Bangalore bench of the ITAT, on Wednesday, observed that purchasing of two properties in different localities cannot be claim tax exemption under sec 54 of the Income Tax Act, 1961.
The Assesse sold his residential property and has purchased two apartments in two different localities, and he claimed tax deductions for both properties under sec 54 of the income tax act 1961. But the Asst. CIT denied the claim of the Assessee and observed that the benefit is available to one residential unit under the said provision.
The Assessee argued that the order of the department is so far it is prejudicial to the interest of the Appellant is bad and the CIT erred in law and facts in holding that the amendment to Finance Act 2014 is clarificactory in nature even though the memorandum explaining the Finance Act 2014 clearly states that the amendment will apply in relation to AY 2015-2016 and subsequent assessment years.
Overruling the contentions of the assessee, the Tribunal noted that the claim cannot be allowed as the assessee has purchased two separate flats in two different localities and further both the flats are not used for residential purpose of the assesse but one flat was let out by the assesse. In the case of the assesse two flats were purchased in different localities and undisputedly no connection or nexus with each other then the case of the assesse has to be decided by considering the purpose, objective and scheme of provision as incorporated in the statute.
The bench noted that the provision does not restrict the assesse from buying more than one asset but this incentive is provided under Section 54/54F only against the property so purchased or constructed for his residential purpose. Therefore these provisions will apply in the case of house property which is purchased or constructed for the assessee’s own residential purpose.
“This intention of the legislature is clear from the fact that the benefit of these provisions of Section 54/54F are available only to the individual and later on extended to HUF and not available to the artificial person. Therefore, in the case of more than one properties are purchased by the assessee, the option is available with the assesse to claim benefit under Section 54 in respect of the residential house purchased for the assesse’s own residence. Thus in case where a residential house is purchased not for the end purpose of assesse’s own residential house but only as an investment or earning income then the benefit of the provision under Section 54/54F would not be available. Therefore, so long as more than one unit could be treated as one house by considering the fact that these constitute one combined unit then the benefit of Section 54(1) cannot be denied as per the pre-amended provisions of the Act. However, where it is clear from the fact that in the case what is purchased by the assesse are two separate residential houses located in different and separate localities and by any parameter cannot be treated as one residential unit then the decisions relied upon by the assesse would not help the case of the assesse for allowing the deduction under Section 54 of the Act,” the bench said.
Finally the ITAT bench, Jason P Boaz (Accountant Member) & Vijay Pal Rao (Judicial Member) has dismissed the appeal of the Assessee.
Read the Full Text of the Order Below
