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TMI Blog2021 (7) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... computed the long term capital gains on the sale of house property and claimed exemption under Section 54. The Assessing Officer had raised various queries with regard to the disallowance of exemptions and the assessee had explained the claim. The assessee has claimed deduction under Section 54 amounting to Rs. 2,05,92,000/-. The Assessing Officer has rejected the claim of deduction made by the assessee under Section 54. The Assessing Officer disallowed the claim made under Section 54 and arrived at a total income of Rs. 4,17,67,626/-. Aggrieved over the same, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) and the Appellate Authority, partly allowed the appeal and confirmed the disallowance made in respect of the investment under Section 54. Aggrieved by the said order, the assessee as well as the Revenue preferred appeals before the Income Tax Appellate Tribunal. The Tribunal dismissed the appeal filed by the Revenue and allowed the appeal filed by the assessee. Challenging the same, the Revenue has filed the above two appeals. 3.The Revenue has raised the following substantial questions of law in the appeal in T.C.A.No.300 of 2021: "(i) Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which any asset is held by an assessee under a gift, the period for which the said asset was held by the previous owner shall be included, the assessee is deemed to have held the asset as a long term capital asset and accordingly,liable for long term capital gains tax. Thus, by applying the deeming provision contained in the Explanation 1(i)(b) to Section 2(42A) of the Act, the assessee is deemed to have held the asset from 29/1/2003 to 30/6/2003 (by including the period for which the said asset was held by the previous owner) and accordingly held liable for long term capital gains tax. 14.It is not disputed by the revenue that the assessee must be deemed to have held the capital asset from 29/1/1993 (though actually held from ½/2003) by applying the Explanation 1(i)(b) to Section 2(42A) of the Act and hence liable for long term capital gains tax. However, the revenue disputes the applicability of the deemed date of holding the asset from 29/1/1993 while determining the indexed cost of acquisition under Clause (iii) of the Explanation to Section 48 of the Act. 15. For better appreciation of the dispute, we quote the relevant part of Section 48 herein : "Mode of Computa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the assessee held the asset with effect from 1/2/2003, the first year of holding the asset would be FY 2002-03 and accordingly, the cost inflation index for 2002-03 would be applicable in determining the indexed cost of acquisition. 17. We see no merit in the above contention. As rightly contended by Mr. Rai, Learned Counsel for the assessee, the indexed cost of acquisition has to be determined with reference to the cost inflation index for the first year in which the capital asset was 'held by the assessee'. Since the expression 'held by the assessee' is not defined under Section 48 of the Act, that expression has to be understood as defined under Section 2 of the Act. Explanation 1(i)(b) to Section 2(42A) of the Act provides that in determining the period for which an asset is held by an assessee under a gift, the period for which the said asset was held by the previous owner shall be included. As the previous owner held the capital asset from 29/1/1993, as per Explanation 1(i)(b) to Section 2(42A) of the Act, the assessee is deemed to have held the capital asset from 29/1/1993. By reason of the deemed holding of the asset from 29/1/1993, the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to tax. 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. 20.4.Similarly, sub-section (1) of Section 54F of the Income-tax Act has been amended to provide that the exemption 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 subsequent assessment years." 19.A closer and bare reading of the aforesaid Explanatory Notes to the provisions of the said Act, clearly shows that the said amendment was intended to be specifically applied only prospectively with effect from A.Y.2015-2016. It took note of the judicial precedents for the period prior to 01.04.2015, giving a different and contra interpretation. Therefore this amendment ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessee should be held entitled to the benefit of deduction under Section 54 of the Act, subject to the purchase or construction being within the stipulated time limit in respect of the plural number of residential houses also. The said provision also envisages an investment in the prescribed securities which to some extent the present Assessee also made and even that was held entitled to deduction from Capital Gains tax liability by the authorities below. If that be so, the Assessee-HUF in the present case, in our opinion, complied with the conditions of Section 54 of the Act in its true letter and spirit and, therefore was entitled to the deduction under Section 54 of the Act for the entire investment in the properties and securities. Therefore, in our opinion, Judgment rendered by the Karnataka High Court in CIT Vs.D.Ananda Basappa ((2009) 309 ITR 329 (Karn)) & Khoobchand M.Makhija (supra) cited at bar by the learned counsel for the Assessee apply on all fours to the facts of the present case. 22.The decision of Punjab and Haryana High Court relied upon by the learned counsel for the Revenue, in which the Division Bench of the said Court finding a distinction with D.Ananda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Sridhar, learned counsel for the respondent-assessee submitted that in view of the judgments reported in [2011] 16 taxmann.com 42 (Bombay) [Commissioner of Income-tax-12 Vs. Manjula J. Shah], [2019] 105 taxmann.com 151 (Madras) [Tilokchand & Sons Vs. Income-tax Officer, Ward-II (4), Madurai] and [2020] 121 taxmann.com 243 (Karnataka) [Commissioner of Income Tax Vs. Vinay Mishra], both the appeals may be dismissed. 8.Having regard to the submissions made by the learned counsel on either side, following the ratio laid down in the judgments reported in [2011] 16 taxmann.com 42 (Bombay) [Commissioner of Income-tax- 12 Vs. Manjula J. Shah], [2019] 105 taxmann.com 151 (Madras) [Tilokchand & Sons Vs. Income-tax Officer, Ward-II (4), Madurai] and [2020] 121 taxmann.com 243 (Karnataka) [Commissioner of Income Tax Vs. Vinay Mishra], the 1st question of law in T.C.A.No.300 of 2021 is decided against the Revenue and in favour of the assessee. The questions of law (ii) and (iii) raised by the Revenue are left open and may be decided in an appropriate appeal. The question of law in T.C.A.No.301 of 2021 is also decided against the Revenue and in favour of the assessee. Accordingly, both the app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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