TMI Blog2018 (11) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 482 - KARNATAKA HIGH COURT]. As further noted that the SLP, filed by the Revenue was dismissed by Hon'ble Apex Court. The only requirement, as per the section, is that it should be a residential house and there is nothing in the section which requires that the residential house should be built in a particular manner. A person may construct a house according to his requirements/needs and sometime due to compulsions. There may be several such consideration for a person while constructing a residential house. Identical ratio was laid in SMT. KG. RUKMINIAMMA [2010 (8) TMI 482 - KARNATAKA HIGH COURT]. So far as in CIT vs Raman Kumar Suri [2012 (12) TMI 421 - BOMBAY HIGH COURT] is concerned, it was decided rather in favour of the assessee, wherein, two flats were interconnected as one residential unit, wherein, exemption was disallowed on different facts. This decision is dated 27/11/2012, whereas, the decision in the case of CIT vs Syed Ali Adil [2011 (8) TMI 1104 - ITAT HYDERABAD] is of later date and the decision in CIT vs Gita Duggal is of [2011 (6) TMI 890 - ITAT DELHI]. The facts of the case of the present assessee are similar to the facts in Gita Duggal (decided by Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is situated at different floor, by placing reliance upon the decision of the Special Bench of the Tribunal in the case of Income Tax Officer vs Ms. Sushila M. Jhaveri (2007) 107 ITD 321 (SB). The ld. counsel relied upon the decision from Hon'ble High Court of Andhra Pradesh in CIT vs Syed Ali Adil (352 ITR 418)(AP), Hon'ble Delhi High Court in CIT vs Gita Duggal (357 ITR 153(Del.), Hon'ble Karnataka High Court in CIT vs Smt. K. G. Rukminiamma 331 ITR 211 (Karn.). On the other hand, the Ld. DR, strongly defended the impugned order by placing reliance upon the aforesaid decision of the Special Bench of the Tribunal in the case of Ms. Sushila M. Jhaveri ((supra)) and CIT vs Raman Kumar Suri 255 CTR 107 (Bom.). It was contended that Flat No.1502 is situated in the same building on 15th Floor, therefore, deduction is not allowable as per the provision of section 54F of the Act, only one unit/a house is to be allowed. 2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is engaged in the business of builder and developer, declared income of ₹ 1,26,11,153/- in his return filed on 31/08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion from the levy of capital gain tax is provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F and 54H as is apparent from section 45 itself. A perusal of the provisions of sections 54, 54B, 54D, 54E, 54EA, 54EB and 54F clearly reveals that the Legislature has used the words a and any with reference to investment of capital gain/sale consideration in certain asset or assets. The Legislature was not oblivious regarding the meaning of these two words. The word any has been used by the Legislature in sections 54B, 54D, 54E, 54EA and 54EB while the word a has been used in sections 54 and 54F. This clearly shows that the Legislature intended different meanings to be given to these two words. A close reading of these sections shows that Legislature intended to allow exemption in respect of investment in more than one asset by using the word any . Section 54E allows exemption in respect of investment in any specified asset . Explanation 1 to section 54E defines the specified asset . It includes various assets in which investment can be made by the assessees who are eligible for exemption under section 54E. There is nothing to indicate that investment is restricte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... choice. The Assessing Officer had already allowed exemption in respect of house, which permitted higher exemption. Therefore, the order of the Commissioner (Appeals) was to be reversed on this issue and the order of Assessing Officer was to be restored. [Para 12] While coming to the aforesaid conclusion, the Bench also considered the following decisions: K.C. Kaushik v. P.B. Rane, Fifth ITO [1990] 185 ITR 499/ 51 Taxman 51 (Bom.) (para 1), Ratanchand Murarka v. Jt. CIT [IT Appeal No. 4485 (M) of 1999, dated 12-9-2001] (para 1), ITO v. Daulat Lutharia [IT Appeal No. 9639 (B) of 1989, dated 16-5-1996] (para 1), ITO v. Bhupendra Patel [IT Appeal No. 70 (M) of 1995, dated 24-4-2002] (para 1), Fulwanti C. Rathod v. ITO [IT Appeal No. 1092 (M) of 1995, dated 3-5-2002] (para 1), ITO v. Nansi Kriti S. [IT Appeal No. 2954 (M) of 1995, dated 28-5-2005] (para 1), Himmatlal H. Sheth v. ITO [IT Appeal No. 6761 (M) of 2002, dated 15-2-2005] (para 1), Prabhakar S. Mogre v. Jt. CIT [IT Appeal No. 27 (M) of 2000, dated 2-5-2005] (para 1), Dy. CIT v. Mohanlal K. Zaveri [IT Appeal No. 2747 (M) of 1998, dated 15-12-2005] (para 1), Krishangopal N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determine the cost inflation index of the property as on 1/4/1981 ignoring the fact that as per clause 3 of the inflation given in Section 48 of the Income Tax Act benefit of indexation can be given only from the year 1999 which is the year when the assessee inherited the property and became the owner and not from 1974? (e) Whether the Tribunal was justified in confirming the decision of Commissioner of Income Tax (Appeals) in allowing the exemption u/s. 54 for investment in two new flats viz. 416A and 516A by treating the same as one single unit ignoring the fact that the assessee purchased two different flats in the same society and converted them into one duplex flat? (f) Whether the Tribunal was justified in treating the two flats viz. 416A and 516A purchased by the assessee as one singular unit for the purpose of deduction under Section 54 and not as two separate and distinct units? Regarding Question -(a) : 3. (a) The respondent is an individual deriving income from salary, house property and other sources. For the Assessment Year 2006-07, the respondent filed return of income declaring a total income of ₹ 2.25 crores and inter alia disclosed a long ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that the additional amount of ₹ 1 crores received by the brother of the respondent had been offered to tax by the brother and the same was duly accounted as his income under the head capital gain. The Tribunal observed that the assessment cannot be based on the perception of the Assessing officer that the assessee should have received ₹ 7 crores as sale consideration. The assessment can only be on the actual amount received by the assessee, the respondent assessee has sold his share in the New Delhi property at ₹ 6 crores only and that alone can be the sale consideration. (f) We find no fault with the order of the Tribunal. Both CIT(Appeals) as well as Tribunal have on consideration of all the facts involved, concluded as a finding of fact that the appellant had received only ₹ 6 crores for the sale of his rights in the New Delhi property and the same had been offered to tax. There is no provision to tax a person on the basis of the deemed income for the purpose of capital gain tax. This finding of the Tribunal as well as CIT(Appeals) has taken into consideration the Memorandum of Understanding reached between the brothers as well as the sale docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the New Delhi property at ₹ 47.74 lacs as its fair market value on 1/4/1981 was accepted and the fair market value of ₹ 17.33 as on 1/4/1981 as arrived at in the assessment order dated 22/12/2008 was not accepted. (c) In appeal, the Tribunal by its order dated 30/4/2010 upheld the finding of the Commissioner of Income Tax (Appeals). The Tribunal held that Nabhi's Guide to House Tax cannot be substituted for the valuation of the New Delhi property done by an empanelled valuer of the Income Tax Department for the purpose of valuation of the property. The Tribunal upheld the finding of the Commissioner of Income Tax (Appeals) that the valuation of a property differs depending upon its size, location, road frontage, corner plot etc. even in respect of two properties situated in the same locality. (d) No fault can be found with the order of the Tribunal upholding the order of the Commissioner of Income Tax (Appeals) that the valuation done by an empanelled registered valuer of the Income Tax Department would certainly take precedence over Nabhi's Guide to House Tax. The valuation done by the registered valuer is with regard to the specific property and takes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extent of ₹ 3 crores as claimed in the return of income. This was on the basis that the respondent herein had produced a Certificate of Co-operative Society that two flats were inter connected by internal stair case. The site plan was also submitted inter alia showing only one entrance gate and one kitchen. The duplex flat Nos. 416A and 516A was purchased on as is and where is basis and the assessee had not joined the said two flat internally after acquiring the flats. The flats were inter connected by the previous owner only and therefore, the fact that there were two different flats was immaterial as Section 54 grants exemption to a residential house and unit. The Commissioner of Income Tax (Appeals) had reached a finding of fact was that two flats were joined into one single flat before the respondent became its owner and was one residential house. (c) On an appeal filed by the revenue, the Tribunal by its order dated 30/4/2010 upheld the findings of Commissioner of Income Tax (Appeals) dated 4/5/2009. The Tribunal also followed the Special Bench decision of the Tribunal in the matter of ITO v. Ms. Sushila M. Jhaveri [2007] 107 ITD 327 (Mum.) to hold that where two f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken up for scrutiny by issuing notice dt.25-08-2008 under section 143(2) of the Act. A notice dt.15-06-2009 under section 142(1) was issued calling for various details. 3. Before the Assessing Officer, the assessee offered under the head, long term capital gains, a sum of ₹ 41.00 lakhs contending that he had inherited an ancestral house property which was sold during the year under consideration and the resultant long term capital gains were offered from sale of the said house; that he had taken the sale consideration of ₹ 1,99,50,000/- for arriving at the capital gains even though the sale deed mentioned the sale consideration as ₹ 2,66,00,000/-; that out of the sale consideration he had purchased two flats in Mayfair Apartment, Banjara Hills, Hyderabad and he is entitled to claim deduction/exemption under section 54 of the Act for an amount of ₹ 93,80,192/- and that in view of the decision in CIT v. D. Ananda Basappa [2009] 309 ITR 329/180 Taxman 4 (Kar.), even though section 54 mentions that the proceeds should be invested in a residential house , it being a beneficial provision, it should be construed liberally and the deduction cannot be restrict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plex. He also placed reliance on the decision of the Special Bench of the Tribunal in ITO v. Ms. Sushila M. Jhaveri [2007] 107 ITD 327 (Mum.) 10. We see no force in the said contention. As held in D. Ananda Basappa's case (supra) 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 CIT v. Smt. K.G. Rukminiamma [2011] 196 Taxman 87/[2010] 8 taxmann.com 121 (Kar.) where a residential house was transferred and four flats in a single residential complex were purchased by the assessee, it was held that all four residential flats constituted a residential hous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llaboration Agreement 40,000,000.00 Less Index cost for pur. of ₹ 1575000 (Fair Value as on 1-04-81) 8,174,250.00 31,825,750.00 Less : Exemption under section 54EC (REC Bonds) 5,000,000.00 26,825,750.00 While completing the assessment the assessing officer took the view that on the terms of the agreement entered into with M/s Thapar Homes Ltd. on 08.05.2006, the cost of construction of the building incurred by the aforesaid company which was the developer of the property would also be included in the total sale consideration. The assessee responded by submitting that the entire cost of construction was incurred by the builder and even if it is considered as part of the sale consideration, since it has been fully invested in the residential house itself, the same would be exempt under Section 54 of the Act. The assessing officer did not accept the assessee's submission. He therefore, added an amount of ₹ 3,43,72,529/- which was the cost of construction incurred by the developer to the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in ITA No.783 of 2008 vide order dated 27.8.2010 wherein it was held as under :- The context in which the expression 'a residential house' is used in Section 54 makes it clear that, it was not the intention of the legislation to convey the meaning that: it refers to a single residential house, if, that was the intention, they would have used the word one. As in the earlier part, the words used are buildings or 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 followed. 7. Upon careful consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; the undivided interest in the land stood transferred to the developer/builder only to the extent of 22.5% for his exclusive enjoyment. It was on these facts that the assessing officer first took the view that the sale consideration for the transfer of the capital asset should be taken not merely at Rs. four crores which was the cash amount received by the assessee, but the cost of construction incurred by the developer on the development of the property amounting to ₹ 3,43,72,529/- should also be added to the sale consideration. The assessee thereupon claimed that if the cost of construction incurred by the builder is to be added to the sale price, then the same should also be correspondingly taken to have been invested in the residential house namely the two floors which the assessee was to get in addition to the cash amount under the agreement with the builder, and the amount so spent on the construction should be allowed as deduction under Section 54 of the Act. It was at this stage that the assessing officer rejected the claim for deduction under Section 54 on the footing that the two floors obtained by the assessee contained two separate residential units having separ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial building or lands appurtenant thereto, he can invest capital gains for purchase of residential building to seek exemption of the capital gains tax. Section 13 of the General Clauses Act declares that whenever the singular is used for a word, it is permissible to include the plural. The contention of the Revenue is that the phrase a residential house would mean one residential house and it does not appear to the correct understanding The expression a residential house should be understood in a sense that building should be of residential in nature and a should not be understood to indicate a singular number. The combined reading of sections 54(1) and 54F of the Income-tax Act discloses that, a non residential building can be sold, the capital gain of which can be invested in a residential building to seek exemption of capital gain tax. However, the proviso to section 54 of the Income-tax Act, lays down that if the assessee has already one residential building, he is not entitled to exemption of capital gains tax, when he invests the capital gain in purchase of additional residential building. This judgment was followed by the same High Court in the decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idential house. We do not think that the fact that the residential house consists of several independent units can be permitted to act as an impediment to the allowance of the deduction under Section 54/54F. It is neither expressly nor by necessary implication prohibited. For the above reasons we are of the view that the Tribunal took the correct view. No substantial question of law arises for our consideration. The appeal is accordingly dismissed with no order as to costs. 2.6. In the light of the above decisions, it is our bounded duty to examine section 54F of the Act as was applicable during the impugned Assessment Year, which is reproduced hereunder:- 54F. (1) [Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period 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, a residential hous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, 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 such new asset as provided in clause ( a ) or, as the case may be, clause ( b ), of sub-section (1) shall be deemed to be income chargeable under the head Capital gains relating to long-term capital assets of the previous year in which such new asset is transferred.] [(4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, the requirement of the section should be taken to have been satisfied. There is nothing in these sections which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use. If there is nothing in the section which requires that the residential house should be built in a particular manner, it seems 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 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. He may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the same building and also are situated on floors above each other i.e. 13th, 14th 15th Floor, while the flats at 13th 14th Floor are duplex flats joined with each other but the fact remains the third flat is situated on the immediate next floor i.e. 15th floor of the same building which is in the immediate vicinity. This question has been settled by Hon'ble Delhi High Court in the aforesaid order in CIT vs Gita Duggal ((supra)) and also by Hon'ble By Karnataka High Court ((supra)). It is further noted that the SLP, filed by the Revenue was dismissed by Hon'ble Apex Court. The only requirement, as per the section, is that it should be a residential house and there is nothing in the section which requires that the residential house should be built in a particular manner. A person may construct a house according to his requirements/needs and sometime due to compulsions. There may be several such consideration for a person while constructing a residential house. Identical ratio was laid down by Hon'ble Karnataka High Court in CIT vs Smt. KG. Rukminamma (2011) 331 ITR 211 (Karnataka). So far as, the decision from Hon'ble jurisdictional High Court in CIT vs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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