By TIOL News Service

MUMBAI, NOV 02, 2018: THE issue before the Bench is - Whether further investment of LTCG in triplex flats, where all the three flats are situated at three different floors, is eligible for deduction u/s 54F. And the verdict is YES.

Facts of the case

THE case of the assessee was selected for scrutiny. During the assessment it was noticed that the assessee had sold 5000 equity shares on a consideration of Rs.3.82 Cr, which resulted into Long Term Capital Gain of around Rs 3.81 Cr. Further, the assessee invested the same by purchasing three flats on a consideration of around Rs.2.63 Cr including stamp duty, registration fees and service tax on the new flats. The case of the assessee was that triplex flats in the same building were purchased and claimed deduction u/s 54F. However, the AO disallowed the claimed exemption of Flat No.1502 and allowed with respect to Flats No.1301 and 1401. The Flats No.1301 & 1401 were duplex for which the claimed exemption was allowed and the exemption for the flat no.1502 was disallowed on the plea that the flat was situated at different floor. It was contended that the deduction was not allowable as per the provision of section 54F and only one unit/a house was to be allowed. On appeal, the CIT(A) upheld the decision.

The Tribunal held that,

++ no doubt flat No.1502 is situated at 15th Floor while the other flats were situated on 13th & 14th Floor of the same building and the claimed deduction was rejected by the Assessing Officer with respect to flat situated in 15th Floor by holding that it is separate and residential unit having separate entrance, therefore, it is a separate unit, consequently, cannot be considered as one unit to enable the assessee to claim the deduction. The fact remains that all the three flats are in the same building and also are situated on floors above each other i.e. 13th, 14th & 15th Floor, while the flats at 13th & 14th Floor are duplex flats joined with each other but the fact remains the third flat is situated on the immediate next floor i.e. 15th floor of the same building which is in the immediate vicinity. This question has been settled by Delhi High Court in the order in CIT vs Gita Duggal and also by By Karnataka High Court. It is further noted that the SLP, filed by the Revenue was dismissed by Apex Court. The only requirement, as per the section, is that it should be a residential house and there is nothing in the section which requires that the residential house should be built in a particular manner. A person may construct a house according to his requirements and needs and sometime due to compulsions. There may be several such consideration for a person while constructing a residential house.

(See 2018-TIOL-2001-ITAT-MUM)