Exemption u/s. 54 in respect of more than one residential flat acquired by the assessee under a joint development agreement with builder

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CIT v. Smt. K. G. Rukminiamma (2011) 331 ITR 211 (Kar.)

The assessee, being the owner of a property, entered into a joint development agreement with a builder to develop the property. Under the agreement, the builder constructed eight residential flats and handed over four residential flats to the assessee. The entire cost of construction and other expenses were borne by the builder.

The issue under consideration is whether capital gains exemption under section 54 can be claimed in respect of the four residential flats treating them as “a residential house”. In the present case, the Revenue contended that the benefit of deduction under section 54 could be availed only in respect of one residential flat and in respect of the remaining three residential flats, the assessee was not entitled to deduction under section 54.

The Karnataka High Court, applying the decision in Anand Basappa (2009) 309 ITR 329 (Kar.) to the present case, held that all the four flats are situated in the same residential building and hence, will constitute “a residential house” for the purpose of section 54. Therefore, the assessee would be entitled to deduction under section 54 in respect of all four flats.