The Mumbai Income Tax Appellate Tribunal (ITAT) has allowed a taxpayer to claim a deduction under Section 54F after treating two flats on different floors of the same building as one residential house. The tribunal found that the flats could be considered a single home based on the circumstances of their purchase and their intended use as one residential accommodation.
The ruling came in the case of Sunil Indravadan Shah, who had sold six commercial units in Mumbai and earned long-term capital gains of ₹4,97,90,808. He later invested in two residential flats in Wing A of 22 Dholera, Parel, Mumbai, and claimed the Section 54F benefit on the investment.
Two Flats Purchased Together
The flats, A-601 and A-1801, were purchased from the same developer on September 29, 2020. Both measured 1,334.19 sq. ft., and each had a purchase consideration of ₹2.65 crore.
The Assessing Officer allowed the deduction for one flat but did not allow the claim relating to the second flat. Shah challenged the decision, maintaining that the two properties had been purchased as a single residential accommodation for his family.
Why the ITAT Treated Them as One Home
The tribunal considered the circumstances surrounding the purchase rather than looking only at the fact that the flats were separate units. Both properties were in the same building and the same wing. They were purchased from the same developer on the same date and had identical areas and purchase values.
The ITAT noted that the flats had separate entrances and were located on different floors. It found that these factors alone did not prevent them from being treated as one residential house for Section 54F.
The tribunal also noted that the law does not require a residential house to be a single physical unit or to be covered by only one registered document. Based on the facts of the case, it allowed the taxpayer’s claim for the two flats to be treated as one residential house.
What the Ruling Means for Taxpayers
The decision may be relevant to taxpayers who purchase multiple residential units with the intention of using them together as one home. It also highlights that the circumstances and intended use of the properties can matter when determining eligibility for Section 54F.
The ruling is based on the specific facts of Shah’s case. It does not mean that purchasing two flats will automatically qualify for the same tax benefit.
