Section 54 and 54F ‘Residential House’ Controversy – Analysis

Section 54 and 54 F: There would hardly be any area that would not be a subject of lawsuits and with the changing situations all over the world in the aspects of housing market, the question of what is the meaning of „ property house ‟ too gets even more deep into controversies. In light of particular changes and case laws, this topic has gained importance and we have actually hence picked this subject for conversation. Now inspect more information for “ Area 54 and 54 F ‘Residential Home’ Controversy” from listed below

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Material in this Short Article.

Area 54 and 54 F ‘Residential Home’ Controversy

Arrangements of section 54 and area 54 F of the Earnings Tax Act, 1961

Section 54 of the Income Tax Act, 1961 offers exemption of capital gain occurring from the transfer of a property home being long term capital possession (i.e. held for greater than 3 years) if investment is made in one domestic home in India.

Similarly Section 54 F of the Income Tax Act, 1961 attends to exemption of capital gain emerging from the transfer of a long term capital possession, besides property house home, if investment is made in one residential home in India.

Idea of Residential Home

This term „ Residential home ‟ has resulted in litigations time and again with the Tax authorities taking one view and assessee ‟ s taking another in terms of just what constitutes „ Residential house ‟.

Analysis is a subjective issue and only when the authorities or courts come out with their stands clearly, that the matter gets settled to some extent and exact same applies in the case of provided scenario. Some of the popular case laws in this regard are:

CIT v. Ananda Basappa (2009) 309 ITR 329 (Kar.)

In this case, the assessee purchased two domestic flats, adjacent to each other from a vendor. The vendor had actually accredited that he had actually effected required modifications to the two flats to make it one domestic house.

CIT v. Syed Ali Adil (2013) 352 ITR 0418 (A.P.)

The facts of above Ananda Basappa were comparable in this case also, wherein the assessee purchased 2 surrounding residential flats out of the sale proceeds of house home, and made required plans so that the flats can be used ABHAY JAIN SRO0355944 as single residence and then claimed exemption under section 54 in respect of financial investment in the property flats.

In both the above cases, the courts ruled in the favor of assessees and held that assessees were entitled to deduction given that the flats made up in the very same structure, nearby and necessary arrangements/modifications were made so that the flats can be utilized as single residence.

Even More, in the case of CIT v. Gita Duggal (2013) 357 ITR 153 (Delhi), the High Court made a sensational observation that sections 54 and 54 F utilize the expression “residential house” and not “property unit” and it is the Assessing Officer who had introduced a new idea of “property unit” into these areas

Thus the courts have actually clearly rolled the balls in the favor of assessee ‟ s again and again and the idea of Residential home has been interpreted widely.

Analysis and conclusion

With the passage of time, new types of residential home have actually emerged and flat system and multi-storeyed buildings have been interpreted as property houses in general parlance. The idea of „ system ‟ has actually not been accepted by many courts as a tenable point of litigation, as discussed above

An interesting part relating to amendment drew out by Finance (No. 2) Act, 2014 in section 54 and section 54 F is– prior to Finance (No. 2) Act, 2014 was modified, the words “one property home” were missing out on and there were lawsuits pertaining to investment in more than one domestic house given that the words “a domestic house” might be interpreted using among the laws of analysis, i.e. „ particular consists of plural ‟. The change has actually ended this confusion by including the words “one residential house”

Though the above modification has actually ended the „ particular and plural ‟ confusion however the exact same has actually not resolved the issue of whether two of more flats in the exact same structure would constitute „ domestic house ‟ or not and it so appears that even after the modification the above rulings might continue to hold great, given that the limitation is concerning investment in „ one property house ‟, and not in „ one unit of a domestic house ‟.

Hopefully this controversy will be brought to an end either by the Honorable Supreme Court or the tax authorities themselves and supply a clear photo.


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