TMI Blog2018 (4) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. One may build a house consisting of four bedrooms (all in the same or different floors) 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 or even the other family members can be adjusted and they can remain mutually supportive. In the instant case the basement is part and parcel of the same building / residential house. Considering all the assessee is entitled for exemption u/s 54 / 54F of the Act, therefore, we find no infirmity in the order of the ld. First Appellate Authority, therefore, it is affirmed. - Decided against revenue - ITA No. 6147/Mum/2016 - - - Dated:- 22-3-2018 - Shri Joginder Singh, Judicial Member And Shri N.K. Pradhan, Accountant Member Revenue by : Shri Saurabh Rai Assessee by : Shri Dilip V. Lakhani ORDER Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional evidence like photographs and electricity bills were considered by the Ld. Commissioner of Income Tax (Appeal) and, thus, it is violation of rule 46A of the Rules. We find that while framing the assessment u/s 143(3), if the Assessing Officer was apprehensive, nothing prevented him to examine the factual matrix and the assessee would have been asked to submit the details, if so required. Even it is noted from Para-10 of the assessment order that the assessee vide letter dated 26.02.2015 submitted all the details, documents and then the order was passed u/s 143(3). Thus, we are satisfied that there is no violation as such as has been claimed by the Revenue, consequently, we find no infirmity in the order of the Ld. Commissioner of Income Tax (Appeal). Thus, this ground of the Revenue is dismissed. 3. The next ground pertains to holding that the assessee was eligible for claiming deduction u/s 54 of the Act. The argument of the learned D.R. is that the basement in the house cannot be termed as a residential house within the provisions of section 54 of the Act. On the other hand, the ld. counsel for the assessee defended the conclusion drawn in the impugned order. It was ple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,- (i) if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,- (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: Provided that nothing contained in this sub-section shall apply where- (a) the assessee,- (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the orig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) ofsection 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,- (i) the amount by which- (a) the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of sub- section (1), exceeds (b) the amount that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r lands which are plural in number and that: is referred to as a residential house , the original asset. An asset newly acquired after the sale of the original asset also can be buildings or lands appurtenant thereto, which also should be a residential house. Therefore the letter a in the context it is used should not be construed as meaning singular. But, being an indefinite article, the said expression should be read in consonance with the other words buildings and lands and, therefore, the singular a residential house also permits use of plural by virtue of Section 13(2) of the General Clauses Act. CIT V. D. Ananda Bassappa (2009) 223 (kar) 186: (2009) 20 DTR (Kar) 266 can be followed. 3.3 There could also be another angle. Section 54/54F uses the expression a residential house . The expression used is a residential unit . The intention of the legislature is very clear and it speaks about a residential unit . If the two units are conjoint together and to make it habitable (situated on the same floor) it will satisfy the provision and exemption u/s 54F will be available to the assessee. However, in the present appeal before us it is an admitted fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not taxable as he had invested more than the said amount in the purchase of a flat in Kalpana on July 26, 1980, for residence. The Income-tax Officer partly accepted the claim and held that the surplus was invested in the purchase of a flat in Priyadarshini, Khar on October 24, 1979, and not in the purchase of a flat in Kalpana, Santacruz, on July 26, 1980, as claimed. The petitioner filed a revision petition under section 264 of the Income-tax Act, 1961, which was rejected by the Commissioner of Income-tax, vide order dated February 5, 1985. It is pertinent to mention that two issues, viz., (i) whether the petitioner had a choice to choose the property against which the capital gains which had arisen on the transfer of a capital asset are to be adjusted; and (ii) whether the property purchased but not actually used for residence for three years fulfils the requirement of section 54(1) of the Income-tax Act, 1961, were raised before the Commissioner. While accepting the contention that the petitioner had a choice and could claim relief under section 54 against the purchase of the flat on July 26, 1980, even though he had purchased a flat on October 24, 1979, in the meantime, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact by itself would not entitle the petitioner to invoke the writ jurisdiction of this court as a matter of course. The contentions were repelled by Shri Sonde, learned counsel for the petitioner. It was pointed out that though extraordinary, the jurisdiction under article 226 was discretionary. When the petition has already been entertained, it may not be proper or legal for the same court to consider the question of entertaining it once again at the time of final hearing. 5. In my judgment, the petition having already been entertained and the jurisdiction being, though extraordinary, discretionary, I will prefer to dispose of the petition on merits. This was also the view taken by this court (Goa Bench) in Writ Petition No. 174/B/1981 decided on August 2, 1984. 6. In order to appreciate the rival contentions on merits of the petition, it is desirable to refer to the provisions of section 54 of the Income-tax Act as they were in force during the relevant period. Section 54 is reproduced hereunder : 54. Profit on sale of property used for residence. - Where a capital gain arises from the transfer of a capital asset to which the provisions of section 53 are not app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee must within a period of one year before or after the date of transfer of such a capital asset, purchased or within a period of two years after that date, construct a house property for his own residence. In this case, both the house properties, i.e., the flat in Priyadarshini and the flat in Kalpana, were purchased by the petitioner within one year of the date of the sale of the flat in Suvarnadeep and both the flats were purchased for the purpose of residence. In the absence of any provision to the contrary, in my judgment. The petitioner is entitled to avail of the relief in respect of the capital gain arising on the sale of his flat in 1979 against the flat purchased in that year as also against the flat purchased on July 26, 1980. It has, of course, to be adjusted against one of the flats only. The petitioner has chosen to seek that relief against the purchase of the flat on July 26, 1980, and, as held by the Commissioner in his order under section 264 of the Income-tax Act for the assessment year 1980-81, I am inclined to hold that it is for the petitioner to claim relief under this section against the purchase of any one of the flats provided that the other c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantially acquired by him for the purpose of his own residence after purchase or construction, as the case may be, would be determinative of the matter. Even if the new property was not substantially put to use for his own residential purposes by the assessee within a reasonable time and if the failure to do so was without any fault on his part, that is, by reason of some unforeseen subsequent events or supervening circumstances, it might still be possible to hold in a given case, provided other circumstances point in that direction, that the real relief, intention or motive entertained by the assessee at or about the time of purchase or construction as regards the use of the newly acquired house property was to occupy it himself. 9. From the above two decisions of the Gujarat High Court, it can fairly be inferred that the petitioner in the present case had purchased the new flat in Kalpana on July 26, 1990, for his own residence. He resided in that flat until his transfer to Baroda. His transfer to Baroda is an unforeseen and subsequent event and, therefore, there is no warrant for construing the relevant expression in the manner suggested by the Revenue to hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainable in the eyes of law? (ii) Whether in facts and circumstances of the case, the action of the authorities below in rejecting the claim of the assessee without their being any material evidence to rebut the claim of the assessee/appellant is legally sustainable in the eyes of law? (iii) Whether in facts and circumstances of the case, the action of the authorities below in ignoring the ratio of the decision in the case of D. Anand Basapa v/s ITO (2004) 91 ITD 53 (Bang.) wherein the exemption u/s 54 of the Act was granted on the acquisition of two houses out of the proceeds of one residential house is legally sustainable in the eyes of law? (iv) Whether in facts and circumstances of the case, the action of the authorities below, impugned orders Annexure A-1 and A-5 are legally sustainable in the eyes of law? 2. The assessee claimed exemption on capital gains on sale of flat on the ground of acquisition of two houses. The Assessing Officer set off the capital gain against one of the houses but held the claim not to be admissible against second house. However, the CIT(A) upheld the claim of the assessee relying upon decision of Bangalore Bench of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted the premises, the flats were occupied by two different tenants is not the ground to hold that apartment is not one residential unit. The fact that the assessee could have purchased both the flats in one single sale deed or could be narrated the purchase of two premises as one unit in the sale deed is not the ground to hold that the assessee had no intention to purchase two flats as one unit. From these observations of Hon'ble High Court, it is clear that while rendering the decision they have kept in mind that the purchase of two flats in the same building which were united for living of the assessee by making necessary modifications made the residential unit as one and, thus, that case could not be applied to the facts of the case of the assessee......... 3. We have heard learned counsel for the appellant. 4. As regards claim for exemption against acquisition of two houses under Section 54 of the Act, the same is not admissible in plain language of statute. In the judgment of Karnataka High Court in CIT v. D. Ananda Basappa [2009] 309 ITR 329 (Kar), referred to in the impugned order, exemption against purchase of two flats was allowed having regard to the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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