Mumbai ITAT allows capital gains relief for two residential flats
The tribunal ruled that two flats on different floors can be treated as one residential house for tax deductions.
The Income Tax Appellate Tribunal (ITAT) Mumbai has ruled in favour of a taxpayer who purchased two residential flats on different floors to claim capital gains relief. According to a report by the Times of India, the taxpayer had sold six commercial units in Mumbai, generating long-term capital gains of approximately Rs 5 crore.
The man sought a deduction under Section 54F of the Income Tax Act by investing the proceeds into residential property. He purchased two flats in Wing A of a building on the same date, though they were located on separate floors with separate entrances.
An Assessing Officer initially accepted the claim for one flat but rejected the deduction for the second, resulting in a disallowance of Rs 2,51,31,621. The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, upheld this decision, noting the properties were distinct due to their separate floors and stamp duty payments.
The taxpayer's counsel argued that the flats were acquired together to serve as a single residential unit for the family, as adjacent interconnected flats were unavailable in Mumbai. The tribunal held that separate entrances and registration documents do not automatically prevent two flats from qualifying as one residential house.
The ITAT observed that the statutory provision does not require a residential house to be a single undivided physical unit. The tribunal noted both flats were bought on the same date from the same developer with identical areas and prices.
The tribunal set aside the previous order and directed the Assessing Officer to allow the deduction under Section 54F in accordance with the law.