2018 (4) TMI 1616 - AT - Income Tax

Tribunal grants deduction under Section 54F for all flats in Joint Development Agreement

Shri. T.A.V. Gupta, Versus The Income-tax Officer, Ward – 1, Tiptur.

Shri. T.A.V. Gupta, Versus The Income-tax Officer, Ward – 1, Tiptur. - TMI Issues Involved:1. Interpretation of 'a residential house' under Section 54F of the Income Tax Act.2. Applicability of the amendment to Section 54F by the Finance (No.2) Act, 2014.3. Eligibility for deduction under Section 54F for multiple residential units.Detailed Analysis:1. Interpretation of 'a residential house' under Section 54F of the Income Tax Act:The primary issue in this case revolves around the interpretation of the term 'a residential house' as used in Section 54F of the Income Tax Act. The assessee argued that the acquisition of six flats under a Joint Development Agreement (JDA) should be considered as 'a residential house' for the purpose of claiming deduction under Section 54F. The Assessing Officer (AO) disagreed, stating that the term 'a residential house' implies only one residential unit, and acquiring six flats violates the conditions stipulated in Section 54F.The Tribunal referred to the decision of the Karnataka High Court in the case of K.G. Rukminiamma, where it was held that multiple residential units obtained under a single agreement can be considered as 'a residential house' for the purpose of Section 54. The Tribunal noted that the facts of the assessee's case were similar to those in K.G. Rukminiamma, where the court had ruled that four flats obtained under a JDA constituted 'a residential house' and were eligible for deduction under Section 54.2. Applicability of the amendment to Section 54F by the Finance (No.2) Act, 2014:The AO contended that the amendment to Section 54F by the Finance (No.2) Act, 2014, which changed the term 'a residential house' to 'one residential house,' was clarificatory and applicable retrospectively. However, the assessee argued that the amendment was prospective, applicable only from Assessment Year (AY) 2015-16 onwards.The Tribunal referred to the decision of the Madras High Court in the case of V.R. Karpagam, where it was held that the amendment to Section 54F was prospective and applicable only from AY 2015-16. The Tribunal agreed with this view, stating that the amendment could not be applied retrospectively to the assessee's case for AY 2014-15. The Tribunal also noted that similar views were taken by the Delhi High Court in the case of Gita Duggal and the Andhra Pradesh High Court in the case of Syed Ali Adil.3. Eligibility for deduction under Section 54F for multiple residential units:The Tribunal examined whether the assessee's claim for deduction under Section 54F for six flats was valid. The CIT(A) had relied on the decision of the Karnataka High Court in the case of Khubchand M. Makhija, where it was held that the acquisition of two independent residential houses did not qualify for deduction under Section 54F. However, the Tribunal distinguished the facts of the assessee's case from those in Khubchand M. Makhija, noting that in the present case, all six flats were situated in the same premises.The Tribunal concluded that the decision in K.G. Rukminiamma was more applicable to the assessee's case, as the flats were part of a single residential building and should be considered as 'a residential house' for the purpose of Section 54F. Therefore, the assessee was entitled to deduction under Section 54F for all six flats.Conclusion:The Tribunal allowed the appeal of the assessee, holding that the assessee was entitled to deduction under Section 54F for all six flats obtained under the JDA. The Tribunal emphasized that the amendment to Section 54F by the Finance (No.2) Act, 2014, was prospective and not applicable to the assessee's case for AY 2014-15. The Tribunal relied on the judicial precedents set by the Karnataka High Court in K.G. Rukminiamma and the Madras High Court in V.R. Karpagam to support its decision.