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July 2, 2022

Multiple apartments that are not connected to one another cannot be considered a single residential house.

by CA Shivam Jaiswal in Income Tax

Multiple apartments that are not connected to one another cannot be considered a single residential house.

Facts and Issue of the case

This is an appeal filed by the assessee against the order of the CIT(A) -2 Bhubaneswar dated 20.8.2019 for the assessment year 2016-17. It was submitted by ld AR of the assessee that the assessee had been allotted land bearing Plot No.5, Kalinga Nagar, Ghatikia, Bhubaneswar under lease from Government of Orissa in the year 1994. The lease hold land was made free hold by Government in the year 2009.          During the assessment year 2014-15, the assessee entered into a collaboration agreement with a builder viz. Shri Pratap Kumar Roy for the purpose of construction of flats in the said plot. The construction was to be carried out by the builder with an undertaking that the assessee was to receive 37.5% of the total built up area and cash component of Rs.10 lakhs. Accordingly, the assessee transferred the proportionate undivided interest in the plot to the builder or his nominee in exchange of 37.5% of the built up area flats. It was the submission that as the builder was unable to provide 37.5% of the constructed area to the assessee in one floor, the builder had provided Flat No.201, 202 and 301 flats of 1760 sq. ft each totaling super built up area of 5280 sq.ft to the assessee.. It was the submission that the assessee was in possession of three flats as one house. The assessee is occupying all the three flats. It was further submitted that Flat No.201 & 202 are conjoint and Flat No.301 is above Flat No.201 and connected through common stair case. It was the submission that for all the three flats, a single electric connection was being operated. It was further submitted that as the assessee is retired from the Air force, no holding tax was leviable in Odisha in respect of three flats. It was the submission that the assessee had claimed exemption u/s.54F of the Act in respect of cost of construction of all three flats and the Assessing Officer disallowed the claim of exemption u/s.54F because the assessee had constructed three residential houses in two different floors and denied the assessee exemption u/s.54F of the Act. It was the submission that on appeal, the ld CIT(A) had dismissed the assessee’s appeal by holding the flats as separate units. It was the submission that the assessee aggrieved with the order of the ld CIT(A), has filed the appeal before the Tribunal. It was the submission that the assessee is using all three flats as there is only one kitchen. To examine the veracity of the claim of the assessee, a remand report after physical verification was called for from the Assessing Officer

In the remand report, the Assessing Officer after physical verification has found that Flat No.201 & 202 is designed to be a single unit without any dividing wall or partition wall between them. Flat No.301 is a separate independent unit situated in the upstairs and not linked to Flat No.201 & 202.
In reply, ld Sr DR vehemently relied upon the order of the ld CIT(A). it was the submission that the assessee has acquired multiple units and, therefore, the assessee is not entitled to the claim of exemption u/s.54F of the Act.

Observation and Conclusion of the court

Court has considered the rival submissions. Admittedly, the physical verification report, remand report clearly show that the assessee has acquired Flat Nos.201 & 202 as a single unit and Flat No.301 on the upper stair is not connected to Flat No.201 & 202 owned by the assessee. Consequently, as the assessee has constructed one residential house being the combination of both Flat Nos.201 & 202, the assessee is entitled to the benefit of exemption u/s.54F of the Act in respect of Flat Nos.201 & 202 to be considered as one. The assessee is not entitled to the benefit of exemption u/s. 54F of the Act in respect of Flat No.301.

In the result, appeal of the assessee was partly allowed.

Jayashree-Sahoo-Vs-ITO-ITAT-Cuttack

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