TMI Blog2021 (3) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... w Delhi relating to assessment year 2012-13. 2. Facts of the case, in brief, are that assessee is in individual and during the year has derived the income from long term capital gains and income from other source. He filed his return of income on 1st August,2012 declaring total income of ₹ 30,370/-. During the course of assessment proceedings, the AO noted that assessee had declared capital gain income of ₹ 1,00,00,000/- against which deduction u/s 54 was claimed at ₹ 80,02,175/-. He asked the assessee to submit documentary evidence in support of cost of acquisition and sale consideration of the property sold during the year and evidence in support of claim of investment in immovable property claimed exempt u/s 54 of the Act. From the various details furnished by the assessee the AO noted that while claiming deduction u/s 54 of the I.T. Act assessee has purchased two properties of different places. He, therefore, asked the assessee to explain the same. Assessee submitted that as per provisions of section 54 of the I.T. Act the assessee should purchase / construct a residential house. Assessee also relied on the various decisions :- CIT VII Vs. Gita Duggal 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residential in nature and a should not be understood to indicate a singular number. Also, s. 54/54F uses the expression a residential house and not a residential unit . S. 54/54F requires the assessee to acquire a residential house and so long as the assessee acquires a building, which may be constructed, for the sake of convenience, in such a fanner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, 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 to us that the income tax authorities cannot insist upon that requirement. A person may construct a house according to his plans, requirements and compulsions. 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 hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word another is singular. Therefore, the intent of legislature was always to allow the benefit of exemption only for investment in one house against the profit earned on sale of residential house. 6.4 The rationale behind introduction of provisions of section 54 of I.T. Act are that if a person wanted to shift his residence due to certain reason, and hence, he sold his old house and from the sale proceeds he purchased another house. In this case the objective of the seller was not to earn income by sale of old house but to acquire another suitable house. If in this case the seller was liable to pay income-tax on capital gains arising on sale of old house, then it would be a hardship on him. Section 54 gives relief from such a hardship. Section 54 gives relief to a taxpayer who sells his residential house and from the sale proceeds he acquires another residential house. 6.5 The controversy raised by different interpretations by certain courts has been put on rest through CBDT Circular no. 01/2015 dated 21st January, 2015 which clearly pointed out that the benefit was always intended for investment in one residential house within India. Accordingly, sub section (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n u/s 54 of I.T. Act in respect of only one residential house. Accordingly, ground of appeal is dismissed. 4. Aggrieved with such order of the Ld. CIT(A), assessee is in appeal before the Tribunal by raising the following grounds :- 1. That the Ld. CIT (A) erred both in fact and in law in confirming addition made of ₹ 22,02,175/- on account of deduction claimed u/s 54 of the Act in respect of investment made in more than one residential house without appreciating the fact that deduction u/s 54 is restricted to only one residential house by Finance Act 2014 with effect from assessment year 2015 - 16 is prospective and not with retrospective effect. 2. That the Ld. CIT (A) erred both in fact and in law in confirming addition made of ₹ 22,02,175/- on account of deduction claimed u/s 54 of the Act in respect of investment made in more than one residential house without appreciating the settled legal position that deduction u/s 54 is allowable in case of investment made in more than one residential house. That the appellant craves leave to add, amend or alter any of the grounds of appeal. 5. Ld. Counsel for the assessee referring to the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of investment made in more than one residential house and the deduction u/s 54 is restricted to only one residential house property by the Finance (No.2) Act 2014 with effect from assessment year 2015-16 is prospective and not with retrospective effect. 10. Ld. DR on the other hand heavily relied on the Ld. CIT(A). He submitted that the issue of exemption u/s 54 of the Act in respect of acquisition of two different residential houses has been decided by the special bench of the Tribunal in the case of ITO vs. Ms. Sushila M Jhaveri and it has been decided in favour of the revenue. So far as the various decisions relied on by the Ld. Counsel for the assessee are concerned, he submitted that those cases are distinguishable from the facts of the present case and not applicable to the instant case. Since here the assessee has purchased two different flats on two different dates and, therefore, assessee is not entitled to the deduction u/s 54 of the I.T. Act in respect of the second flat. 11. I have considered the rival arguments made by both the sides, perused the orders of the AO and Ld. CIT(A) and the paper book filed on behalf of the assessee. I have also considered the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rising 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 arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain. [(2) The amount of the capital gain 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 utilized 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 under sub-section (1) of section 139] in an account in any such bank or institution as may be specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee the Hon ble High Court held that assessee is entitled to benefit of exemption u/s 54(1) of the Act in respect of both the residential properties, the observation of the Hon ble High Court from 10 onwards reads as under :- 10. We have considered the submissions made on both the sides and have perused the record. In order to appreciate the rival submissions made at the bar, we deem it appropriate to reproduce Section 54( I) of the Act, which read, prior to its amendment by Finance (No.2) Act, 2014, as under: 54(1) Subject to the provisions of sub-Section (2), where, in the case of an assessee being an individual ora Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head Income from house property (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 house, then, instead of the capital gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Kishan Das 120191 103 taxmann.com 414/263 Taxman 657/413 ITR 337. In view of aforesaid enunciation of law by different High Courts including this court and with a view to give definite meaning to the expression a residential house', the provisions of Section 54(1) were amended with an object to restrict the plurality to mean singularity by substituting the word 'a residential house' with the word 'one residential house1. The aforesaid amendment came into force with effect from 1-4- 2015. The relevant extracts of Explanatory note to provisions of Finance (No. 2) Act, 2014 reads as under: 20.3 Certain courts had interpreted that the exemption is also available if investment is made in more than one residential house. The benefit was intended for investment in one residential house within India. Accordingly, sub-Section (1) of Section 54 of the Income-Tax Act has been amended to provide that the rollover relief under the said Section is available if the investment is made in one residential house situated in India. 20.5 Applicability:- These amendments take effect from 1st April, 2015 and will accordingly apply in relation to Assessment year 2015-16 and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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