Two flats merged into one must get tax exemption

C.Unnikrishnan





HC Relief For Juhu Resident

If two adjacent flats are bought from different people through two agreements and then converted into a single unit with a common kitchen, then the owner is exempt from paying capital gains tax, the Bombay high court has said.The HC upheld the Income Tax Appellate Tribunal (ITAT) order that went in favour of a Juhu resident, Devdas Naik. In 2007-08, he sold a bungalow for Rs 3 crore and bought three flats --one in his name, the second one jointly owned by him and his wife and the third in his wife's name.
Naik claimed exemption for two of the flats, which are located adjacent to each other, saying they were used as one contiguous unit. He also said the size of each flat was around 500 sq ft and so, they had to be combined to utilize them as one unit. The flats involved were the one registered in his name and the one jointly held by his wife.
But the income tax department said Naik was not eligible for the exemption as they considered one flat as a residential unit and not two flats, even if they were located side-by-side. Refuting the argument, the HC said that the general as well as the internal layout plans of the flats indicated that there was only one common kitchen; the apartments were built in such a way that the adjacent units could be combined into one.
The Income Tax Act grants relief in capital gains tax if investments are done within specified norms. The department's contention was upheld by the commissioner. But the commissioner in charge of the appeals differed: “There is uniformity of judicial opinion to the effect that where several self-contained dwelling units, which are contiguous and situated in the same compound and within common boundaries and having unity of structure could be regarded as one house.“ All the flats in the building were built in such a way that two adjacent flats can be combined into one unit.
The ITAT said, “Without prejudice, even if the appellant had made an investment in two or more separate units and combined them for the purpose of using it as single dwelling unit with common entries, living area and kitchen, investment in two or more such units would also qualify for claiming deduction ...“
Waiver under Income Tax Act The Income Tax Act grants exemption from capital gains tax if someone invests in a new flat in two years after the sale of an existing one.
Exemption is also granted if someone buys a flat and sells the existing one within a year. Also, if someone builds a house three years after the sale of an existing flat, capital gains exemption is granted.

Source:::: The Times of India, 16.07.2014,  p.4,  http://epaperbeta.timesofindia.com/Article.aspx?eid=31804&articlexml=Two-flats-merged-into-one-must-get-tax-16072014004052

New rule lowers HRA exemption claim limit

TIMES NEWS NETWORK 

    If you are a salaried taxpayer claiming HRA (house rent allowance) deduction, watch out. The central government has lowered the exemption limit for reporting the rent received. Salaried taxpayers claiming HRA exemption and paying a rent of over Rs 1 lakh per year have to give landlord’s PAN (permanent account number). Till now, if the total rent paid was less than Rs 15,000 a month there was no need to submit the landlord’s PAN details. The new rule effectively lowers the rent limit from Rs 15,000 a month to Rs 8,333 per month for claiming HRA exemption without making any disclosures. 
    “Further, if annual rent paid by the employee exceeds Rs 1,00,000 per annum, it is mandatory for the employee to report PAN of the landlord to the employer,” the Central Board of Direct Taxes said in its latest circular. “In case the landlord does not have a PAN, a declaration to this effect from the landlord along with the name and address of the landlord should be filed by the employee,” it said. 
    Though incurring actual expenditure on payment of rent is a pre-requisite for claiming deduction under section 10(13A) of the I-Tax Act, it has been decided as an administrative measure that salaried employees drawing HRA up to Rs 3,000 per month will be exempted from production of rent receipt. 
    The new rule is aimed at people claiming HRA exemption for living in their own house. “It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in Rule 2A, qualifies for exemption from income-tax,” CBDT said in its circular. 
    Thus, HRA granted to an employee who is residing in a house/flat owned by him is not exempt from income-tax. “The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent before excluding the house rent allowance or any portion thereof from the total income of the employee,” CBDT said.


Source:::: The Times of India, 19-11-2013, p.15,  http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=TOINEW&BaseHref=TOIM/2013/11/19&PageLabel=15&EntityId=Ar01507&ViewMode=HTML