TMI Blog2013 (8) TMI 757X X X X Extracts X X X X X X X X Extracts X X X X ..... emption under section 54F of the Act in respect of all the seven flats - Assessing Officer, therefore directed to compute capital gain, if any, after allowing exemption under section 54F of the Act in respect of all the seven flats which were received by the assessee under the development agreement. In view of our aforesaid finding, the other issue as to whether the long term capital asset transferred by the assessee under development agreement was simply a land as held by the department or a residential house along with land as claimed by the assessee so as to entitle it for exemption under section 54 of the Act has become inconsequential and therefore, not required to be adjudicated upon – Decided in favor of Assessee. - ITA.No.422/Hyd/2013, ITA.No.423/Hyd/2013, ITA.No.424/Hyd/2013 - - - Dated:- 10-7-2013 - Shri Chandra Poojari And Shri Saktijit Dey,JJ. For the Petitioner : Shri K. K. Gupta, A.R. For the Respondent : Shri R. Laxman, D.R. ORDER Per Saktijit Dey, J.M. These appeals are filed by different assessees against separate Orders of the CIT(A). Since, common grounds are raised in all these appeals, these appeals are clubbed together, heard together an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee i.e., whether it is simply a land or a land with building and secondly whether the assessee is eligible to claim exemption under section 54 of the I.T. Act, 1961. 3. Briefly, the facts relating to the aforesaid issue are that the assessee is an individual. The assessee is a co-owner of a residential property bearing No. 6-2-97 to 100 and 6-2-102 to 110 situated at Boiguda, Secunderabad admeasuring about 6600 sq. yards. The assessee along with the other co- owners entered into a development agreement for construction of flats with a developer. Assessee's share in the property was 1818 sq. yards and as per the development agreement the owner has to transfer 50% of his land for the super-structures he will receive as consideration. Thus, under the development agreement, the assessee received 7 flats towards his share with a constructed area of 11704 sq. feet. The assessee worked out the value of the flats received as his share at Rs. 27 lakhs ( @ Rs.239.69 per sq. feet) and worked out capital gains on Rs.15,57,534/- after deducting the amount of Rs.11,42,466/- as index cost of acquisition. The assessee claimed exemption under section 54 of the Act on the entire am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its. : 3) Extract from the decision :- " .........As held in D. Ananda Basappa's case [2009} 309 ITR 329 (Karn) by the Karnataka High Court, the expression "a residential house" in section 54(1} of the Act has to be understood in a sense that the building should be of residential nature and "a" should not be understood to indicate a singular number and where an assessee had purchased two residential flats, he is entitled to exemption under section 54 in respect of capital gains on sale of its property on purchase of both the flats, more so, when the flats are situated side by side and the builder has effected modification of the flats to make it as one unit, despite the fact that the flats were purchased by separate sale deeds. This decision was followed by the Karnataka High Court in C1T v. Smt. K. G. Rukminiamma [2011} 331 ITR 211 (Karn) where a residential house was transferred and four flats in a single residential complex were purchased by the assessee, it was held that all the four residential flats constituted "a residential house" for the purpose of section 54 and that the four residential flats cannot be construed as four residential houses for the purpose of section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is nothing in the section which requires that the residential house should be built in a particular manner, it seems to us that the income tax authorities cannot insist upon that requirement. A person may construct a house according to his plans and requirements. Most of the houses are constructed according to the needs and requirements and even compulsions. For instance, a person may construct a residential house in such a manner that he may use the ground floor for his own residence and let out the first floor having an independent entry so that his income is augmented. It is quite common to find such arrangements, particularly post-retirement. One may build a house consisting of four bedrooms (all in the same or different f1oors) in such a manner that an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may even arrange for his children and family to stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. There may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom House Property" and if the assessee within a period of one year before or two years after that date on which, the transfer took place purchased or has within a period of three years after that date, constructed a residential house, then no capital gain will be charged to tax. Section 54F provides that in a case where the assessee has transferred any long term capital asset not being a residential house and within a period of one year before or two years after the date on which the transfer took place, purchased or within a period of 3 years after that date, constructed a residential house, then the capital gain will not be charged to tax. 8. The reading of the aforesaid provisions makes it clear that both the provisions are parimateria excepting the nature of long term capital asset which is subject to transfer. While in the case of section 54 of the Act, it is a building or a land appurtenant thereto which is in the nature of a residential house in case of section 54F, the long term capital asset is an asset other than a residential house. However, both the sections speak of either purchase or construction of "a residential house". The Assessing Officer as well as the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are adjacent to one another and have a common meeting point. In the impugned order, the Tribunal has also relied upon the decisions in K. G. Vyas' case (supra), P.e. Ramakrishna, HUF's case (supra) and Prem Prakash Bhutani's case (supra) wherein it was held that exemption under section 54 only requires that the property should be of residential nature and the fact that the residential house consists of several independent units cannot be an impediment to grant relief under section 54 even if such independent units were on different floors. The decision in Ms. Sushila M. Jhaveri's case [2007] 292 ITR (A T) 1 (Mumbai) [SB} holding that only one residential house should be given the relief under section 54 does not appear to be correct and we disapprave of it. We agree with the interpretation placed on section 54 by the High Court of Karnataka in D.Ananda Bassappa's case (2009) 309 ITR 329 (Karn) and Smt. K.G.Rukminiamma's case (2011) 331 ITR 211 (Karn.) and the decisions of the Mumbai, Chennai and Delhi Benches of the Tribunal in K.G.Vyas (supra), P.C.Ramakrishna, HUF (supra) and Prem Prakash Bhutani (supra). We, therefore, hold that the Commissioner of Income-tax (Appeals) was corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, not required to be adjudicated upon. Resultantly, the decision relied upon by the learned D.R. in the case of ITO vs. Smt. Rohini Reddy (Supra) and the decision of Hon'ble Supreme Court in the case of CIT vs. TN Arvind Reddy 120 ITR 46 would not apply to the facts of the present case. 10. So far as ground No.4 is concerned, the assessee has not canvassed any argument in respect of the aforesaid ground either orally at the time of hearing or in the written submission. Hence, it is, presumed that the assessee has nothing to say in respect of the aforesaid ground. Accordingly, the ground raised is dismissed. 11. ITA.No.423/Hyd/2013 and ITA.No.424/Hyd/2013 : Following our decision in ground Nos. 1, 2 and 3 of ITA.No.422/Hyd/2013 dealt with hereinbefore, we set aside the Orders of the CIT(A) in these appeals also and direct the Assessing Officer to compute the capital gain, if any, after allowing exemption under section 54F of the Act in respect of all the flats received by the respective assessees. 12. In the result, all the appeals viz., ITA.No.422,423 424/Hyd/2013 are partly allowed. Order pronounced in the open Court on 10th July, 2013. - - TaxTMI - TMITax - Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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