Subsequent Amalgamation of Two Houses Does Not Qualify for Section 54F exemption: ITAT Delhi

ACIT Vs Rahul Garg (ITAT Delhi)

The Revenue appealed against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (CIT(A)/NFAC) for Assessment Year 2023, challenging the deletion of the Assessing Officer’s disallowance of the assessee’s deduction under Section 54F amounting to ₹28,81,62,921. The assessment had been completed under Section 143(3) of the Income-tax Act, 1961.

The Assessing Officer had disallowed the deduction on the ground that the assessee purchased two adjacent residential properties—Plot No. F-9, Sector-44, Noida, registered on 13.12.2022, and Plot No. F-8, Sector-44, Noida, registered on 23.01.2023. According to the Assessing Officer, the second property was purchased within one year of the transfer of the original asset, attracting the restriction contained in proviso (a)(ii) to Section 54F(1). Consequently, the claim of deduction under Section 54F was denied.

Before the CIT(A), the assessee submitted that the two adjacent properties were intended to form one residential house. It was stated that both plots measured 450 sq. metres each, were purchased with the intention of creating a single residential property of approximately 900 sq. metres, and that initial payments for both properties were made simultaneously on 02.05.2022 and 06.05.2022. The assessee explained that the registries were executed on different dates due to transfer permissions being granted by the NOIDA Authority on different dates. It was further submitted that the NOIDA Authority amalgamated the two plots by letter dated 13.04.2023, prohibited their future de-amalgamation, and subsequently issued an occupancy certificate after inspection. The assessee also relied on an architect’s certificate confirming that the two properties had been interconnected and were being used as a single residential unit. In addition to investment in the two properties, the assessee had deposited ₹2,81,00,000 under the Capital Gains Account Scheme, 1988 and claimed a total deduction of ₹28,81,62,921 under Section 54F.

The CIT(A) examined Section 54F and referred to several judicial decisions cited by the assessee. After considering the facts, the CIT(A) concluded that the assessee had always intended to acquire the two adjacent properties as one residential house, noting that substantial advance payments for both properties were made on the same dates, the difference in registration dates resulted from delays in transfer permissions from the NOIDA Authority, the plots were subsequently amalgamated into a single property, the architect certified that they had been interconnected into one residential unit, and the NOIDA Authority issued a single occupancy certificate. Holding that the registration of Plot No. F-8 formed part of the acquisition of one residential unit and not the purchase of another residential house, the CIT(A) directed the Assessing Officer to allow deduction under Section 54F in respect of ₹26,00,62,921 invested in the two bungalows and to verify the deposit of ₹2,81,00,000 in the Capital Gains Account Scheme before allowing the balance claim.

Before the Tribunal, the Revenue supported the Assessing Officer’s view, while the assessee relied on the reasoning adopted by the CIT(A). The Tribunal noted that the assessee had earned long-term capital gains on sale of shares on 04.04.2022 and had purchased the two adjacent properties through separate registered sale deeds executed on different dates. It also observed that the properties were amalgamated only after the purchases.

The Tribunal held that the two properties had been treated as separate residential houses throughout until their subsequent amalgamation. It observed that the amalgamation of the properties after execution of separate registered purchase deeds constituted sufficient material to treat them as separate houses. The Tribunal further noted the Revenue’s contention that Plot No. 8 had been purchased from M/s Spoorty Developers (P.) Ltd. through its authorised director, Smt. Seema Sharma, whereas the other property had been purchased from Smt. Seema Sharma in her individual capacity. Referring to Salomon v. Salomon & Co. Ltd., the Tribunal observed that an individual and a company are separate legal persons.

The Tribunal also considered the judicial precedents relied upon by the assessee and reproduced in the CIT(A)’s order. It held that those decisions were distinguishable, observing that they concerned multiple units or different floors constituting a single residential house, whereas the present case involved two separate residential houses that were amalgamated only after their purchase.

Accordingly, the Tribunal held that the CIT(A) had erred in treating Plot No. 8, Block-F, Sector-44, Noida, purchased on 23.01.2023, as eligible for deduction under Section 54F. It restored the Assessing Officer’s findings to that extent and directed that the necessary computation be made in accordance with law. The Revenue’s appeal was partly allowed.

Cases Discussed

• Chanda Runwal vs. ACIT (Mumbai ITAT), [2025] 175 taxmann.com 141
• Lata Goel (Delhi High Court), ITA 127/2025, judgment dated 30.04.2025
• Saroj Rani vs. ITO (Delhi ITAT), ITA No. 5472 of 2024
• Nakul Aggarwal vs. ACIT (Mumbai ITAT), (2024) 167 taxmann.com 540
• Navin Jolly v. ITO (Karnataka High Court), [2020] 117 taxmann.com 323
• Mohammadanif Sultanali Pradhan vs. DCIT, 181 ITD 238
• Ms. Anita Mahindrakumar Oberai vs. ITO (Pune ITAT), 142 taxmann.com 580
• DCIT vs. Shri Ashok Santu Bhavnani (Mumbai ITAT), ITA No. 6510/Mum/2019
• Smt. Kamlesh Khanna vs. ACIT (Delhi ITAT), ITA No. 7841/Del/2019
• CIT v. A. Suresh Rao (Karnataka High Court), [2014] 41 taxmann.com 475 (Karnataka) (MAG)
• Commissioner of Income-tax v. Gita Duggal (SC), [2014] 52 taxmann.com 246
• CIT v. Gita Duggal (Delhi High Court), [2013] 357 ITR 153
• CIT vs. Syed Ali Adil (Andhra Pradesh High Court), [2013] 33 taxmann.com 212
• CIT v. Raman Kumar Suri (Bombay High Court), [2013] 29 taxmann.com 231/212 Taxman 411 (Bombay) / 2012 (12 TMI 421)
• ITO v. Ms. Shushila M. Jhaveri (Mumbai ITAT Special Bench), [2007] 107 ITD 327/14 SOT 394 (Mumbai)
• CIT v. D. Ananda Basappa (Karnataka High Court), [2009] 180 Taxman 4/309 ITR 329
• Salomon v. Salomon & Co. Ltd. (House of Lords), [1897] AC 22

FULL TEXT OF THE ORDER OF ITAT DELHI

This Revenue’s appeal for Assessment Year 2023 arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (for short, ‘CIT(A)/NFAC’), Delhi’s DIN & order No. ITBA/NFAC/S/250/2025-26/1080902901(1), dated 19.09.2025, involving proceedings u/s 143(3) of the Income Tax Act, 1961; hereinafter referred to as, “the Act”.

Heard both the parties. Case file perused.

2. Coming to the Revenue’s sole substantive grievance canvassed in the instant appeal that the learned CIT(A)/NFAC has erred in law and on facts in reversing the Assessing Officer’s action disallowing the assessee’s section 54F claim of Rs. 28.81 Crores in assessment order dated 25.03.2025, we note that the lower appellate discussion under challenge to this effect; reads as under:

5. DECISION: I have perused the record of this proceeding. gone through the facts of the case, the grounds of appeal and the submissions made by the appellant. On the basis thereof, the grounds of appeal raised by the appellant are adjudicated, on the basis of received pleadings, as under:

5.1 Ground No. 1 and 2 are general in nature and need no adjudication. These grounds are therefore dismissed.

5.2. The gravamen of the issue, as pleaded by the appellant in the grounds 3 to 5, is that the AO had rejected the appellant’ claim of deduction of Rs 28,81,62,921/- u/s 54F of the Act on the ground that the appellant had purchased a 2nd independent residential asset on 23.01.2023, i.e., within one year from the date of purchase of original asset, thus, making him ineligible for the claimed deduction of the capital gain upon being hit by the proscription contained in the proviso a(ii) to Section 54F(1) of the Act.

5.3. In the assessment order, the AO had observed that the appellant had purchased 2 adjacent plots i.e. Plot F-9, Sector 44, Noida on 13.12.2022 for a consideration of Rs. 13,00,00,000/- and Plot F-8, Sector 44, Noida on 23.01.2023 for a consideration of Rs. 11,25,00,000/-, which had been claimed by the appellant as investment in ‘one’ residential property. However, the AO had observed that the appellant, thus, had purchased 2 independent residential assets on two different dates i.e. 13.12.2022 and 23.01.2023 and hence, the appellant had violated the restrictions imposed in the proviso to Section 54F(1)(ii) of the Act as he had purchased the 2^nd independent residential asset on 23.01.2023 within a year from the date of transfer of original asset. For this reason, the AO had disallowed the deduction of capital gains of Rs. 28,81,62,921/-, as claimed by the appellant under section 54F of the Act.

5.4. It would, thus, be apropos to first read the provisions of Section 54F of the Act, whose relevant extracts are reproduced, here as under –

Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house.

54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual …, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in india (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,—

a. if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45;

b. if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45:

Provided that nothing contained in this sub-section shall apply where –

(a) the assessee,-

(i) …….

(ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or

5.5. A reading of the statutory litera would show that the section 54F(1) of the Act speaks of one residential house and the construction or purchase of one residential house for offsetting the capital gains. Such offset would fail if another new residential house is acquired within a year of acquisition of the new residential asset. The question that would arise if a literal and pedantic interpretation is provided to this provision. This provision by its plain look would call for a purposive interpretation and one residential house or a new asset would have to be understood in that sense, which has been used in a cognate sense. This is how the courts and tribunals have also interpreted the provision, both prior to and even after the amendment.

5.6. Before proceeding to have a look at them, it would also be important to take a note of some peculiar facts of this case, which would also be necessary to decide the issue herein. In the AY 2023-24, the appellant earned Long Term Capital Gains of Rs.75,46,30,654 on sale of shares of M/s Mogli Labs (P) Ltd., a company based in Singapore. Against the same, he claimed deduction of Rs. 28,81,62,921/- u/s 54F of the Act in respect of investment made in two adjacent residential properties and the amounts, deposited in Capital Gains account scheme.

In addition to the investment, as above, of Rs.26,00,62,921/- in the residential house properties, the appellant deposited an amount of Rs. 2,81,00,000/- in the Capital Gains Account Scheme, 1988. Accordingly, total deduction of Rs. 28,81,62,921/- was claimed by the appellant u/s 54F of the Act.

5.7. The appellant has submitted that the properties F-8, Sector 44, Noida and F-9, Sector 44, Noida, purchased by him, were adjacent house properties and were amalgamated immediately subsequent to such purchase, and thus, constituted as one single house property for claiming exemption under section 54F of the Act. It has been submitted that both the properties F8 and F9, Sector-44, Noida were effectively owned by same person, Seema Sharma (though one property was registered in the name of company in which she was the director and authorized signatory) and both the properties were purchased together by the appellant. It has been submitted that the appellant wanted to purchase a big residential house property to accommodate his family. Considering the future needs of the family, he wanted to purchase a residential house property of around 1000 sq. metres in Noida. However, in Noida, the maximum size of houses available was only 450 sq. metres and therefore, the appellant purchased two adjacent properties (i.e. F8 Sector 44, Noida and F 9 Sector 44, Noida) of 450 sq. metres each (in total 900 sq. metres) with the intent to have a single residential house. The appellant submitted that the initial payments towards the purchase consideration of both properties were made simultaneously, i.e., on 02.05.2022 (Rs.50 lakhs each) and on 06.05.2022 (Rs.2 crores each) and around the same time (i.e. May and June 2022), approx. 50% of the purchase consideration was paid by the appellant in respect of both the properties. Thereafter, the registry of the property F-09, Block-F, Sector-44, Noida was made on 13.12.2022 and property F­08, Block-F, Sector-44, Noida on 23.01.2023. It has been submitted that the time lag in registries of both the properties was because of the timing of transfer permissions granted by the NOIDA Authority to the seller parties. The copies of the two registered deeds, in respect of the properties were submitted before the AO and have also been filed before me. Thus, to summarize, the sequence of events in respect of purchase of adjacent properties is tabulated as under:

the appellant wanted to purchase a big residential house property to accommodate his family. Considering the future needs of the family, he wanted to purchase a residential house property of around 1000 sq. metres in Noida. However, in Noida, the maximum size of houses available was only 450 sq. metres and therefore, the appellant purchased two adjacent properties (i.e. F8 Sector 44, Noida and F 9 Sector 44, Noida) of 450 sq. metres each (in total 900 sq. metres) with the intent to have a single residential house. The appellant submitted that the initial payments towards the purchase consideration of both properties were made simultaneously, i.e., on 02.05.2022 (Rs.50 lakhs each) and on 06.05.2022 (Rs.2 crores each) and around the same time (i.e. May and June 2022), approx. 50% of the purchase consideration was paid by the appellant in respect of both the properties. Thereafter, the registry of the property F-09, Block-F, Sector-44, Noida was made on 13.12.2022 and property F­08, Block-F, Sector-44, Noida on 23.01.2023. It has been submitted that the time lag in registries of both the properties was because of the timing of transfer permissions granted by the NOIDA Authority to the seller parties. The copies of the two registered deeds, in respect of the properties were submitted before the AO and have also been filed before me. Thus, to summarize, the sequence of events in respect of purchase of adjacent properties is tabulated as under:

5.8. The appellant has then submitted that after the registration of adjacent properties, the New Okhla Industrial Development Authority (“NOIDA”) vide letter dated 13.4.2023 had amalgamated the two plots. The said amalgamation letter stated that this unit was to be treated as a single property and had prohibited their de-amalgamation again into two plots. The appellant has, therefore, submitted that consequent to the amalgamation ordered by the NOIDA under the abovesaid letter, the said authority had recognized the two properties as a single residential unit.

5.9. The appellant has additionally relied upon an Architect’s certificate dated 22.02.2025, wherein the architect has confirmed that F8 and F9, Sector 44, Noida are adjacent house properties, which stand amalgamated, vide order dated 13.04.2023 of the NOIDA. It has also confirmed that two properties have been interlinked/ joined for use as single house property. The appellant had also applied before NOIDA Authority for submission of complete drawing of property for their consideration, and thereafter, the NOIDA Authority had issued a Certificate dated 06.03.2025, wherein it was certified that the properties ‘F-08 and F-09 Sector-44, Noida’ were fit for occupation. All these documents had been filed before the AO by the appellant, which have also been filed before me.

5.10. In the above factual background, it is undisputed that the two properties F-8, Sector 44, Noida and F-9, Sector 44, Noida, purchased by the appellant, were adjacent house properties, wherein the initial investment for purchase of both the properties were made by the appellant on the same day in May, 2022, wherein payment of Rs.2.50 crores for each subject property were made by the appellant. Thereafter, the property F-9, Sector 44, Noida was registered in the name of the appellant on 13.12.2022 and F-8, Sector 44, Noida was registered in the name of the appellant on 23.01.2023. It is also an undisputed fact that subsequent to the registries; the NOIDA Authority had amalgamated the two properties with a caveat that the same cannot be de-amalgamated again in future. Thus, prima facie, it appears that the appellant had purchased the two properties for use as a single residential property and, therefore, had made parallel initial investment in the two properties, in May, 2022. The two registries differed in dates only because of receipt of transfer permission by the seller from the NOIDA Authority on different dates, which led to delay in registration of the second residential property, namely, F-8, Sector 44, Noida by a month.

5.11. As noticed supra, the Section 54F of the Act provides that on account of sale of any long term capital asset, not being a residential house, if the assessee purchases one residential house in India within a period of one year before or two years after the date on which transfer took place purchased or, within a period of three years after that date constructed one residential house in India, the capital gains proportionate to the sale consideration invested will be eligible for deduction under section 54F of the Act. Further, I also note that the term ‘one residential house’ was incorporated in section 54F of the Act w.e.f. 01.04.2015. Prior to 01.04.2015, the section 54F provided deduction in respect of “a’ residential house” which was substituted vide Finance Act (No.2), 2014 to insert ‘one’ residential house.

5.12. In the present case, the reason for denying the benefit under section 54F of the Act by the AO is the treatment by him of the investment made by the appellant in properties F-8, Sector 44, Noida and F-9, Sector 44, Noida as investments in two house properties to invoke the provisions of the clause a(ii) of the proviso to sub section (1) of section 54 of the Act to thereby hold that the appellant was not entitled for the claim of exemption u/s 54F of the Act as against the case of the appellant to treat this investment to be in one residential house property.

5.13. The Delhi High Court in the case of CIT v. Gita Duggal [2013] 357 ITR 153 dealt with an akin issue. In this case, the assessee therein had purchased several independent residential units consisting of basement, ground floor, first floor & second floor and had claimed the same them a single unit to seek exemption u/s 54 of the Act. It had been denied by the AO. The CIT(A) had allowed the claim of the assessee, which was affirmed by the Tribunal. The revenue moved in appeal before the High Court. The High Court affirmed the decision of the Tribunal by interpreting and holding that there was nothing in the Sections 54/ 54F, which required the residential house to be constructed in a particular manner. The only requirement under the two provisions were that the same should be for the residential and not for the commercial use. There was nothing in the section, which required that the residential house should be built in a particular manner. The Income Tax authorities, consequently, could not insist upon such requirement. The court held that a person may construct a house according to his plans and requirement. Most of the houses are constructed according to the needs and requirements and even compulsions. It can be usefully extracted as under –

“9. There could also be another angle. Section 54/54F uses the expression “a residential house”. The expression used is not “a residential unit”. This is a new concept introduced by the assessing officer into the section. Section 54/54F requires the assessee to acquire a “residential house” and so long as the assessee acquires a building, which may be constructed, for the sake of convenience, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the Section should be taken to have been satisfied. There is nothing in these sections which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use. If there is nothing in the section which requires that the residential house should be built in a particular manner, it seems to us that the income tax authorities cannot insist upon that requirement. A person may construct a house according to his plans and requirements. Most of the houses are constructed according to the needs and requirements and even compulsions. For instance, a person may construct a residential house in such a manner that he may use the ground floor for his own residence and let out the first floor having an independent entry so that his income is augmented. It is quite common to find such arrangements, particularly post-retirement. One may build a house consisting of four bedrooms (all in the same or different floors) in such a manner that an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may even arrange for his children and family to stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. There may be several such considerations for a person while constructing a residential house. We are therefore, unable to see how or why the physical structuring of the new residential house, whether it is lateral or vertical, should come in the way of considering the building as a residential house. We do not think that the fact that the residential house consists of several independent units can be permitted to act as an impediment to the allowance of the deduction under Section 54/54F. It is neither expressly nor by necessary implication prohibited.”

5.14. This judgment of the High Court of Delhi was subsequently affirmed by the apex Court by dismissing the appeal, filed by the revenue vide order reported as the Commissioner of Income-tax v. Gita Duggal [2014] 52 taxmann.com 246. To the same ratio are the decision of Karnataka High Court in Navin Jolly v. ITO [2020] 117 taxmann.com 323 and Andhra Pradesh High Court in CIT vs. Syed Ali Adil: [2013] 33 taxmann.com 212. It needs to be stated that these decisions were for the assessment years prior to amendment made by Finance Act (No.2), 2014, whereby the words ‘a residential house’ were substituted with ‘one residential house’, prospectively, with effect from 01.04.2015.

5.15. I find that the Delhi High Court has stood its view even now, as held in Gita Duggal, supra) as seen from its judgment dated 30.04.2025 in Lata Goel (ITA 127/2025) to hold that multiple residential units may be construed as a single residential house for the purposes of exemption u/s 54F of the Act and that the term ‘a residential house’ can be construed as ‘one residential house’, as now contained in the Act. The relevant portion of the Lata Goel reads as under —

“19. it is clear from the above that separate floors of the singular house bearing the address D-6/5 Vasant Vihar, New Delhi, were purchased by the family members of the Assessee. The fact that different floors may be owned or partly owned would not detract from the fact that the portions owned were required to be considered ‘one residential house’….

“25. The aforesaid decisions were rendered in the context of construing whether the new asset purchased is ‘a residential house’ – an expression used in Section 54 and 54F of the Act. However, the said decisions would be equally applicable for construing the term ‘one residential house’ as used in clause (i) of the proviso to Section 54F of the Act. We say so because in Pawan Arya (supra) as well as in Gita Duggal (supra) and Mrs Kamla Ajmera (supra), the term ‘a residential house’ has been construed to mean ‘one residential house’. We find it difficult to accept that, in the given facts, different floors of a house are required to be considered as multiple residential houses.

26. In view of the above, we find no infirmity with the decision of the learned ITAT in holding that the Assessee could not be denied the deduction under Section 54F of the Act on the ground that she holds more than one residential unit.”

5.16. Thus, what had been stated by the jurisdictional Delhi High Court in Gita Duggal, supra, in case of pre 2014 law would hold true even for the post 2015 assessment years, as stated in Lata Goel, supra. This would be even though the Lata Goel was also rendered in the context of the AY 2011-12. This is because the High Court held that the fact that different units or floors may be owned or partly owned would not detract from the fact that the portions owned were required to be considered as ‘one residential house’.

5.17. The appellant has referred to the decision of Ahmadabad Bench of Tribunal in case of Mohammadanif Sultanali Pradhan vs. DCIT: 181 ITD 238. This decision was rendered for AY 2015-16. The Tribunal held that the assessee claimed exemption under section 54F of the Act by making investment of long-term capital gain in two bungalows located adjacent to each other and used as one residential unit. The relevant findings of the decision is as under:

‘7. We have heard the rival contentions of both the parties and perused the materials available on records. There is no dispute to the facts of the case as discussed above. Therefore, we are not inclined to repeat the same for the sake of brevity. The issue in the present case relates whether the assessee is eligible for exemption under section 54F of the Act against the long­term capital gain for the investment made in the two properties which are adjacent to each other and used as one residential unit. Indeed, the provision of law requires that the exemption will be available to the assessee under section 54F of the Act for the investment in one residential unit.

7.1 Admittedly, there are 2 units bearing separate numbers which were purchased by the assessee out of the long-term capital gain income. Both the units are adjacent to each other and the same are used as single residential unit. Thus, the question arises, exemption provided under section 54F of the Act can be denied to the assessee merely on the ground that there were two registries of the properties. In our considered view, the answer stands in favour of the assessee in the present facts and circumstances. Under the provisions of the Act i.e. 54F of the Act, there is no definition/ clarification provided about the area of the residential property. It means, one assessee can buy huge bungalow/ property say thousand square meters and can claim the deduction subject to the conditions. Similarly, the other assessee on the other hand acquired two different residential properties adjacent to each other but both the properties put together has only two hundred square meters, but he will be extended the benefit of the exemption with respect to one unit only because of the reason that there are two different properties based on registry documents.

7.2 There can be a situation that the family of the assessee is quite large, comprising of several members in the family and therefore he needs two properties adjacent to each other to accommodate his family members. So, from the point of view of the assessee, it is single property, but he got two different properties registered as per the requirement of the builder. Thus, in our considered view, the assessee cannot be deprived of the benefit conferred under the statute merely on the reasoning that there were two different registries of the buildings/properties.

It is also not a case of the revenue/ assessee that both the properties purchased by the assessee were located in different graphical area. In such a situation the law amended under section 54F of the Act appears to be applicable where the assessee buys two properties in two different areas.

7.3 Moreover, the principles laid down by the courts cannot be just brushed aside on the aspect of defining the one residential unit. In this regard we find support and guidance from the judgment of Hon’ble High Court of Karnataka in the case of CIT v. D. Ananda Basappa 12009] 180 Taxman 4/309 ITR 329 wherein it was held as under…………

7.4 In view of the above and after considering the facts in totality, we are of the view that the assessee is entitled for the exemption provided under section 54F of the Act in the present facts of circumstances. Hence, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Thus, the ground of appeal of the assessee is allowed.

8. In the result, the appeal of the Assessee is allowed.”

5.18. Reliance is also placed upon decision of Mumbai Bench of the Tribunal in the case of Nakul Aggarwal vs. ACIT, (2024) 167 taxmann.com 540. In that case, the assessee invested gains in two adjacent flats and claimed exemption under section 54F of the Act for the AY 2017-18 (i.e. amended provisions). However, the same was disallowed by the AO on the ground that the assessee violated the provisions of section 54F by purchasing two flats as against one as required under section 54F. When the matter reached the Tribunal, it was held as under:

“4.1. Admittedly, there is no dispute regarding the purchase of both the houses by the assessee which is adjacent to each other. The only issue disputed by the revenue is that, the assessee purchased two houses under two independent agreements, and therefore the intention to treat it as one single unit is not satisfied. The revenue is also alleging that at the time of purchase, the assessee was already having a self-occupied property and thereby necessary conditions under section 54F also do not stands fulfilled. And the assessee’s case is that post purchase of the two flats, the revised plan was approved by MHADA wherein the two flats were considered as one single unit, with one kitchen and therefore the necessary criteria under section 54 F stands fulfilled.

4.2. Before we go into the merits, it is necessary to understand the provisions and the intention of the legislature to bring in the amendment by way of Finance Act, 2014. The intention of the legislature to introduce the amendment was that investment should be made only in one residential house.

4.5. Hon’ble Karnataka High Court in case of CIT v. A. Suresh Rao [2014] 41 taxmann.com 475 (Karnataka) (MAG) considered similar situation wherein the significance of the expression “held” used by the legislature was analysed and explained in a great length. Further, Hon’ble Bombay High Court in the case of CIT v. Raman Kumar Suri [2013] 29 taxmann.com 231/212 Taxman 411 (Bombay) / 2012 (12 TMI 421) observed that, when two flats were joined together before the assessee became the owner of the two flats and certification from the society also establishes that the flats were joined together and were considered as one residential house, the Assessing Officer had to accept these facts and cannot disallow the claim merely because the flats were purchased by two separate agreements.

4.6. So long as the house is used by the assessee as one single unit, though by conversion, in our view, the exemption cannot be denied to the assessee under section 54F of the Act. There is nothing on record brought by the revenue other than arguing that the assessee originally entered into two independent agreements for purchase of the flat. e iriiPe^\diment with the assessee at that stage was because, the builder orig ally got thee. plan approved as two separate units. The plan was subsequently evised, in order to suit the requirement of the assessee to use it as one sin e unit. The revised plan very categorically identifies one kitchen and other nbcessary structures, to be used as a single dwelling unit. The revised plan furnished by the assessee has not been opposed by the revenue with any contrary evidence. Thus, the conditions relevant for claiming deduction under section 54F is fully satisfied in the present facts oftho cas.

4.7. At this junduir^–ewe refer to the Special Bench decision of this Tribunal in case of ITO v. Ms. Shushila M. Jhaveri reported in 12007] 107 ITD 327/ 14 SOT 394 (Mumbai), exemption under section 54 was held to be allowable only in case of purchase of a single house. Entire discussion revolved around interpretation of “a residential house” in section 54. It was had by the Tribunal as under:

“The word “a” means “any” which, in turn, means “many” or “more than one”. According to various dictionary meanings, it also includes “one” or “one out of many”. The word “any” may have several meanings according to the circumstances. It may mean “all”, “each”, “some” or “one or more out of several” but it is not confined to a plural sense. It may also be used to denote “one”. So, both the words “a” and “any” are ambiguous and, therefore, the meaning of these words has to be seen with reference to the context in which these words are used.” Further, it was held that “The word “any” has been used by the Legislature in sections 548, 54D, 54E, 54EA and 54E8 while as the word “a” has been used in sections 54 and 54F of the Act. This clearly shows that the Legislature intended different meanings to be given to these two words. A close reading of these sections shows that the Legislature intended to allow exemption in respect of investment in more than one asset by using the word “any”.

4.8. Hon’ble Special Bench in the above referred decision focused their discussion on the word “a” and held that exemption under section 54/54F would be available in respect of one house only. But where two houses joint together constitutes a single unit for residence, then exemption under section 54 would be available to such joint residential house. Hon’ble Special Bench, also noted that, where two units are distantly situated, then it could not constitute to be “a residential house” and, therefore, exemption under section 54 will be available only to one residential house at the option of the assessee.

4.9. We, therefore, do not find any reason to dismiss the claim of the assessee based on surmises and conjectures of the authorities below. We direct the Ld.AO to grant complete deduction under section 54F as claimed by the assessee.

Accordingly, ground 2 raised by the assessee stands allowed.”

5.19. The appellant has also relied upon the decision of the jurisdictional Delhi Bench of the Tribunal in the case of Saroj Rani vs. ITO: ITA No. 5472 of 2024 wherein the Tribunal allowed the claim of exemption under Section 54 for AY 2016-17 on investments made in seven residential units on the same floor. The relevant extracts f the decision of the Tribunal are reproduced as under:

12. We find that the Ld AO considered the investment in seven residential units of the same complex; each unit being adjacent to other units, with no outsider flat coming in between as investment in multiple houses and applied the amendment effective from 01.04.2015 to invoke the concept of “one residential house” instead of “a residential house”. The AO and the CIT(A) held that the judgement of Hon’ble Delhi High Court in the case of CIT vs Gita Duggal 3571TR 153(Del) was not applicable, post above amendment.

13. We find that the Hon’ble Delhi Court in the Late Goel in !TA 127/225 vide its order dated 30.04.2025, referring its own decision in the case of Gita Duggal case [supra], had held that multiple residential units may be construed as a single residential house for the purposes of exemption u/s 54F of the Act and that the term ‘a residential house’ can be construed as ‘one residential house’. It would be pertinent to reproduce the relevant portion of the judgment of the Hon’ble Delhi Court in the case of Lata Goel which is as under:

14. Considering the facts of the case in totality, in light of the decision of the Hon’ble Delhi Court [supra] where the term ‘a residential house’ has been construed to mean ‘one residential house’ and that different floors of the house do not mean multiple houses, we hold that “one residential house” in section 54/54F of the Act would encompass within its fold seven residential units on the same floor. Accordingly, we set aside the findings of the Id. CIT(A) and direct the Assessing Officer to delete the addition of Rs. 1,86,36,599- and allow exemption u/s 54 of the Act on the seven residential units as claimed by the assessee. Grounds raised by the assessee are allowed.”

5.20. The appellant has also relied upon the decision of Pune Bench of the Tribunal in the case of Ms. Anita Mahindrakumar Oberai vs. ITO: 142 taxmann.com 580 (Pune-Trib.) (Assessment Year 2015-16). In that case also, the assessee invested sale consideration into purchasing two Flats, numbering, 1101 and 1102 at Malad, Mumbai with total consideration of Rs.1.26 crore, which was claimed as exempt u/s 54F of the Act. The AO held that the exemption was available only in respect of one flat. On appeal, the Tribunal held that since these units were adjacent to each other and meant for use as a single property, mandate of the substituted provision, being, one residatial house, is satisfied and accordingly allowed the exemption u/s.54F.

5.21. To the similar ratio are the other case laws, relied upon by the appellant, which are as under:

• • DCIT vs. Shri Ashok Santu Bhavnani: ITA No. 6510/Mum/2019 (Mum ITAT)
  • Chanda Runwal vs. ACIT: [2025] 175 taxmann.com 141 (Mumbai – Trib.)
  • Smt. Kamlesh Khanna vs. ACIT: ITA No. 7841/De1/2019 (Del. ITAT)

5.22. The consistent juridical interpretation, as stated Gita Duggal, supra, states “that there is nothing in the sections 54 and 54F of the Act, which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the one residential use and not for commercial use. If there is nothing in the section which requires that the residential house should be built in a particular manner, then the income tax authorities cannot insist upon that requirement. A person may construct a house according to his plans and requirements”.

5.23. Therefore, the fact that the residential house consists of several independent units, would not be an impediment to the allowance of the deduction under Section 54/54F. It is neither expressly nor by necessary implication prohibited and a residential house and one residential house both prior to and after 2015 would have to be purposively interpreted to cater to the domestic necessities of the claimant and the same cannot be literally jacketed. The factual matrix in a given case would determine the interpretation and claim in each case. This has been adequately reflected in the read decisions of the courts and tribunal.

5.24. Admittedly, in the present case, there is no dispute regarding the purchase of two houses by the appellant, adjacent to each other, with an intent to amalgamate the same as one residential unit. The AO had found that the appellant had purchased two houses through two independent registries, and therefore, the intention to treat them as one single unit was not satisfied. The perusal of sale deeds, however, showed that the two properties (i.e. F-8, Sector 44 Noida and F-9, Sector 44 Noida) were adjacent to each other and the initial payments towards the purchase of both properties were made by the appellant in the month of May, 2022 wherein an advance of Rs.2,50,00,000 was paid parallelly. In fact, till June 2022, approx. 50% of the purchase consideration in respect of both the properties was paid by the appellant. Further both the properties were purchased from Seema Sharma, wherein one deed had been signed by her in individual capacity, and the other deed was signed in her capacity as the director of M/s Spoorty Developers Pvt Ltd. Thus, the above fact of the case clearly shows that the intent of the appellant was always to purchase both the properties F-8, Sector 44 Noida and F-9, Sector 44 Noida parallelly from Seema Sharma as ‘one residential house’. The relevant extract from purchase deed evidencing the payment of Rs. 50 lac and Rs. 2 Cr. each for both the properties on 02.05.2022 and 06.05.2022 is as under-

3. That now there is no remaining balance due by the TRANSFEREE to be paid to the Transferor aforesaid in connection with the said property.

For Spoorly Developers Pvt. Ltd.

Director

3. That now there is no remaining balance due by the TRANSFEREE to be paid to the Transferor aforesaid in connection with the said property.

Transferor:
Seema Sharma

Transferee:
Rahul Garg

5.25. Subsequently, after the registration of properties in the name of the appellant, the NOIDA Authority had undisputedly issued a letter dated 13.04.2023 amalgamating the two plots and prohibiting de-amalgamation of the same back into two plots. This again confirmed that the intent of the appellant was to treat both the properties as a single residential unit and not as separate units. The same also stood confirmed vide certificate from the Architect dated 22.02.2025 filed by the appellant, wherein the architect also confirmed that F8 and F9, Sector 44, Noida were adjacent house properties and had been interlinkedi joined for use as a single house property.

5.27. Further, the AO had observed that on perusal of the drawings, it was noticed that there was a wall between the two plots and there was no space to interlink or amalgamate the two independent residential property/ bungalows. The architect, however, had certified that that the two properties were interlinked/ joined for use as one residential property and copy of drawing certifying that it was single residential unit was submitted before NOIDA Authority vide application number 250217007 on 17.02.2025. In fact, the NOIDA authority, in response, had certified that erection/ re-erection/ alteration / demolition on Plot No. F8 and F9 was completed under the supervision of architect Ashok Kumar and that the building confirms in all respects the requirements of regulation in respect of occupancy.

—

5.28. In view of the above discussion, following facts emerge —

1. The assessee has purchased two adjacent bungalows from Sema Sharma. One property was sold by her in individual capacity and the other property as director of her family concern.

2. Advance payments of Rs. 2.5 Cr each was made on the same dates for both the properties.

3. The different dates for entering into the agreement (13.12.2022 and 23.01.2023) was due to the lag in timing of receipt of transfer permissions from the NOIDA Authority to the seller parties.

4. The New Okhla Industrial Development Authority (“NOIDA”) vide letter dated 13.4.2023 had amalgamated the two plots. The said amalgamation letter stated that this unit was to be treated as a single property and had prohibited their de-amalgamation again into two plots.

5. As per certificate issued by Architect, both the properties have been interconnected into single residential unit_

6. After inspection of the premises single Occupancy certificate has been issued by Noida authorities on March 6, 2025.

5.29. Considering the above facts, it is held that the appellant had intended to and had purchased the two adjacent properties for using as one single residential property from Seema Sharma and had made the advance payments for the two properties on the same dates with intention to use both the property for use as one residential house. The execution of agreement on different dates were solely on account of delay in receipt of transfer permissions from Noida. Therefore, the registration of property F8 was a part of transaction of acquisition of one residential unit (i.e. F8 and F 9) and not a purchase of a new property other than the specified property. Thus, in the light of factual matrix of the case, consistent decisions of the courts and tribunal, and juridical interpretations provided therein, the AO was not correct in invoking the provision a(ii) to Section 54F (1) of the Act and making the disallowance u/s 54F. The AO is therefore directed to allow the deduction u/s 54F of the Act of Rs. 26,00,26,384/- incurred towards acquisition of Bungalows F8/ F9.

5.30. Further, as regard the balance amount of Rs. 2,81,00,000/-, it is claimed by the appellant the said amount was duly deposited by the appellant in accordance with Capital Gains Account Scheme, 1988 before the due date for furnishing the ITR under section 139(1) of the Act. The AO is therefore directed to verify the deposit and allow the claim made by the of Rs.2,81,00,000 under section 54F of the Act.

This is what leaves the Revenue aggrieved.

3. Both the parties vehemently reiterate their respective stands against and in support of the correctness of the CIT(A) above extracted detailed discussion. Suffice to say, there is hardly any dispute on facts that this assessee; an individual, had admittedly derived long term capital gains amounting to Rs. 7,54,63,654/- from sale of shares on 04.04.2022. There is further no quarrel between the parties that he thereafter made the twin investments in the very much adjacent house properties at Plot No. 8 & 9, Block-F, Sector-44, Noida, involving as many vendors M/s Spoorty Developers (P) Ltd. through its authorized director Smt. Seema Sharma and she herself as an individual on 13.12.2022 & 23.01.2023 for the former and 13.12.2022 qua the latter house, respectively, as tabulated in Para 5.6 hereinabove. It was in this factual backdrop that the learned assessing authority considered the aforesaid twin houses as separate ones to quote section 54F(1)(a & b) r.w. Proviso (a)(ii) thereto that even if the assessee had got the aforesaid residential properties subsequently amalgated on 13.04.2023, his section 54F deduction claim herein could not be accepted in light of the statutory amendment vide Finance Act, 2014 with effect from 01.04.2015. The same admittedly stands reversed in the CIT(A) detailed lower appellate discussion under challenge.

4. It is in this factual backdrop that we are required to adjudicate the Revenue’s aforesaid sole substantive issue i.e. the assessee’s eligibility to claim the impugned section 54F deduction. Mr. Ved Jain has filed the assessee’s very elaborate submissions inter a/ia highlighting the entire factual backdrop that the learned CIT(A) detailed discussion has rightly held him eligible for the impugned deduction. The same fails to evoke our concurrence. We are of the considered view that given the fact that the aforesaid twin properties had all along been treated as separate residential houses leading to their amalgamation subsequent to the assessee’s as many registered purchased deeds, both of them could not be treated as “one” residential house since going against the aforesaid statutory amendment. We are further of the considered view that given the fact the assessee got his amalgamation application accepted by the concerned municipality/corporation subsequent to his purchase deeds itself forms the sufficient material to hold both these houses properties as separate ones all along.

5. Learned CIT(DR) further seeks to buttress the point that as against the assessee’s case, the vendor herein Smt. Seema Sharmad does not happen to be the owner of both these properties as regarding plot/house no. 8, she had appeared as the authorized director of the company/owner of M/s Spoorty Developers (P) (supra). Her case therefore is that both this company as well as the authorized director do not form the different legal entities persons i.e. an individual and a corporate one going by Salomon v Salomon & Co Ltd [1897] AC 22 (House of Lords). The assessee could hardly dispute that be under the Income Tax Act or in the Company Law, such an individual and a company in which he or she is the Director, form different persons only.

6. Mr. Ved Jain lastly places reliance on various judicial precedents quoted in the CIT(A)’s order (supra). We are of the considered view that none of them gets attracted in the assessee’s case as the facts therein are found to be entirely different since involving various units forming the single residential house or different floors in the same residential house; as the case may be, whereas we have already discussed the entire factual matrix at length that these are two houses which got subsequently amalgamated on 13.04.2023 only. We thus conclude in this factual backdrop that the learned CIT(A) has erred in law and on facts in treating the assessee’s residential house property plot No. 8, Block-F, Sector-44, Noida purchased on 23.01.2023 as eligible for section 54F deduction and the Assessing Officer’s assessment findings to this extent are hereby restored in very terms. Necessary computation shall follow as per law.

No other ground or argument has been pressed before us.

7. This Revenue’s appeal is partly allowed in above terms.

Order Pronounced in the Open Court on 10.07.2026.