The Section 54 deduction on multiple dwelling houses is valid until these units are in the same physical location: ITAT

The Section 54 deduction on multiple dwelling houses is valid until these units are in the same physical location: ITAT

The assessee, a Non-Resident Indian (NRI) who expired in Kuwait. The declaration for AY 2013-14 was filed electronically on 30.07.2013 by his son Mr.re Heera Lal Bhasin, in his capacity as the legal heir of his deceased father declaring income at Rs. 6,98,170. The assessee had sold his residential property in New Delhi for Rs. 7,00,00,000 on 2.11.2012 resulting in a long term capital gain of Rs. 6,70,18,000 which the assessee claimed as exempt u/ s 54 of the Income Tax Act of 1961 as he invested Rs. 9,44,34,110 in purchasing three plots in Gurgaon, Haryana, and building a single house on the three plots; so that the family of the assessee can use the aforementioned house as a single dwelling house. It has been argued that the construction of the aforementioned house on adjoining plots enabled the assessee to build the large house and that the term “a dwelling house” in Section 54 of the Act is not limited to a single apartment or house. Lo. AO disagreed with the assessee as the assessee. AO was of the opinion that the three houses could not be considered as “a single dwelling house”, because each of them is an independent house consisting of a kitchen, a bathroom, a living room and a separate bedroom. In the assessment under section 147 rw 143(3) of the Act, Ld. AO restricted the deduction under Section 54 of the Act to a single house which amounted to Rs. 3,14,78,037 resulting in the addition of Rs. 3,55,40,000 to the income of the assessee.

Appeal before the CIT(A): On appeal to the Ld. CIT(A), the assessee was granted relief and his claim for a Section 54 deduction was justified.

Appeal before the ITAT: The court relied on the decision of the Hon’ble Delhi High Court in CIT vs. Gita Duggal used by Ld. CIT(A) and argued that the word “a” can represent multiple dwelling units as long as they are in the same building and are contiguous to each other and used as a single dwelling house. In this case, the claim for deduction under section 54 of the Act related to a dwelling house built on three adjoining contiguous plots. It has further been observed that the principle of multiple houses/residential units is valid until these units are in the same physical location and are contiguous to each other. The court accepted the observations and conclusions of Ld. CIT(A) and dismissed Revenue’s appeal.

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