TaxTMI 
TaxTMI 
2017 (10) TMI 1392
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....o.18-C, Polaris, Tata Aquila Heights, HMT Road, Jalahalli, Bangalore and second apartment bearing No.3032, Block B, Prestige Silverdale, Sarjapur Road, Bangalore for a consideration of Rs. 1,29,73,596 and Rs. 1,34,00,000 respectively total amounting to Rs. 2,63,73,596. Accordingly, the assessee claimed the deduction under Section 54 of the Act in respect of both the apartments purchased by the assessee and against the entire capital gain arising from sale of house property. The Assessing Officer denied the claim of the assessee for the second apartment and restricted the benefit under Section 54 only for one flat at Prestige Silverdale which is of higher value of two. Thus the Assessing Officer assessed the balance capital gain of Rs. 65,39,851 to tax. The Assessing Officer was of the view that the assessee has purchased two flats in two different locations and claimed exemption under Section 54 of the Act which is not permissible. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) and relied upon the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. Rukmaniamma 331 ITR 211. The assessee also relied upon the decision of Hon&#....
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....parate flats in two different localities and further both the flats are not used for residential purpose of the assessee but one flat was let out by the assessee. The decisions of Hon'ble High Court in the peculiar facts of those cases cannot be applied in the present case. He has referrd to the decision of Hon'ble jurisdictional High Court in the case of K.G Rukmaniamma (supra) and submitted that in the said case all four flats were in the same building and contiguous and the same were treated by the Hon'ble High Court as adjacently situated therefore would constitute a residential house. 6. Similarly in the case of DCIT Vs. Khoobchand M Makhija 223 Taxman 189, the Hon'ble High Court has decided the issue on the basis of peculiar facts of the case and has observed in para 18 that their decision cannot be read as a singular unit or a multiple so as to avoid paying tax under Section 45 of the Act. He has relied upon the decision of Hon'ble Punjab & Haryana High Court in the case of Pawan Arya Vs. CIT 200 Taxman 66, the decision of Special Bench of Mumbai Bench of this Tribunal in th case of ITO Vs. Ms. Sushila M Jhaveri 107 ITD 327 and decision of the Chennai ....
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....orated in the statute. Therefore there is no quarrel on this principle so far as liberal meaning has to be given to the provisions for achieving the object and purpose and to the extent the investment has been made by the assessee in the construction of house well within the period prescribed under Section 54/54F then even if the house was not completed in all respects but the assessee has already incurred the entire expenditure then the benefit of section 54/54F cannot be denied. 8. In the case of the assessee two flats were purchased in different localities and undisputedly no connection or nexus with each other then the case of the assessee has to be decided by considering the purpose, objective and scheme of provision as incorporated in the statute. The provision does not restrict the assessee from buying more than one asset but this incentive is provided under Section 54/54F only against the property so purchased or constructed for his residential purpose. Therefore these provisions will apply in the case of house property which is purchased or constructed for the assessee's own residential purpose. This intention of the legislature is clear from the fact that the benef....
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.... the legislature has provided that profits or gains derived from each and every transfer of a capital asset is not to be brought to tax. If a house property, which was used mainly for the purpose of the assessee's or his parent's own residence during the prescribed period, is transferred and the assessee, within the stipulated timelimit, purchases or constructs a new property for the purpose of his own residence, then, the surplus resulting upon the sale of the old house property is not to be brought to tax, for the transaction is in reality a case merely of change of capital asset without change of purpose and the resultant profit is ploughed back into the acquisition of a new capital asset of same nature for a similar purpose. The legislative object in enacting the exemption provisions is thus clear that when an assessee utilises the surplus money realised on the sale of the old house property, which was mainly in his or his parent's selfoccupation, for acquiring a new house property, which he purchases or constructs with the end in view of his own immediate residential purpose, then, he should not be made subject to the charge of capital gains. In order to effectuate....
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....d, the Court or the Tribunal or the authorities have to keep in mind the facts of the particular case. When we have held "a" cannot be read as singular, it also cannot be read as multiples and so as to avoid paying tax under Section 45 of the Act. Therefore, in the facts and circumstances of this case, we answer the first substantial question of law raised in favour of the assessee and against the Revenue." The peculiar facts of the said case has been considered by the Hon'ble High Court is that the assessee had grown up children therefore, the assessee purchased houses for his two sons to avoid future disputes and litigation and after considering those peculiar facts, the Hon'ble High Court has held that it was not a case where the assessee attempted to avoid tax but even after purchasing two residential houses still there remains unutilized capital gain which was offered to tax. Accordingly having regard to the residential need of the family of the assessee, the Hon'ble High Court has considered these two houses as a single residential house for the purpose of Section 54/54(1) of the Act. It was specifically made clear by the Hon'ble High Court that while inter....
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....exemption under section 54 in respect of one property only and no question has been raised by learned Authorised Representative regarding the choice of the property or the factual aspect of the matter. 7. So it relates to the decision relied upon by learned Authorised Representative of Hon'ble Karnataka High Court in the case of CIT v. D. Anand Basappa, it may be mentioned that the said case cannot be applied to the case of the assessee on the ground that in that case the two houses purchased by the assessee were not independent properties and a factual finding has been recorded that the two apartments which were claimed to be exempted against sale consideration were situated side by side and it was also stated by the builder in that case that he has effected modification of the flats to make it as one unit by opening the door in between two apartments. On these facts, the Hon'ble High Court has observed that the fact that at the time when Inspector inspected the premises, the flats were occupied by two different tenants is not the ground to hold that apartment is not one residential unit. The fact that the assessee could have purchased both the flats in one single sale ....