagam’s case

Decision- Investment in Different Flats even if in different location would not deny assessee benefit under section 54F:

The court, therefore, had no hesitation in quantifying that the assessee got 15 flats together with his sons won’t disentitle him from getting the benefit of the section 54F of the Income Tax Act merely on the reason that all fifteen flats aren’t  in the same Block.  Predominantly the factual position that all the 15 flats are located at the same address namely, ‘Rain Forest’ No.57, New No.36, Taylor’s Road, Rem Street, Kilpauk, Chennai 600 010.

The court also observes that even if the location of the 15 flats are in different blocks would not disentitle the assessee and his two sons from getting the benefit of Section 54F of Income Tax Act.

The court also observed and noticed that in all the different judgments, regardless of whether it is U/s 54 or 54F of Income Tax Act, the judgments have progressed only on the base that the flats are in the same location. Therefore, once it is established that the flats are in same address/location, the question ‘whether the flats are in the same block or in different blocks’ does not arise. As per the court observation, as long as the all 15 flats are in the same location/address even if flats are situated or located in different blocks it does not alter the position. After all, all the 15 flats are a product of a single agreement of development of the same piece of the said land.

Apartments are Flats are co-owned- Different Flats mean only different ration of co-ownership, Hence benefit under section 54F cannot be denied

The logic behind the court’s view is that the assessee, regardless of whether it is one flat or various flats, gets the only proportional undivided share in a land for the same piece of land. Consequently, the assessee does not purchase more than single property in that sense of the matter. Apartments and Flats are based on co-ownership completely.

Finally, the court concluded that the assessee is entitled to the benefit of Section 54F of Income Tax Act.

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