The Income Tax Appellate Tribunal (ITAT), Mumbai bench, which was ruled in favor of N Aggarwal, a taxpayer, grants him full tax benefit for investment which made in adjoining of two flats,which was earlier treated as a single unit, announces in a significant judgement.
Aggarwal claims that a tax deduction of several crores under Section 54-F of income tax (I-T) Act, following his investment in two adjoining flats in a guarded estate in Andheri. Under this section, if a taxpayer sells long-term assets (other than house property) and invests the entire net sales consideration in one residential house, within the specified period, the entire long-term capital gain arising from the sale of the original assets is exempted from tax.
In this case, the issue is being raised by the I-T department that the taxpayer had purchased two flats under two separate agreements and thus, the intention to treat it as one single house has not met.
On the other hand, Aggarwal has maintained that these two flats were always meant to be used in a single residential unit. The builder acquires an approval in a form of two individual units; the agreement has entered separately as two individual flats.
According to the ITAT bench,’’ as long as the house is used by the taxpayer as one single unit, though by conversion in our view, the exemption cannot be denied under Section 54F’’.
The revised plan very categorically identifies one kitchen and other necessary structures to be used as a single dwelling unit.
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