DCIT Vs Priyanka Bhaskar Shah (ITAT Mumbai)
Disagreeing with this view, Ms. Priyanka appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who ruled in her favor, treating the two flats as a single unit. The Revenue then appealed to the ITAT, which remanded the case back to the Assessing Officer, instructing physical verification of the flats. The ITAT clarified that if the flats were found to be combined as claimed, the exemption should be granted. This case emphasizes the need for physical inspection in determining whether adjoining flats qualify as a single residential unit under Section 54F for capital gain exemption.
1. Section 54 of the Income Tax offers an exemption on Capital gain from the sale of any asset if the proceeds are reinvested in a residential property.
2. There is always a debate over whether an investment in two adjoining units will be considered a single residential property or two different properties for exemption under Section 54.
3. The expression ‘a residential house’ should be understood because the building should be residential and ‘a’ should not be understood to indicate a singular number. – Held by Hon’ble HIGH COURT OF KARNATAKA in the case of Commissioner of Income-tax v.
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