TMI Blog2019 (2) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... allotment letter dated 22/10/2008 for which the agreement was executed on 15/12/2011 which was in furtherance of the stated allotment only. AO, in our opinion, got misled by the fact that right in the flat got vested in the assessee upon allotment and the same got exchanged with actual flat upon execution of the agreement and therefore, the holding period should have been counted from the date of the agreement. Allotment as well as execution of the agreement did not vest two different capital assets in the hands of the assessee which got exchanged with each other upon execution of the agreement rather the event of allotment as well as execution of agreement was part & parcel of the same transaction and only an improvement in ownership rights held by the assessee in the flat. This being the case, no infirmity could be found in the impugned order and therefore, this ground stands dismissed. Having said so, the resultant gains earned by the assessee would be LTCG only and therefore, we proceed to delve into the issue of assessee’s eligibility to claim deduction u/s 54F. As further fortified by the observation of first appellate authority that amendment to Section 54F was app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on the judgment of Bombay High Court in the case of Devdas Naik which is different from this case in respect of single kitchen in two flats whereas in assessee case two residential houses had two kitchen. 5. On the fact and circumstances of the case and in law, the Ld. CIT(A) is not justified in allowing deduction u/s 54F of the I.T.Act, 1961 inspite of the fact that assessee has illegally adjoined two residential houses without prior permission of BMC, which is a responsible authority for implementation of safety norms of residences and only BMC can allow alternation in residential flats. Further, it is evident by the Society's letter that assessee is using single entry for both residences and it is not possible to use both residences with single entry without breaking walls separating two flats illegally. 6. The appellant prays that the order of the CIT(A) on the above grounds be reversed and that of the Assessing Officer be restored. The assessment for impugned AY was framed by Ld. Assistant Commissioner of Income Tax, Circle-20(3), Mumbai [AO] in scrutiny assessment u/s 143(3) on 23/03/2016 wherein the income of the assessee was determined at ₹ 209 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee defended the same vide submissions dated 16/03/2016 and contended that the two flats were not only adjacent flats but were being used as a single residential house. To support the same, a certificate dated 29/02/2016 issued by the concerned society was placed on record. However, not convinced, Ld. AO noted that the assessee had leased out these flats vide lease agreement dated 19/03/2013 according to which two flats were leased out and their area was mentioned separately in the lease agreements which show that both flats were independent flats even on the date of leasing out to an entity namely TPG Capital India Private Limited. These facts, in the opinion of Ld. AO, negated assessee s claim that both the flats were joined together. The reply received from Executive Engineer, BMC, Byculla, Mumbai in response to notice u/s 133(6) revealed that no proposal was received by the authorities regarding amalgamation of two flats. The aforesaid facts led the Ld. AO to conclude that the assessee violated conditions of Section 54F and therefore, not entitled for the said deduction. 2.4 Finally, the resultant gain of ₹ 20.35 Crores were treated as STCG and added to the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tude and the definition has re-emphasised this by use of the words of any kind . Thus, any right which can he called property will be included in the definition of capital asset . A contract for sale of land is capable of specific performance. It is also assignable. Therefore, a right to obtain conveyance of immovable property, was clearly property as contemplated by s. 2(14). In case of Richa Bagrodia VS .DCIT-12(3), Mumbai (ITANo.3601/M/2012) it was held that the date of allotment should be reckoned as the date for computing the holding period for the purpose of capital gains. Applying the above decision in case of the appellant, period of holding will be considered from date of allotment letter i.e. 22.10.2008 and not 15.12.2011 i.e. when agreement was entered. Since the appellant has acquired the capital asset on 22.10.2008 and sold the same on 25.05.2012, the appellant is said to have transferred long term capital asset and is entitle to the benefit of indexation and can also claim deduction u/s. 54F provided condition laid down in Sec. 54F are fulfilled. 6. Grounds of appeal no. 3. This ground is related to deduction claimed u/s. 54F of two flats pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce has been made of the Annexure 'F-I' and 'F-II' of the agreements wherein both the flats have been shown with different kitchen. As per AO, when the flats ere purchased from the developers they were independent flats as per the plan and if at all they have to be joined it was the responsibility of buyer to bear the cost as well as to seek the permission of the local authority. iv) As per AO, Merger of two flats was after taking possession of flats and formation of society. Further, the society's certificate does not spell out the date on which the merger of two flats was done. Therefore, there is a reason to believe that the two flats were joint together after society came into existence, till then both these flats were having definite existence. v) The AO referred to Lease agreement dated 19.03.2013 which shows that the two flats were leased out and their area was mentioned separately which shows that both flats were independent flats even on the date of leasing of the flats to TPG Capital India P. Ltd. vi) Letter received from Municipal Authority makes it abundantly clear that till the date of letter there was no application from the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed for 'a' residential house purchased. Further s. 54F was amended w.e.f. 01.04.2015 by substituting the word a with one .Thus, it shows that prior to the amendment the exemption provided under section 54(1) was not restricted to investment made in one residential house. 6.3 In various decisions given by Hon'ble High Court and Hon'ble Tribunal, interpretation of the word a preceding the expression residential house has been given. In case of CIT vs. DEVDAS NAIK (Supra), it was held that deduction u/s 54 can be allowed if flats are a single unit and a house for purpose of residence even if acquisition of flats were done independently. In case of CIT Anr. vs. D. Ananda Basappa it was held that expression a residential house should not be understood to indicate a singular number; assessee having purchased two residential flats, exemption under s. 54 was available, more so as these flats are situated side by side and the builder has effected modification of the flats to make it as one unit. 6.4 From the above judicial pronouncements, it is clear that deduction can be claimed u/s. 54F for two residential flats if they are being used as a single ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee on 29/09/2008 i.e. much before issuance of allotment letter. The agreement for allocation of flat was executed vide agreement dated 15/12/2011 which was registered on 13/04/2012. This agreement is in respect of the same flat which was allotted to the assessee vide allotment letter dated 22/10/2008 and the agreement also contains reference of the allotment letter. The perusal of these facts reveal that the property proposed to be acquired by the assessee was specific a unique property which was clearly identified in the allotment letter dated 22/10/2008 for which the agreement was executed on 15/12/2011 which was in furtherance of the stated allotment only. The Ld. AO, in our opinion, got misled by the fact that right in the flat got vested in the assessee upon allotment and the same got exchanged with actual flat upon execution of the agreement and therefore, the holding period should have been counted from the date of the agreement. However, we have noted that allotment as well as execution of the agreement did not vest two different capital assets in the hands of the assessee which got exchanged with each other upon execution of the agreement rather the event of allotment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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