2023 (3) TMI 145 - AT - Income Tax

Exemption u/s 54/54F - property comprising land and building at Chennai has been acquired by Chennai metro Rail Ltd u/s. 194LA - said property has been acquired by the assessee in the year 1987 and further made a construction in the year 1997 and assessee had also purchased new residential house property - HELD THAT - As it is very clear that property transferred by the assessee by way of compulsory acquisition by Chennai Metro Rail Ltd is a long term capital asset which is eligible for the benefit of exemption u/s. 54 of the Act. Although there is a dispute with regard to the nature of property whether it is commercial or residential the assessee has filed relevant evidences to prove that said property was a residential house property and income from which is assessable under the head income from house property. Therefore we are of the considered view that the assessee is entitled for exemption u/s. 54 of the Act towards capital gains derived from transfer of capital asset. Amount of exemption claimed by the assessee and further whether the assessee has satisfied the conditions prescribed u/s. 54 - In this case there is no dispute with regard to the fact that the house property purchased by the assessee on 30.08.2012 is having a multiple units which is one a residential house property. Therefore we are of the considered view that the assessee is entitled for exemption u/s. 54 - In so for as the observations of the AO with regard to the purchase of another residential house property on 12.12.2013 in light of provisions of section 54F we find that the observations of the AO is devoid of merits because the assessee never claimed exemption u/s. 54F of the Act but has claimed exemption u/s. 54 of the Act. Therefore we reject the observations of the AO. We are of the considered view that exemption claimed u/s. 54 of the Act in respect of purchase of new residential house property on 30.08.2012 is in accordance with law and the assessee has rightly claimed exemption after satisfying conditions prescribed therein. Therefore we direct the AO to allow exemption claimed u/s. 54 of the Act in respect of purchase of new residential house property and construction thereon. Exemption claimed u/s. 54EC - As we find that the assessee has made a normal fixed deposit of Rs. 25 lakhs each in two nationalized banks. Although the assessee has made fixed deposits on or before due date for filing return of income u/s. 139(1) of the Act but fact remains that in order to get the benefit u/s. 54EC of the Act the assessee should invest the amount of capital gain in eligible bonds. In this case the assessee has made investment in normal fixed deposits. In our considered view said investment does not quality for exemption u/s. 54EC of the Act. Thus we upheld the findings given by the ld. CIT(A) in rejection of exemption claimed u/s. 54EC of the Act. Appeal filed by the assessee is partly allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Eligibility for exemption under Section 54 of the Income Tax Act.
3. Eligibility for exemption under Section 54EC of the Income Tax Act.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal was filed with a delay of 832 days. The assessee, a senior citizen aged 71, cited medical reasons including Coronary Artery Disease, Diabetes, Hypertension, and a Coronary Artery Bypass Graft Surgery for the delay. The Tribunal noted that 715 days of the delay fell within the Covid period, which was exempted from condonation by the Supreme Court. The remaining 117 days were attributed to the assessee's ill-health, supported by medical records. The Tribunal referenced the Supreme Court decision in N. Balakrishnan vs M. Krishna Murthy, which allows for condonation of delay in the absence of mala-fide intentions. Consequently, the delay was condoned, and the appeal was admitted for adjudication.

2. Eligibility for Exemption under Section 54:
The assessee's property was acquired by Chennai Metro Rail Ltd, resulting in long-term capital gains. The assessee claimed exemption under Section 54 for purchasing another residential property and constructing additional units within the stipulated period. The Assessing Officer (AO) denied the exemption, stating that the new property consisted of multiple units and thus did not qualify as a single residential house. The CIT(A) upheld the AO's decision, noting that the property had multiple kitchens and units, and also rejected the exemption for a second property purchased at Aminjikarai, Chennai.

The Tribunal, however, referred to judicial precedents, including the Supreme Court's decision in CIT vs Gita Duggal and the Karnataka High Court's decision in Arun K. Thiagarajan vs CIT, which interpreted "a residential house" to include multiple units within a single property. The Tribunal concluded that the assessee was entitled to exemption under Section 54, as the property purchased on 30.08.2012 was within two years of the transfer and constituted a single residential house with multiple units. The Tribunal directed the AO to allow the exemption of Rs. 1,27,03,112 under Section 54.

3. Eligibility for Exemption under Section 54EC:
The assessee claimed exemption under Section 54EC for Rs. 50 lakhs invested in fixed deposits with nationalized banks. The AO and CIT(A) denied the exemption, stating that the investment was not in eligible bonds as required under Section 54EC. The Tribunal upheld this decision, noting that fixed deposits do not qualify for exemption under Section 54EC, which specifically requires investment in eligible bonds.

Conclusion:
The appeal was partly allowed. The Tribunal condoned the delay in filing the appeal, granted exemption under Section 54 for the new residential property, but upheld the denial of exemption under Section 54EC for the fixed deposits. The order was pronounced on 28th February, 2023, at Chennai.