2013 (12) TMI 1006 - AT - Income Tax

Assessee wins appeal for exemption under section 54, Tribunal cites legal precedents

The Tribunal allowed the assessee's appeal, setting aside the CIT's order disallowing exemption u/s 54 for multiple floors. It held that the denial was ... Order u/s 263 – Held that:- The property transferred by the assessee, which resulted in the impugned capital gain, was co-owned by the assessee and his wife with 50% share each. The assessee’s wife also received equal consideration and equal share in the five floors of the building – Following CIT v. Gita Duggal [2013 (3) TMI 101 - DELHI HIGH COURT] - Relief u/s 54 is available in respect of “a residential house” which should not be restricted to “a residential unit” - A person may construct a house according to his plans and requirements. He may use the ground floor for his own residence and let out the first floor having an independent entry so that his income is augmented – Following Malabar Industrial Co. Ltd. v. CIT 2000 (2) TMI 10 - SUPREME Court] - Where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law – Decided in favour of assessee. Issues:1. Disallowance of exemption u/s 54 for multiple floors claimed by the assessee.2. Jurisdiction of CIT under section 263 in revising assessment orders based on debatable issues.Analysis:Issue 1: Disallowance of exemption u/s 54 for multiple floors claimed by the assesseeThe appeal pertains to the assessment year 2005-2006 where the assessee declared a total income of Rs.38,851, showing long term capital gain at Nil. The dispute arose when the Assessing Officer included the capital gain of Rs.76,64,008 in the total income, challenging the exemption claimed by the assessee u/s 54 and 54EC for investing in new flats. The Commissioner of Income-tax, through notices and subsequent orders, disallowed the exemption for multiple floors claimed by the assessee, stating that only one floor was eligible for the exemption. The Tribunal, after considering the facts and circumstances, referred to the case of the assessee's wife, a co-owner of the same property, where similar exemption claims were allowed for all floors. The Tribunal dismissed the Revenue's Miscellaneous Application, emphasizing that on debatable issues, no revision can be done. Citing legal precedents and the judgment of the Hon'ble Delhi High Court, the Tribunal held that the denial of exemption u/s 54 was a debatable issue and set aside the CIT's order, allowing the exemption claimed by the assessee.Issue 2: Jurisdiction of CIT under section 263 in revising assessment orders based on debatable issuesThe Tribunal analyzed the scope of section 263, emphasizing that similar to section 254(2), it vests jurisdiction in non-debatable issues. Referring to legal precedents, including the decision in Malabar Industrial Co. Ltd. v. CIT, the Tribunal reiterated that when two legally sustainable views exist on a particular point, the CIT cannot revise the assessment order based on a different view unless the view adopted by the Assessing Officer is unsustainable in law. In this case, the Tribunal found that the view taken by the Assessing Officer, allowing the exemption u/s 54, was a possible view. Citing the judgment of the Hon'ble Delhi High Court and the Tribunal's decision in the case of the assessee's wife, the Tribunal concluded that the denial of exemption u/s 54 was not justified under section 263 as it involved a debatable issue. Therefore, the Tribunal allowed the appeal, setting aside the CIT's order.In conclusion, the Tribunal held that the denial of exemption u/s 54 for multiple floors by the CIT was not valid as it pertained to a debatable issue, and the jurisdiction under section 263 could not be exercised on such grounds. The Tribunal's decision was based on legal precedents and the interpretation of relevant provisions, ultimately allowing the assessee's appeal.