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TMI Blog2015 (9) TMI 1397X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid order of the Tribunal (ITA No.8797 and 8798/Mum/2010) order dated 27/02/2015 for ready reference:- "These two appeals have been filed by two assessees against the order of CIT(A), for the assessment year 2007-08, in the matter of order passed u/s.143(3) of the I.T.Act. 2. Common grievance in both the appeals relate to disallowance of claim of deduction u/s.54(1) in respect of residential flats acquired by the assessees in consideration of old house sold to the builder. 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee Vilma Mary Pereira has sold immovable property situated at "Violet Valley" (with garage) at Junction of 26th and 30th Road at Bandra (W), Mumbai for a total consideration of Rs. 3,05,00,000/- vide agreement dated 28.4.2006 to M/s. Aqua Marine Enterprises. The share of the assessee is 23% in the said property and the other assessee Mr. Peter Pereira was having share of 77% in the said house. From the agreement, the A.O. observed that the assessee was to receive three more flats i.e. two flats having a carpet area of 1200 sq.ft. each and one flat having carpet area of 750 sq.ft. and three parking spaces (two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said properties as on 1.4.1981 against the consideration. If the new flat was to be given in lieu of the old area occupied by the assessee in the old structure, then the value of the said old structure should have been reduced from the value of the entire property as on 1.4.1981 while computing the LTCG on such sale. However, the assessee has taken the FMV of the entire property as on 1.4.1981 into consideration while computing the LTCG on the sale of such property. 5. The A.R. of the assessee vide his submission dated 12.11.2009 stated that if market value of the new flat is added to income of the assessee, then the investment in new residential property should be allowed u/s.54 at market value. The AO. analysed the contention of the assessee. According to the A.O., exemption u/s.54 is available only when the assessee has purchased a new flat one year before or two years after the date of transfer or has constructed a new residential' house within a period of three years from the date of transfer of the house property (original). The flats (alongwith car 'parking spaces) received by the assessee in the proposed building as 'additional consideration' agreed upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. with one open and two stilt parking in kind. 2. In the assessment order. the A.O. has valued the consideration received in kind for Rs. 3,32,70,540/- and additions were made in the assessment order under the head long term capital gains without considering the said amount as reinvestment is neither purchased nor constructed by the assessee. 3. As regards benefit of section 54, this section makes it clear that capital gain arising from the transfer of a house property is exempt from tax provided the following conditions are satisfied :- (a) The house property is a residential house whose income is taxable under the head 'Income from house property' as transferred by an individual or an HUF. (b) The house property (may be self occupied or let out) is a long term capital asset. (c) The assessee has purchased a residential house within a period of one year before the transfer or within two years after the date of transfer or has constructed a residential house property within a period of three years after the date of transfer. The appellant has fulfilled the precondition mentioned at point Nos.(a) & (b) above was not in doubt. This was also not in dispute that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structed on the plot of old house sold by assessee. The new flats agreed to be given to assessee amounts to investment by assessee in residential house. Therefore, the AO was not justified in adding back the additional consideration given in the form of allotment of three flats by declining claim of deduction u/s.54 of the I.T.Act. 10. In the present case before us, the assessee has purchased/constructed the new residential property and paid the consideration equivalent of price by payment in kind. Therefore, the assessee is entitled for exemption u/s.54 of I.T.Act, 1961 in respect of these flats. 11. An issue was also raised by the AO with regard to sharing of 3 flats between the co-owners of the property and the exemption u/s.54 allowable in case of investment in one residential flat only. In this regard, we found that the details of allocation of area of new residential property between co-owners are as follows :- Name Ratio Area in Sq.Ft. Description Mr. Peter S. Pereira 77% 2400 Flat No.301 & 302 adjacent flats @1200 Sq.Ft. each on 3 rd floor and two Stilt car parking space Ms Vilma M. Pereira 23% 750 Flat No.402 on 4th floor and one car parking space ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 be several such considerations for a person while constructing a residential house. The physical structuring of the new residential house, whether it is lateral or vertical, should not come in the way of considering the building as a residential house. The fact that the 'residential house consists of several independent units cannot be permitted to act as an impediment to the allowance of the deduction under s.54/54F. It isneither expressly nor by necessary implication prohibited. Tribunal was therefore justified in allowing exemption under s.54 in respect of entire investment in construction of basement, ground floor, first floor, second floor and third floor." 13. In view of the above discussion, we do not find any merit in the action of the AO for decline of claim of deduction u/s.54 in respect of residential flats allotted by builder in consideration of sale of old house. 14. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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