2013 (3) TMI 101 - DELHI HIGH COURT

Deduction u/s 54/54F disallowed - as per AO house/units in the first and second floors holding that they were separate and independent residential units having separate entrances and cannot be considered as one unit to enable the assessee to claim the deduction - ITAT allowed assessee's claim of deduction u/s 54 - Held that:- Section 54/54F uses the expression “a residential house”. The expression used is not “a residential unit”. This is a new concept introduced by the AO into the section.

There is nothing in Sections 54/54F which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use. If there is nothing in the section which requires that the residential house should be built in a particular manner, income tax authorities cannot insist upon that requirement.

A person may construct a house according to his plans and requirements. One may build a house consisting of four bedrooms (all in the same or different floors) in such a manner that an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house.There may be several such considerations for a person while constructing a residential house.Therefore, unable to see how or why the physical structuring of the new residential house,whether it is lateral or vertical, should come in the way of considering the building as a residential house. The residential house consists of several independent units can be permitted to act as an impediment to the allowance of the deduction under Section 54/54F - Tribunal took the correct view. No substantial question of law arises for consideration - in favour of assessee.