TMI Blog2019 (3) TMI 700X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is prior to the A.Y. 2015-16 wherein an amendment has been brought by the Finance Act, 2014. AO was not justified in declining the claim of exemption to the assessee in respect to two units of the house property allotted by the developer to the assessee. AO is directed to allow exemption in respect of both the units. Capital gain computation - Determination of the FMV as on 1.4.1981 - valuation to DVO - Action of the CIT(A) for referring the matter back to the DVO for determination of fair market value as on 01/4/1981 - HELD THAT:- Revenue makes a reference, to the DVO, in term of Section 55A of the Act, it should be of the opinion that the value determined by the Registered Valuer as the FMV of the property as on 1st April, 1981 is less than its FMV. Only on having formed the above opinion, it is entitled to call upon the DVO to submit a report with regard to its FMV as on 1st April, 1981. In the Assessee’s case neither the FMV as per the registered valuer’s valuation report was less that the FMV estimated by the DVO, nor is it a case where the FMV of the asset claimed by the Assessee is not supported by a registered valuer’s valuation report. Accordingly reference to the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aves leave to add, alter, amend, delete or modify any of the above-referred grounds of appeal 2. Rival contentions have been heard and record perused. Facts in brief are that the assessee is an individual deriving income from Salary and Other Sources. During the year under consideration, the Assessee, vide agreement dated 04.07.2009 granted development rights of her share (50%) in the property Dommus Josephi Plot No 160, Perry Road, Bandra (W), Mumbai (except an FSI of approx. 2,850 square feet), which was gifted to her by her uncle Joseph Aloysius Fernandes, to Calvin Properties Developers (Developers). As regards the floor space index (FSI) of approx. 2,850 square feet carpet area, it was retained / reserved by her for construction of her residence in the new building proposed to be constructed by the Developers (page 14, Article 3.1).Hence, as per the terms mentioned in the development agreement (DA), the Assessee is entitled to a consideration of ₹ 2,53,00,000/- and the cost of construction of the two residential units admeasuring 1,425 sq. ft. each, one on the first and the other on the second floor as the said FSI continued to belong/owned by the Assessee in term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section states that a residential house should be purchased/constructed . 7. Finally the Assessing Officer allowed deduction only respect of one flat. By the impugned order, the ld. CIT(A) confirmed the action of the Assessing Officer against which the assessee is in further appeal before us. 8. We have heard the rival contentions and carefully gone through the orders of the authorities below. The Assessing Officer declined the assessee s claim with respect to two flats given by the builder by relying on the decision of the Hon ble Bombay High Court in the case of K.C. Kaushik Vs P.B. Rane, ITO (1990) 84 CTR 62 (Bom). The Assessing Officer observed that both the units have separate main doors for each and the units were not adjoined together. The Assessing Officer further stated that there was no inside staircase between two units that both the units has been utilized with separate kitchens. 9. The ld. AR of the assessee has relied on the decision of the Hon ble Andhra Pradesh High Court in the case of CIT Vs. Syed Ali (2013) 352 ITR 418 wherein the Hon'ble High Court has held that: the exemption under section 54 only requires that the property purchased by ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill depend on the building construction plan whether units can be adjoined by inside staircase or by common door or not. In the present case, the assessee s residential house, with respect to which the assessee is claiming deduction u/s 54/54F of the Act, comprises of two adjacent units, on the first and second floor of the same building. Both units constitute one residential house for the purpose of section 54/54F of the Act. 12. There are catena of decisions, wherein, it has been held that, even if the assessee purchases different residential units, which are located on different floors and are used as a residential house, for the purpose of section 54/54F, it cannot be held that the assessee has purchased more than one residential house. Also, there are decisions to the effect that, where two adjacent units are purchased and used by the assessee as a single residential house, both units would be considered for claiming exemption notwithstanding the fact that they are converted into one residential unit or not. 13. By the Finance Act, 2014, an amendment was brought in Section 54/54F of the Act which is effective from 01/04/2015 i.e. from A.Y. 2015-16 whereby the phrase a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, and the assessee within a period of one year before or two years after the date of transfer, purchases, or within a period of three years after the date of transfer constructs, a residential house, then, the amount of capital gains to the extent invested in the new residential house is not chargeable to tax under section 45 of the Income-tax Act. 20.2 The provisions contained in sub-section (1) of section 54F of the Income-tax Act, before its amendment by the Act, inter-alia, provided that where capital gains arises from transfer of a long-term capital asset, not being a residential house, and the assessee within a period of one year before or two years after the date of transfer, purchases, or within a period of three years after the date of transfer constructs, a residential house, then, the portion of capital gains in the ratio of cost of new asset to the net consideration received on transfer is not chargeable to tax. 20.3 Certain courts had interpreted that the exemption is also available if investment is made in more than one resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue regarding the determination of the FMV as on 1.4.1981 does not arise from the assessment order of the AO and was not an issue taken up in appeal by the assessee before the learned CIT(A). The FMV as on 1.4.1981, accepted by the AO, was found to be excessive by the CIT(A) (because it is trite that increased FMV as on 1.4.1981 would lead to reduced tax on capital gains) and therefore vide letter dated 13.6.2014, after recording the reasons for disturbing the FMV, the ld. CIT(A) directed the Assessing Officer to refer the matter to the DVO for determination of fair market value as on 01/4/1981. The ld. CIT(A) has dealt with this issue after relying on the decision of the Hon ble Bombay High Court in Rallis India Ltd. v. CIT 374 ITR 462 (Bom.)(for the same AY 2002-03) and held that that though the AO cannot make a reference to the DVO once the assessment order is passed, the CIT(A) can make a reference to the DVO for determination of the FMV as on 1.4.1981, or direct the AO to make such reference. We observed that in the case of Rallis India Ltd., though the AO had not referred the matter of valuation of FMV as on 1.4.1981 to the DVO, he had not accepted such FMV at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d valuer, if the Assessing Officer is of opinion that the value so claimed is less than its fair market value. However subsequent to the amendment made vide finance act 2012 under section 55A, wherein the word is less than its fair market value is substituted by the word is at variance with fair market value , now AO can refer the valuation to DVO for both the instances but that too only for the assessment year 2012-13 and thereafter as the said amendment applies prospectively. 19. For the above proposition, we rely on the decision of the Bombay High Court in CIT v. Puja Prints 360 ITR 697 (pages 52-57 of CLPB), wherein it was held: 7. We find that Section 55A(a) of the Act very clearly at the relevant time provided that a reference could be made to the Departmental Valuation Officer only when the value adopted by the assessee was less then the fair market value. In the present case, it is an undisputed position that the value adopted by the respondent-assessee of the property at ₹ 35.99 lakhs was much more than the fair market value of ₹ 6.68 lakhs even as determined by the Departmental Valuation Officer. In fact, the Assessing Officer referred the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e further observe that the above position was reiterated by the Hon ble court, in Rallis India Ltd. v. CIT 374 ITR 462 (Bom.). It held: 15. It is a settled position that the provisions of Section 55-A of the Act which were amended in 2012 by substituting the following words as it variance with its FMV for is less than its FMV is clarificatory and not retrospective as held by this Court in CIT v. Puja Prints [2014] 360 ITR 697/24 Taxman 22/43 taxmann.com 247. Therefore, the Revenue did not contend that the provisions of Section 55-A of the Act is retrospective. It, therefore, follows that where admittedly the value arrived at by the Registered Valuer of the land is more than its FMV, no jurisdiction is acquired by the authorities to invoke Section 55-A of the Act. In para 17, the court reiterated that before the Revenue makes a reference, to the DVO, in term of Section 55A of the Act, it should be of the opinion that the value determined by the Registered Valuer as the FMV of the property as on 1st April, 1981 is less than its FMV. Only on having formed the above opinion, it is entitled to call upon the DVO to submit a report with regard to its FMV as on 1st April, 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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