Income Tax Tribunal Approves Exemption for Two Flats Treated as a Single Home - Section 54F

A recent ruling by the Income Tax Appellate Tribunal (ITAT) in Mumbai clarified how taxpayers can claim tax benefits when investing in two adjoining flats and using them as a single home. This decision could help many buyers, especially in cities like Mumbai where people often combine smaller flats into larger living spaces.

In this case, the taxpayer sold long-term assets and used the money to buy two neighboring flats in Mumbai. They claimed a tax deduction under Section 54-F of the Income Tax Act, which allows tax exemption on capital gains if the money is invested in a single residential property. The Income Tax Department argued that because the taxpayer bought the two flats through separate agreements, it didn’t count as a single house.

However, the ITAT ruled that the two flats were indeed used as a single home, and therefore, the tax benefits under Section 54-F should apply. The tribunal pointed out that the building plan, which combined the two flats into one unit, was approved by the Maharashtra Housing and Area Development Authority (MHADA) and was not disputed by the tax authorities.

This ruling is important for people looking to buy and combine adjoining flats. It shows that as long as the flats are used as one home, buyers can still qualify for tax exemptions on their investment.

Tax experts do advise being careful, as each case is different. In some situations, authorities may need to check if the flats are physically combined into one home. Buyers should ensure they get proper approvals when combining flats to claim these tax benefits.