TMI Blog2003 (10) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee further invested during the year Rs. 107.81 lakhs. Thus the assessee claimed exemption under section 54 in respect of capital gains arising on the sale of Brunton Road property against the investment made in the residential flat. As per the agreement with the developer of the residential flat M/s. Ormonde Developers Pvt. Limited. The assessee agreed to purchase two residential flats, bearing Nos. G-01 and G-02 both next to each other. The agreed consideration towards each of the flat was Rs. 52.61 lakhs and Rs. 55.20 lakhs aggregating to Rs. 107.81 lakhs. The argument of the assessee is that the two residential flats were converted into one big flat and thus the benefit under section 54 should be with reference to both the flats. This point was negated by the Assessing Officer. Though the investment by the assessee on the residential flat was accepted at Rs. 107.81 lakhs, the benefit of the provisions of section 54 could be allowed only against Rs. 55.20 lakhs being the investment made on part of the flat. 4. Learned CIT(A) concluded that the exemption in respect of investment in "a residential house" means one and not any. Since the intention of Legislature is clear to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouse or houses", "the new asset/assets." Similarly in clauses (i) (ii), the cost of acquisition of new asset is directed to be taken as Nil if the new asset is sold within three years of its purchase. If the Legislature intended more than one residential unit, here also it could have used the words "if there are more than one units the cost of acquisition in respect of new asset should be the date on which it is acquired". The whole scheme of section 54(i) and (ii) spells out that what the Legislature means unambiguously is one residential house. The Hon'ble Supreme Court in CIT v. Vegetable Products Limited [1973] 88 ITR 192 has held that if the language of the statute is plain, the fact that the consequences of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the Legislature to step in and remove the disparity. Further, the Supreme Court in CED v. Alladi Kuppuswamy [1977] 108 ITR 439 has opined "it is true that a physical statute should be construed strictly so as to be given every benefit of doubt to the subject. But where the phraseology of a particular section of the statute takes within its sw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92 (Mum.) of 1995, dated 3-5-2002] 'E' Bench is not applicable as the said decision is in respect of exemption under section 54 of the Act. Hence the assessee is in appeal before us. 5. Learned counsel for assessee Shri Devraj made elaborate arguments. According to the assessee, he invested an amount of Rs. 1,07,81,249 (Rs. 52,60,916 in flat No. G-1 and Rs. 55,20,333 towards flat No. G-2) on two adjacent residential flats. The assessee further incurred registration and stamp duty charges of approximately 15% which worked out to approximately Rs. 16.20 lakhs. Thus, the total cost of the flats worked out to Rs. 124.01 lakhs. Took the possession of the flats in May, 1997. The assessee had the intention of using both the flats as one large apartment and accordingly requested the developer to merge both. The developer handed over the possession of the single large flat (with two khata numbers and two different registration). However, due to family compulsions the assessee could not move in. Having difficulty in finding one tenant for the large flat, he was forced to reconvert into two and leased out the same on monthly rentals. A copy of the confirmation of the developer of having agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following the decision of Mrs. Gulshanbanoo Mukhi case only. It was further submitted that the reliance on the decision of Hon'ble Bombay High Court in K.C. Kaushik v. P.B. Rane, Fifth ITO [1990] 185 ITR 499 by Assessing Officer is also misplaced as in the said case the assessee never claimed the deduction for more than one residential units. Thus the assessee is entitled to deduction under section 54 in respect of both the residential units which is part of one entire building comprising several residential apartments. In the end it was submitted that there is difference of opinion among the Bombay Bench of the Tribunal. Thus both the views are possible. Since the issue is concerning grant of benefit to the assessee, it should be so interpreted so as to tilt in the favour of assessee rather than revenue since two views are reasonably possible. In view of the decision of Supreme Court in Vegetable Products Limited, the view favourable to the assessee should be adopted. 6. Learned Departmental Representative Smt. Archana Choudhary submitted that the facts of the case need to be noted. From the facts it is clear that though the assessee intended of merging two flats into one large ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed the claim of the assessee holding that since all the four apartments were in one building though on different floors but under occupation of the same family, the deduction under section 54 was allowable. Later on, ITAT, Mumbai in the case of Mrs. Gulshanbanoo R. Mukhi held that since there is an amendment in sections 54 and 54F with effect from 1-4-1983 and since the intention of the Legislature is clear to allow deduction only in respect of 'one house', 'a residential house' shall be only 'one residential house' and deduction under section 54 is allowable only for 'one residential house'. Later on, ITAT, Mumbai itself, without noticing the decision of Mrs. Gulshanbanoo R. Mukhi's case, in the case of Smt. Fulwanti C. Rathod relying upon the decision of K.G. Vyas's case held that the assessee is entitled to deduction in respect of all the flats, being consecutively numbered under one roof occupied by members of one family, are eligible for deduction under section 54 while computing long term capital gains. 7.2 We, therefore, examine as to whether 'a residential house' should be treated as 'one residential house' or whether 'more than one residential house' can be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions relating to exemption of capital gains on transfer of self-occupied house property on investment in other house property for self-occupation - section 54 - 19.1 under section 54 of the Income-tax Act, capital gains arising on the transfer of a house property which in the two years immediately preceding the date of its transfer was used by the assessee or a parent of his for self-residence is exempted from income-tax if the assessee within a period of one year before or after that date, purchases or within a period of two years after the date of such transfer constructs a house property for the purpose of his own residence. The exemption of capital gains is restricted to the amount of such capital gain utilised for the purchase or construction of the new house property. Where the amount of capital gain is greater than the cost of the house property so purchased or constructed, the balance amount of capital gains is charged to tax. If, however, the amount of capital gain is equal to or less than the cost of the house property purchased or constructed, the capital gain is completely exempted from income-tax. If such house property purchased or constructed is transferred wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... house or part of house belonging to assessee". It was observed on pages 107 108 thus: "To attract the exemption under clause (iv) of section 5(1) of the Act the house owned by the assessee should be used by the assessee exclusively for residential purpose. In the present case the assessee is a Hindu undivided family consisting of four adult male members. Each of them is occupying one residential unit in the building bearing door Nos. 92 and 92A. It is well settled that though a Hindu undivided family is ordinarily joint not only in estate but also in food and worship, the members of such family need not have a common residence. In other words, the family may continue to remain undivided even though different members of the family are residing separately. If a building otherwise comes within the meaning of the word "house", the mere fact that different members of the Hindu undivided family who own that building, are living separately in different self contained portions thereof, will not, in our opinion constitute that building into many houses." Hence 'a residential house' can contain more than one residential unit and still can be considered 'a residential house' only. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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