Case Law Details
Ravi Jain Vs ACIT (ITAT Delhi)
The Hon’ble high court of Karnataka unequivocally held that the contention of the Revenue is that the phrase “a” residential house would mean one residential house and it does not appear to the correct understanding. The expression “a” residential house should be understood in a sense that building should be of residential in nature and “a” should not be understood to indicate a singular number. The combined reading of ss. 54(1) and 54F of the IT Act discloses that, a non-residential building can be sold, the capital gain of which can be invested in a residential building to seek exemption of capital gain tax.
However, the proviso to s. 54 of the IT Act, lays down that if the assessee has already one residential building, he is not entitled to exemption of capital gains tax, when he invests the capital gain in purchase of additional residential building.
When an HUF’s residential house is sold, the capital gain should be invested for the purchase of only one residential house is an incorrect proposition. After all, the HUF property is held by the members as joint tenants. The members keeping in view the future needs in event of separation, purchase more than one residential building, it cannot be said that the benefit of exemption is to be denied under s. 54(1) of the IT Act.
On facts, it is shown by the assessee that the apartments are situated side by side. The builder has also stated that he has effected modification of the flats to make it as one unit by opening the door in between two apartments. The fact that at the time when the Inspector inspected the premises, the flats were occupied by two different tenants is not the ground to hold that the apartment is not a one residential unit. The fact that the assessee could have purchased both the flats in one single sale deed or could have narrated the purchase of two premises as one unit in the sale deed is not the ground to hold that the assessee had no intention to purchase the two flats as one unit.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
