Mumbai ITAT: Two Flats Count as One Home

A taxpayer in Mumbai has successfully claimed a ₹2.51 crore deduction under Section 54F for capital gains tax. This was achieved by investing proceeds from selling six commercial units into two residential flats located on different floors of the same building. The Mumbai Income Tax Appellate Tribunal (ITAT) ruled that these two separately registered flats could be treated as a single residential house.

The taxpayer sold commercial properties in Kalbadevi Road for ₹5.32 crore, generating capital gains of approximately ₹4.97 crore. They then purchased two 1,334.19 sq. ft. flats in Parel, Mumbai, for ₹2.65 crore each, on September 29, 2020. The tax department initially disallowed the exemption for the second flat, arguing Section 54F applies to only one residential house.

However, the ITAT referenced Delhi High Court rulings, supporting a broader interpretation of 'a residential house'. The tribunal found that purchasing flats simultaneously from the same developer in the same building and wing, intended for single family use, meant the different floors did not disqualify them as one unit.

This decision provides crucial clarification for taxpayers seeking capital gains tax exemption. While two flats on different floors can qualify as one residential house, tax authorities will review the specific facts and circumstances of each case to determine if they genuinely constitute single residential accommodation.