TaxTMI 
TaxTMI 
2018 (11) TMI 629
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....ace, Kandivali(W) for a consideration of Rs. 2,63,79,011/-. The Ld. Assessing Officer disallowed the claimed exemption of Flat No.1502 and allowed with respect to Flats No.1301 and 1401. The Ld. counsel explained that Flats No.1301 & 1401 were duplex for which the claimed exemption was allowed and the exemption for the flat no.1502 was disallowed on the plea that this flat is situated at different floor, by placing reliance upon the decision of the Special Bench of the Tribunal in the case of Income Tax Officer vs Ms. Sushila M. Jhaveri (2007) 107 ITD 321 (SB). The ld. counsel relied upon the decision from Hon'ble High Court of Andhra Pradesh in CIT vs Syed Ali Adil (352 ITR 418)(AP), Hon'ble Delhi High Court in CIT vs Gita Duggal (357 ITR 153(Del.), Hon'ble Karnataka High Court in CIT vs Smt. K. G. Rukminiamma 331 ITR 211 (Karn.). On the other hand, the Ld. DR, strongly defended the impugned order by placing reliance upon the aforesaid decision of the Special Bench of the Tribunal in the case of Ms. Sushila M. Jhaveri ((supra)) and CIT vs Raman Kumar Suri 255 CTR 107 (Bom.). It was contended that Flat No.1502 is situated in the same building on 15th Floor, therefore, d....
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....e orders and find that the Special Bench of the Tribunal in Ms. Sushila M. Jhaveri (2007) 107 ITD 321 (SB) held as under:- "Section 45, which is charging section, uses the expression 'transfer of a capital asset'. Here the word 'a' means 'every', since capital gain of each capital asset has to be computed depending upon the period of holding. Exemption from the levy of capital gain tax is provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F and 54H as is apparent from section 45 itself. A perusal of the provisions of sections 54, 54B, 54D, 54E, 54EA, 54EB and 54F clearly reveals that the Legislature has used the words 'a' and 'any' with reference to investment of capital gain/sale consideration in certain asset or assets. The Legislature was not oblivious regarding the meaning of these two words. The word 'any' has been used by the Legislature in sections 54B, 54D, 54E, 54EA and 54EB while the word 'a' has been used in sections 54 and 54F. This clearly shows that the Legislature intended different meanings to be given to these two words. A close reading of these sections shows that Legislature intended to allow exemption in respect of investment in more than one asset b....
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....assage, common kitchen, etc., then it would be a case of investment in one residential house and consequently, the assessee would be entitled to exemption. [Para 11] In the instant case, the investment was made in two flats located at different localities in Mumbai. Accordingly, the assessee was entitled to exemption in respect of investment in one house only of her choice. The Assessing Officer had already allowed exemption in respect of house, which permitted higher exemption. Therefore, the order of the Commissioner (Appeals) was to be reversed on this issue and the order of Assessing Officer was to be restored. [Para 12] While coming to the aforesaid conclusion, the Bench also considered the following decisions: • K.C. Kaushik v. P.B. Rane, Fifth ITO [1990] 185 ITR 499/ 51 Taxman 51 (Bom.) (para 1), • Ratanchand Murarka v. Jt. CIT [IT Appeal No. 4485 (M) of 1999, dated 12-9-2001] (para 1), • ITO v. Daulat Lutharia [IT Appeal No. 9639 (B) of 1989, dated 16-5-1996] (para 1), • ITO v. Bhupendra Patel [IT Appeal No. 70 (M) of 1995, dated 24-4-2002] (para 1), • Fulwanti C. Rathod v. ITO [IT Appeal No.....
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....oring the fact that rates adopted by the A.O. as from Nabhi's Guide to house to Delhi based on L& DO rates is more in consonance with the FMV? (c) Whether the Tribunal was justified in upholding the findings of the Commissioner of Income Tax (Appeals) to adopt the FMV as per register valuer ignoring the fact that the valuer has not given any reasons for not adopting the Government approved rates in absence of comparable sales instances? (d) Whether the Tribunal was justified in approving the decision of Commissioner of Income Tax (Appeal) to determine the cost inflation index of the property as on 1/4/1981 ignoring the fact that as per clause 3 of the inflation given in Section 48 of the Income Tax Act benefit of indexation can be given only from the year 1999 which is the year when the assessee inherited the property and became the owner and not from 1974? (e) Whether the Tribunal was justified in confirming the decision of Commissioner of Income Tax (Appeals) in allowing the exemption u/s. 54 for investment in two new flats viz. 416A and 516A by treating the same as one single unit ignoring the fact that the assessee purchased two different flats in....
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....g arrived at between the brothers is a legally binding document, which also finds mention in the sale deed dated 14/10/2005 under which New Delhi property was sold. The Commissioner of Income Tax (Appeals) held that by virtue of Memorandum of Understanding it is clear that the income of Rs. 1 crores was diverted before it reached the respondent and is thus not includable in the respondent's income. (e) In Appeal, the Tribunal by its order dated 30/4/2010 upheld the finding of the Commissioner of Income Tax (Appeals). The Tribunal also recorded the fact that the additional amount of Rs. 1 crores received by the brother of the respondent had been offered to tax by the brother and the same was duly accounted as his income under the head capital gain. The Tribunal observed that the assessment cannot be based on the perception of the Assessing officer that the assessee should have received Rs. 7 crores as sale consideration. The assessment can only be on the actual amount received by the assessee, the respondent assessee has sold his share in the New Delhi property at Rs. 6 crores only and that alone can be the sale consideration. (f) We find no f....
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....thetical buyer in a hypothetical market. The Commissioner of Income Tax (Appeals) held that the registered valuer's report could not be doubted as it explained the basis for adopting the value and the appellant had demonstrated that New Delhi property enjoyed a better value because of its location. The Commissioner of Income Tax (Appeals) held that Nabhi's Guide to House Tax was not applicable specially in view of the valuation report given by the registered valuer which has not been found to be incorrect. Consequently, the registered valuer's report valuing the New Delhi property at Rs. 47.74 lacs as its fair market value on 1/4/1981 was accepted and the fair market value of Rs. 17.33 as on 1/4/1981 as arrived at in the assessment order dated 22/12/2008 was not accepted. (c) In appeal, the Tribunal by its order dated 30/4/2010 upheld the finding of the Commissioner of Income Tax (Appeals). The Tribunal held that Nabhi's Guide to House Tax cannot be substituted for the valuation of the New Delhi property done by an empanelled valuer of the Income Tax Department for the purpose of valuation of the property. The Tribunal upheld the finding of the Com....
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....nvestment in one residential house only. Further the fact that two flats had been joined and made into one flat would not be considered to be purchase of one flat but would be purchase of two separate flats. Consequently, the Assessing officer restricted the exemption to only Rs. 1.45 crores as according to him Section 54 of the Act exempts investment in a residential house i.e. one residential house only. (b) In appeal, the Commissioner of Income Tax (Appeals) by his order dated 4/5/2009 held that the respondent herein is entitled to the benefit of exemption under Section 54 of the Act to the extent of Rs. 3 crores as claimed in the return of income. This was on the basis that the respondent herein had produced a Certificate of Co-operative Society that two flats were inter connected by internal stair case. The site plan was also submitted inter alia showing only one entrance gate and one kitchen. The duplex flat Nos. 416A and 516A was purchased on as is and where is basis and the assessee had not joined the said two flat internally after acquiring the flats. The flats were inter connected by the previous owner only and therefore, the fact that there were two different fl....
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.... held as under:- "This appeal is filed under section 260-A of the Income Tax Act, 1961 (for short 'the Act') by the Revenue challenging the order dated 09-09-2011 in I.T.A.No.284/Hyd/2011 of the Income Tax Appellate Tribunal, Hyderabad Bench "B", Hyderabad. 2. The respondent is an individual assessee. He filed his return of income for the assessment year 2007-08 on 31-08-2007 with the Assistant Commissioner of Income Tax, Circle-VI (1), Hyderabad admitting therein a net income of Rs. 43,97,840/-. The said return was processed under section 143(1) of the Act on 24-02-2009. Meanwhile, the case was taken up for scrutiny by issuing notice dt.25-08-2008 under section 143(2) of the Act. A notice dt.15-06-2009 under section 142(1) was issued calling for various details. 3. Before the Assessing Officer, the assessee offered under the head, long term capital gains, a sum of Rs. 41.00 lakhs contending that he had inherited an ancestral house property which was sold during the year under consideration and the resultant long term capital gains were offered from sale of the said house; that he had taken the sale consideration of Rs. 1,99,50,000/- for ....
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....m.), ITO v. P.C. Ramakrishna, (HUF) [2007] 108 ITD 251 (Chennai) and Prem Prakash Bhutani v. Asstt. CIT [2009] 31 SOT 38 (Delhi) (URO) 7. Challenging the same, the Revenue has filed the present appeal. 8. Heard Sri B. Narasimha Sarma, learned Standing Counsel for the Income Tax Department at the stage of admission. 9. He contended that the deduction under section 54 of the Act is allowable only for one residential house and not for more than one residential house and that the Tribunal erred in holding that the deduction under section 54 of the Act is allowable for two independent residential flats in the same complex. He also placed reliance on the decision of the Special Bench of the Tribunal in ITO v. Ms. Sushila M. Jhaveri [2007] 107 ITD 327 (Mum.) 10. We see no force in the said contention. As held in D. Ananda Basappa's case (supra) by the Karnataka High Court, the expression "a residential house" in section 54 (1) of the Act has to be understood in a sense that the building should be of residential nature and "a" should not be understood to indicate a singular number and where an assessee had purchased two residential flats, he is entit....
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....nda Basappa (2009) 309 ITR 329 held as under:- "The revenue has filed the appeal under Section 260A of the Income Tax Act, 1961 against the order dated 07.06.2001 passed by the Income Tax Appellate Tribunal in ITA 3613/Del./2010 for the assessment year 2007-08. 2. The assessee which is the respondent in the appeal is an individual. In the computation of income filed along with the return of income, she declared long term capital gains of Rs. 2,68,25,750/- in the following manner :- "Income from Capital Gain Long Term A 22 WESTEND COLONY Consideration as per Collaboration Agreement 40,000,000.00 Less Index cost for pur. of Rs. 1575000 (Fair Value as on 1-04-81) 8,174,250.00 31,825,750.00 Less : Exemption under section 54EC (REC Bonds) 5,000,000.00 26,825,750.00" While completing the assessment the assessing officer took the view that on the terms of the agreement entered into with M/s Thapar Homes Ltd. on 08.05.2006, the cost of construction of the building incurred by the aforesaid company which was the developer of the property would also be included in the total sale consideration. The assessee ....
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....unit by treating the units as two separate residential properties. " The Tribunal confirmed the decision of the CIT (Appeals) by observing as under: - "6. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that ld. counsel of the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of the Hon'ble Karnataka High Court in the case of CIT & Anr.v. Smt. K.G. Rukminiamma in ITA No.783 of 2008 vide order dated 27.8.2010 wherein it was held as under :- "The context in which the expression 'a residential house' is used in Section 54 makes it clear that, it was not the intention of the legislation to convey the meaning that: it refers to a single residential house, if, that was the intention, they would have used the word "one." As in the earlier part, the words used are buildings or lands which are plural in number and that: is referred to as "a residential house", the original asset. An asset newly acquired after the sale of the original asset also can be buildings or lands appurtenant thereto, which also should be "a residential house." Therefor....
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....errace at its own costs and expenses. In addition to the cost of construction incurred by the builder on development of the property, a further payment of Rs. four crores was payable to the assessee as consideration against the rights of the assessee. The builder was to get the third floor. The assessee accordingly handed over vacant physical possession of the entire property along with 22.5% undivided interest over the land. The handing over of possession of the entire property was however only for the limited purpose of development; the undivided interest in the land stood transferred to the developer/builder only to the extent of 22.5% for his exclusive enjoyment. It was on these facts that the assessing officer first took the view that the sale consideration for the transfer of the capital asset should be taken not merely at Rs. four crores which was the cash amount received by the assessee, but the cost of construction incurred by the developer on the development of the property amounting to Rs. 3,43,72,529/- should also be added to the sale consideration. The assessee thereupon claimed that if the cost of construction incurred by the builder is to be added to the sal....
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....come final, the special leave petition filed by the revenue against the said decision having been dismissed by the Supreme Court as reported in the annual digest of Taxman publication. The judgment of the Karnataka High Court supports the contention of the assessee. An identical contention raised by the revenue before that Court was rejected in the following terms : "A plain reading of the provision of section 54(1) of the Incometax Act discloses that when an individual-assessee or Hindu undivided family- assessee sells a residential building or lands appurtenant thereto, he can invest capital gains for purchase of residential building to seek exemption of the capital gains tax. Section 13 of the General Clauses Act declares that whenever the singular is used for a word, it is permissible to include the plural. The contention of the Revenue is that the phrase "a" residential house would mean one residential house and it does not appear to the correct understanding The expression "a" residential house should be understood in a sense that building should be of residential in nature and "a" should not be understood to indicate a singular number. The combined....
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....arrange for his children and family to stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. There may be several such considerations for a person while constructing a residential house. We are therefore, unable to see how or why the physical structuring of the new residential house, whether it is lateral or vertical, should come in the way of considering the building as a residential house. We do not think that the fact that the residential house consists of several independent units can be permitted to act as an impediment to the allowance of the deduction under Section 54/54F. It is neither expressly nor by necessary implication prohibited. For the above reasons we are of the view that the Tribunal took the correct view. No substantial question of law arises for our consideration. The appeal is accordingly dismissed with no order as to costs." 2.6. In the light of the above decisions, it is our bounded duty to examine section 54F of the Act as was applicable during the impugned Asse....
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....hases, within the period of 7 [two years] after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head "Income from house property", other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of....
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....substituted with 'one residential house'. 2.7. If the aforesaid section is analyzed section 54/54F uses the expression 'a residential house' as was applicable during the impugned Assessment Year. The expression used is not 'a residential unit'. This is a new concept introduced by the Assessing Officer into the section. Section 54/54F requires the assessee to acquire a 'residential house' and so long as the assessee acquires a building, which may be constructed, for the sake of convenience, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the section should be taken to have been satisfied. There is nothing in these sections which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use. If there is nothing in the section which requires that the residential house should be built in a particular manner, it seems that the income-tax authorities cannot insist upon that requirement. A person may construct a house according to his plans and ....
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.... use of plural by virtue of Section 13(2) of the General Clauses Act. CIT v. D. Ananda Bassappa[2009] 223 (kar) 186 : [2009] 20 DTR (Kar) 266 followed. In the present appeal, no doubt flat No.1502 is situated at 15th Floor while the other flats were situated on 13th & 14th Floor of the same building and the claimed deduction was rejected by the Ld. Assessing Officer with respect to flat situated in 15th Floor by holding that it is separate and residential unit having separate entrance, therefore, it is a separate unit, consequently, cannot be considered as one unit to enable the assessee to claim the deduction. The fact remains that all the three flats are in the same building and also are situated on floors above each other i.e. 13th, 14th & 15th Floor, while the flats at 13th & 14th Floor are duplex flats joined with each other but the fact remains the third flat is situated on the immediate next floor i.e. 15th floor of the same building which is in the immediate vicinity. This question has been settled by Hon'ble Delhi High Court in the aforesaid order in CIT vs Gita Duggal ((supra)) and also by Hon'ble By Karnataka High Court ((supra)). It is further noted that the SLP....