TaxTMI 
TaxTMI 
2015 (9) TMI 1010
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....-. The assessee has claimed deduction of Rs. 77,82,600/- u/s.54(2) of the I.T. Act from the capital gain computed by her. According to the AO the deduction u/s.54 of the Act is available only in respect of the capital gain from transfer of a residential house. Since the assessee, in her computation, has even mentioned that the sale consideration is from sale of a residential house the AO held that the contention of the assessee is not correct. The assessee has only transferred her agricultural land and the deduction for purchase of a new property has to be u/s.54F of the I.T. Act. After computing the indexed cost of acquisition at Rs. 34,71,300/- from the sale consideration of Rs. 3,10,50,000/- the AO determined the net capital gain at Rs. 2,25,78,700/-. After deducting an amount of Rs. 69,12,529/- being the proportionate reinvestment of Rs. 77,82,600/- in residential house u/s.54F the AO computed the long term capital gain at Rs. 2,06,66,172/-. 3. The Ld.CIT examined the records and observed that while framing the assessment the AO had allowed the deduction u/s.54F of the I.T. Act to the extent of Rs. 69,12,528/- on investment of Rs. 77,82,600/-. He noted that the assessee had pu....
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....erm capital gains. Various decisions were also relied upon to substantiate that residential house can contain more than one residential unit and still can be considered as a residential house only. 5. However, the Ld.CIT was not satisfied with the explanation given by the assessee. He observed from the records that there is no dispute that at the time of construction there were 2 flats bearing Flat No.13 and Flat No.14 which were purchased by the original buyer Mr. Narsimhamurti Srinivas and Mrs. Krupa Srinivas from the builder vide two agreements dated 04-04-1995 and 07-04-1995. These flats were resold to Mr. Aziz Abdulhussein Lakhani & Mrs. Rosalind Aziz Lakhani through two separate agreements. Even though it is claimed that the combined flats were purchased through single purchase deed the distinction of Flat No.13 and Flat No.14 is still maintained and clarified in the purchase deed. The flat No.13 was purchased for Rs. 28,07,000/- and flat No. 14 was purchased for Rs. 45,93,000/- in the deed itself. Had it been one flat/residential house, as claimed by the assessee, one combined amount should have been paid. He observed from the floor space map furnished during the 263 procee....
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....unsel for the assessee strongly opposed the order passed u/s.263 by the CIT. He submitted that the assessee has submitted all details to the AO including the deed of assignment. The assessee had inadvertently claimed deduction u/s.54 of the I.T. Act which was denied by the AO but he allowed proportionate deduction u/s.54F of the Act by restricting such deduction to Rs. 69,12,528/- instead of Rs. 77,82,600/-. This clearly indicates that the AO has applied his mind and it is only misconception and prejudice of the CIT that the AO has not applied his mind. Referring to the order of the CIT he submitted that the Ld.CIT has accepted that the assessee has submitted floor space map wherein Flat Nos. 13 and 14 have been combined by seller and it is single residential house having single entrance and single kitchen. He submitted that even in one residential house there can be more than two separate kitchens and more than one electric meters for different purposes. He also drew the attention of the Bench to the amendment carried out by the Finance (No.2) Act, 2014 to the provisions of section 54F according to which the words "one residential house in India" are added. This according to the L....
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....t cannot be said that there was no enquiry and that the assessment was therefore erroneous and prejudicial to the interest of the revenue. Referring to the Full Bench decision of the Hon'ble Gauhati High Court in the case of CIT Vs. Jawahar Bhattarcharjee reported in 67 DTR 217 he submitted that the Hon'ble High Court in the said decision has explained the expression "erroneous" assessment in context of section 263 is an assessment made on wrong assumption of facts or on incorrect application of mind or without due application of mind or without following the principles of natural justice. He submitted that in the instant case there is one vendor and one agreement entered. Even though 2 separate considerations were mentioned for all other practical convenience purposes the assessee has not claimed any time that she has purchased one flat but she has purchased 2 adjacent combined flats as one single residential house to invest her capital gains. 11. Referring to the decision of the Special Bench of the Tribunal in the case of ITO Vs. Ms. Sushila Jhaveri reported in 107 ITD 327 (AT) SB) he submitted that the Special Bench in the said decision has held that the exemption u/s.54 and 5....
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....on u/s.54(2) made by the assessee at Rs. 77,82,600/-. A copy of the purchase deed was also before the AO. Therefore, it cannot be said that the AO has not applied his mind on the issue of applicability of deduction u/s.54F on account of 2 adjacent flats. Since at the prevailing time various decisions were available to the proposition that where more than one units are purchased which are adjacent to each other and are converted into one house for the purpose of residence by having common passage, common kitchen etc. then it would be a case of investment in one residential house and consequently the assessee would be entitled to deduction u/s.54F. The Special Bench of the Tribunal in the case of Ms. Sushila Jhaveri (Supra) was dated 17-04-2007 and the assessment order was passed on 30-06-2010. Therefore, the view taken by the AO in the given facts and circumstances cannot be said to be non application of mind. 15. The issue now stands decided in favour of the assessee by the decision of the Hon'ble jurisdictional High Court in the case of Devdas Naik (Supra) where it has been held that where acquisition of 2 flats had been done independently but eventually they were a single unit a....