2016 (5) TMI 1332 - AT - Income Tax

Disallowance of claim u/s 54F - Investment more than one residential property in the same block - Held that - The pre and post amended provisions are considered by the Jurisdictional High Court in the case of V.R. Karpagam (2014 (8) TMI 899 - MADRAS HIGH COURT) and granted relief even though different flats were allotted to the assessee as any residential house. The ld. Commissioner of Income Tax (Appeals) has dealt exhaustively on the law and judicial decision of High Court and Tribunal and explanations filed by the assessee viz-a-viz and highlighted provisions and the factual matrix of the case. Considering the apparent facts of the case and provisions we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) and uphold the same and dismiss the appeal of the Revenue. - Decided in favour of assessee.

Summary

Issues Involved
1. Eligibility for exemption under Section 54F of the Income Tax Act, 1961.
2. Interpretation of "one residential house" versus "a residential house" for tax exemption purposes.
3. Applicability of the jurisdictional High Court decision in CIT Vs. V.R. Karpagam.
4. Impact of the Finance Act, 2014 amendment on the definition of "residential house."

Detailed Analysis

1. Eligibility for Exemption under Section 54F of the Income Tax Act, 1961

The primary issue revolves around whether the assessee is eligible for exemption under Section 54F of the Income Tax Act, 1961, for investments made in multiple residential units. The Revenue contends that the assessee should not be eligible for the exemption because the investments were made in more than one residential unit, even though these units were located within the same door number but in different blocks and had separate amenities like kitchens and electricity connections.

2. Interpretation of "One Residential House" Versus "A Residential House"

The Revenue argues that the term "one residential house" should be strictly interpreted to mean a single residential unit. However, the Commissioner of Income Tax (Appeals) relied on the jurisdictional High Court's decision in CIT Vs. V.R. Karpagam, which held that the term "a residential house" can include multiple units within the same property. The Commissioner of Income Tax (Appeals) noted that the law applicable to the assessee was based on pre-amended provisions, which allowed for a broader interpretation.

3. Applicability of the Jurisdictional High Court Decision in CIT Vs. V.R. Karpagam

The Revenue's grounds for appeal included the argument that the decision in CIT Vs. V.R. Karpagam should not be applied to this case. However, the Commissioner of Income Tax (Appeals) and subsequently the Tribunal upheld the applicability of this decision, which allowed for the exemption under Section 54F even if the investment was made in multiple residential units, provided they were part of the same property.

4. Impact of the Finance Act, 2014 Amendment on the Definition of "Residential House"

The Finance Act, 2014, amended the definition of "residential house" to "one residential house in India," effective from April 1, 2015. The Tribunal noted that this amendment was not applicable to the assessment year in question (2012-2013). The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision, which was based on the pre-amended provisions allowing for a broader interpretation of "a residential house."

Conclusion

The Tribunal dismissed the Revenue's appeal, upholding the Commissioner of Income Tax (Appeals)'s decision to grant the exemption under Section 54F to the assessee. The Tribunal concurred with the Commissioner of Income Tax (Appeals)'s interpretation of the term "a residential house" based on the jurisdictional High Court's decision in CIT Vs. V.R. Karpagam. The Tribunal also noted that the Finance Act, 2014 amendment was not applicable to the assessment year in question. Therefore, the assessee was eligible for the exemption under Section 54F for investments made in multiple residential units within the same property.