ITAT Grants Section 54F Exemption for Two Adjoining Residential Houses Used as One

Mohammadanif Sultanali Pradhan Vs DCIT (ITAT Ahmedabad)

The Ahmedabad Bench of the Income Tax Appellate Tribunal considered the assessee’s appeal against the order of the Commissioner of Income Tax (Appeals)-6, Ahmedabad for Assessment Year 2015-16, arising from an assessment completed under Section 143(3) of the Income Tax Act, 1961. The sole issue before the Tribunal was whether the assessee was entitled to exemption under Section 54F in respect of investment made in two adjoining residential bungalows.

The assessee, an individual engaged in the business of letting out property on rent and earning income from bank time deposits, declared capital gains of ₹23,84,101 after claiming exemption of ₹2,08,00,000 under Section 54F. The assessee contended that the exemption was available because the investment had been made in two adjacent bungalows bearing Nos. 18 and 19 situated in the same society at Survey No. 606/2, TPS No. 92, Sarkhej–Makarba–Okaf-Fatewadi, Mouje Sarkhej, Taluka Vejalpur, District Ahmedabad.

The Assessing Officer held that exemption under Section 54F could be claimed only in respect of one bungalow. Accordingly, the Assessing Officer restricted the exemption to ₹1,43,77,118 and disallowed the balance claim of ₹64,22,882, adding the disallowed amount to the assessee’s total income.

Before the Commissioner (Appeals), the assessee submitted that both bungalows were adjacent, situated in the same society, and together constituted a single residential unit. The Commissioner (Appeals), however, observed that Section 54F had been amended by substituting the expression “a residential house” with “one residential house” with effect from Assessment Year 2015-16, the year under consideration. On that basis, the Commissioner (Appeals) rejected the assessee’s contention and upheld the Assessing Officer’s order.