Purchase of One Residential House with Modifications of Two Adjacent Properties Amounts to a Single Residential House: ITAT Allows S.54F Exemption Claim

The Income Tax Appellate Tribunal (ITAT) has ruled that the purchase of one residential house with modifications of two adjacent properties amounts to a single residential house, allowing the taxpayer to claim exemption under Section 54F of the Income Tax Act. The taxpayer had purchased two adjacent properties and made modifications to combine them into a single residential unit. The Assessing Officer had denied the exemption, arguing that the properties were separate units. However, the ITAT held that the intention of the taxpayer was to create a single residential house, and the modifications made to the properties supported this intention. This ruling provides clarity on the interpretation of Section 54F and reinforces the principle that the substance of the transaction should be considered over its form. Taxpayers can now confidently claim exemptions for similar transactions, provided they can demonstrate the intention to create a single residential unit.