September 2008
S. 54 — Where several flats in same building and contiguous with each other, treated as one house for purposes of S. 54.
By C. N. Vaze, Shailesh Kamdar, Chartered Accountants
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Part A — Reported Decisions
45 (2008) 22 SOT 58 (Hyd.)
Prabhandam Prakash v. ITO
ITA No. 147 (Hyd.) of 2007
A.Y. 2001-02. Dated : 25-1-2008
S. 54 of the Income-tax Act, 1961 — Where several flats are
purchased in same building and are contiguous with each other, they would be
treated as one house and not several houses for purposes of S. 54.
For the relevant A.Y., the assessee claimed exemption
u/s.54/54F in respect of investment in 3 adjoining flats on the same floor and
one flat on another floor. Two of these flats were occupied by the assessee and
the other two flats were let out.
The Assessing Officer denied the exemption on the ground that
all the flats were independent, having separate kitchens and with no
inter-connection. The CIT(A) upheld the disallowance.
The Tribunal allowed the exemption to the assessee in respect
of the 2 flats occupied by him after considering the decisions in the following
cases :
(a) Shiv Narain Chaudhari v. CWT, (1977) 108 ITR 104
(All.)
(b) B. B. Sarkar v. CIT, (1981) 132 ITR 150 (Cal.)/7
Taxman 239
(c) K. G. Vyas v. Seventh ITO, (1986) 16 ITD 195 (Bom.)
(d) CIT v. Kodandas Chanchlomal, (1985) 155 ITR
273/23 Taxman 579
(e) D. Anand Basappa v. ITO, (2004) 91 ITD 53
(Bang.)
(f) Smt. Hansa Bai Sanghi v. ITO, (2004) 89 ITD 239
(Bang.)
The Tribunal noted as under :
1. Where several flats are purchased in the same building
and are contiguous to each other, they would be treated as one house and not
as several houses. Whether one or more municipal numbers are given is of no
consequence. The purpose is to see whether the assessee and his family are
using those several dwelling units for their residence or not.
2. However, where the assessee, after acquiring the new
property has not put it to use for his own residence but has let it out, it
means that it was not meant for immediate residence. In the present case, out
of the four flats acquired, two flats on the first floor were occupied by the
assessee and the remaining two were let out. Therefore, respectfully following
the judgment of the Gujarat High Court in the case of Kodandas Chanchlomal (supra),
we hold that the assessee be given pro rata exemption in respect of the
two flats occupied by him.
