2019 (4) TMI 282 - AT - Income Tax

ITAT affirms deductions for two residential properties under Section 54 for AY 2013-14

The ITAT upheld the CIT(A)'s decision, allowing the assessee to claim deductions under Section 54 for two residential properties for the assessment year ... Deduction u/s. 54 in respect of two residential flats - vide amendment to Sec. 54, vide the Finance (No. 2) Act, 2014 with effect from 01.04.2015, “a residential house” was substituted by “one residential house in India” - scope of amendment - HELD THAT:- The case of the assessee for the A.Y. 2013-14 and the amendments in Section 54 of the Act came into the existence by virtue of Finance Act (no. 2) 2014 w.e.f. 01.04.2015. Undoubtedly, the said amendment is not required to be applicable in the case of the assessee which is specifically for the A.Y. 2013-14. Taking into account all the facts and circumstances, we are of the view that the finding of the CIT(A) is quite correct which is not liable to be interfere with at this appellate stage. Accordingly, these issues are decided in favour of the assessee against the revenue. Issues Involved:1. Deduction under Section 54 of the Income Tax Act, 1961 for multiple residential houses.2. Interpretation of 'a residential house' in Section 54 prior to the amendment by Finance (No.2) Act, 2014.3. Applicability of judicial precedents on the interpretation of Section 54.Detailed Analysis:1. Deduction under Section 54 of the Income Tax Act, 1961 for multiple residential houses:The primary issue was whether the assessee could claim a deduction under Section 54 for two residential flats. The assessee had claimed deductions for two properties, one at Chirarichem Bar, Village Anjuna, Goa, and another at Candolim Apartment, Bardez, Goa. The Assessing Officer (AO) allowed the deduction only for one property, leading to the assessee appealing to the CIT(A), who allowed the claim for both properties. The revenue then appealed against this decision.2. Interpretation of 'a residential house' in Section 54 prior to the amendment by Finance (No.2) Act, 2014:The CIT(A) and the ITAT examined whether the term 'a residential house' in Section 54, prior to its amendment effective from 01.04.2015, could mean multiple residential units. The CIT(A) relied on judicial precedents, particularly the cases of Nilesh Pravin Vora and Yatin Pravin Vora vs. ITO, and Brij Bhushan Tayal vs. ACIT, which held that the term 'a residential house' included multiple residential units before the amendment.3. Applicability of judicial precedents on the interpretation of Section 54:The ITAT referred to the decision in Mr. Ravi Shankar Vs. ACIT, where it was held that the pre-amended Section 54 did not restrict the number of residential houses for claiming deductions. The ITAT also cited the Karnataka High Court's judgment in Commissioner of Income Tax Vs. Khoobchand M. Makhija, which interpreted 'a residential house' to include multiple units, supported by Section 13(2) of the General Clauses Act, 1897, which allows singular terms to include the plural.The ITAT further referenced the Madras High Court's decision in CIT Vs. Smt. V. R. Karpagam and the Andhra Pradesh High Court's ruling in CIT Vs. Syed Ali Adil, which confirmed that prior to the amendment, Section 54 allowed for deductions on multiple residential properties.Conclusion:The ITAT concluded that the amendment to Section 54, effective from 01.04.2015, which specified 'one residential house in India,' was not applicable to the assessment year 2013-14. Therefore, the assessee was entitled to claim deductions for both residential properties. The ITAT upheld the CIT(A)'s decision and dismissed the revenue's appeal, affirming that the assessee's claim for deductions under Section 54 for both properties was valid.Final Order:The appeal filed by the revenue was dismissed, and the order was pronounced in the open court on 29.03.2019.