TaxTMI 
TaxTMI 
2019 (7) TMI 1610
X X X X Extracts X X X X
X X X X Extracts X X X X
....order which resulted in enhancement of Assessment without issue of Notice u/s. 251(1) of the Act on the above issue. Rs. 5,77,188/- 4. The Appellant craves leave to add, alter, amend and delete any of the grounds at the time of hearing. Total tax effect (see note below) Rs. 21,57,182/- 3. Brief facts till the assessment stage are noted by CIT(A) in para 4 of his order and the same is reproduced hereinbelow for ready reference. "4. The Appellant had sold a vacant site situated in a Layout formed by the Reserve Bank of India Staff Co-operative Society Ltd., Kothanur Village. Uttarahalli Hobli, Bangalore south Taluk through a Registered Sale Deed dtd: 03-04-2014 for a sale consideration of Rs. 90,00,000/-, The Appellant after sale of the Original Asset, has purchased. a Flat in an Apartment called Dhansu Classic, Nayanahalli, Banerughatta Road, Bangalore through a Registered sale deed dtd: 25-04-2014 for a consideration of Rs. 30,98,100/-. The Appellant in addition to the purchase of the above property has also purchased another flat in the Apartment called "M.S. Royal" situated at Sy. No. 7/4, Arekere Ward No. 193, in Arekere Village, Begurli, Bangalore South Taluk, B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....041/Bang/2017 dated 25.10.2017, copy available on pages 83 to 95 of paper book. In particular, our attention was drawn to internal page no. 8 of this Tribunal order which is highlighted by him as available on page no. 90 of the paper book and pointed out that it was held by the Tribunal in this case that in the case of more than one property purchased by the assessee, the option is available with the assessee to claim benefit u/s. 54 in respect of residential house purchased for assessee's own residence. He submitted that since as per this Tribunal order, the option is available with the assessee, even if it is held that deduction is allowable in respect of one property, the same should be allowed in respect of second property purchased by the assessee on 28.04.2014 and not in respect of first property purchased on 25.04.2014. The ld. DR of revenue supported the order of ld. CIT(A). Reliance was placed by him on the Tribunal order rendered in the case of Rusi N. Billimoria as reported in 27 SOT 40. 6. We have considered the rival submissions. First of all, we reproduce para nos. 6.1 to 6.5 of the impugned order of CIT(A) because the decision of CIT(A) is contained in these paras a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erty, other than the new asset, within a period of one year after the date of transfer of the original asset. In view of this provision, as you have purchased two residential flats within one year from the date of transfer of the land (original asset), your claim for exemption u/s 54F is liable to be rejected. 3. In view of above, you are hereby given an opportunity to make your submission, if you so desire, either in person or through your authorised representative before the undersigned on 14-09-2018 at 3.00PM. A written submission can also be filed if you do not want to appear in person. 6.3 The appellant has filed a written submission in this office on 26-09- 2018 which is reproduced below: 1. The Appellant in response to the letter dtd: 21-08-2018 begs to file the following objection against the proposed disallowance of deduction under clause (ii) of the proviso provided to section 54F of the Act as under. 2. The Appellant has already filed a detailed Written Submissions dtd: 24-07-2018 placing reliance on the following decisions. i. The Judgment dtd: 04-07-2014 of the Hon'ble High Court of Karnataka in the case of B. Srinivas v/s. ITO Ward- 3(3) Bangalore in ITA....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sion envisaged as 254F in the Act and therefore the quoted provision as to 254F (1) is not applicable. 7. The Appellant was directed to file a submissions on or before 14- 09-2018 and on the said date the Appellant appeared in the office. but unable to meet the CIT(A) since he was on official duty away from Bangalore. 6.4 The submission of the appellant has been considered. However, in view of the amendment in the provision wef 01-04-2015, the appellant will not be entitled for deduction u/s 54F for two residential houses. Further, as the appellant has invested in purchase of two residential properties within one year of sale of the original asset, as per proviso (a) (ii) to section 54F(1), the loses the entitlement to claim deduction u/s 54F. Clause (ii) (a) of the proviso to section 54F(1) provides that nothing contained in this sub-section shall apply where the assesses purchases any residential property, other than the new asset, within a period of one year after the date of transfer of the original asset. From the wordings of the clause, it is clear that on satisfaction of the condition mentioned therein, the case of the assessee for exemption will be lost at the very outs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stment made in the aforesaid 2 properties placing reliance on the judgment dtd: 04-07-2014 of the Hon'ble High Court of Karnataka in the case of B.Srinivas v/s. ITO Ward - 3(3) Bangalore in ITA No. 1134/2008. In the said judgment the Hon'ble High Court of Karnataka has allowed reinvestment made in two houses situated in the same locality. However the Ld. AO has rejected the Appellant's claim for deduction in respect of Reinvestment made in two properties being Residential Houses in the same locality on the ground that the provision of section 54F was amended with effect from 01-04-2015 and accordingly the Appellant was entitled for deduction in respect of Re- Investment relating to One Residential House. 6.The AO in view of the amended provision w.e.f 01-04-2015 has allowed deduction in respect of investment made on a property purchased on 25-04-2014 amounting to Rs. 30.98,100/- and disallowed the deduction in respect of the second property purchased on 28-04- 2014 for a consideration of Rs. 55,74,770/- inclusive of Stamp duty, registration fee and other incidental expenses. 7. The Ld. AO was of the view that the decision of the Hon'ble High Court of Karnataka i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e locality and therefore the entire reinvestment of Rs. 86,72,870/- is allowable. 9. Without Prejudice to the above submissions, the Appellant submits :nat the Appellant's claim for reinvestment amounting to Rs. 55.74,770/- ought to have been allowed by the AO in respect of the reinvestment made in purchase of Second house through a registered sale deed dtd: 28-04-2014 ignoring the reinvestment made of Rs. 28.85,940/- (exclusive of Stamp Duty and Registration Fee) in the First house purchased on 25-04-2014. 10. The Appellant has filed an Appeal before the Ld. CIT(A) Bangalore- 7 against the Assessment Order and disputed that the AO was not justified to allow the deduction only in respect of One Residential House purchased on 25-04-2014 rejecting the Appellant's claim for the deduction in respect of investment made on 28-04-2014 amounting to Rs. 55,74,770/- in purchase of a second house. 11. The Ld. CIT(A) in the Appellate Order dtd: 01-10-2018 has held that :ne Appellant has contravened the proviso (a)(ii) of section 54F (1) and accordingly the Appellant was not entitled for deduction in respect of the Reinvestment made in two house properties. In view of the said fin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....claim the benefit u/s. 54 in respect of the residential house purchased. A Copy of the order of the Hon'ble ITAT Bangalore in the above case is placed at Page No. 83 to 95 of Paper Book (the relevant page 8 of the Order). 15. The Appellant submits that as per the decision dtd: 25-10-2017 of the Hon'ble ITAT in the above case, the appellant is entitled for the deduction in respect of the second property purchased on 28-04-2014 and therefore it is prayed that this Hon'ble Bench be pleased to pass order setting aside the Appellate Order of the Ld. CIT(A) dtd: 01-10- 2018 and further be pleased to direct the AO to allow the deduction u/s. 54F of the Act, amounting to Rs. 55,74,770/- relating to the reinvestment made in purchase of the second property as per sale deed dtd: 28-04-2014 in the interest of equity and justice." 8. We first decide this issue as to whether the assessee is eligible for deduction u/s. 54F in respect of both the house property purchased by the assessee or not because if it is found by us that the assessee is eligible for deduction u/s. 54F in respect of both house properties then the proviso (a)(ii) to section 54(1) will not be applicable in the pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce was placed on a judgment of Hon'ble Rajasthan High Court rendered in the case of CIT vs. Laxman Singh, 159 ITR 983. Hon'ble Karnataka High Court observed in this judgment that this judgment of Hon'ble Rajasthan High Court supports the case of the assessee but in spite of this, it was held by Hon'ble Karnataka High Court that in line with the view taken by Hon'ble Gujarat High Court in the case of Maneklal Vallabhdas Parekh, 72 ITR 637, it is held that though the subject of the charge is the income of the previous year, the law to be applied is that in force in the assessment year unless otherwise stated or implied. 10. After holding this that the assessee is not eligible for deduction u/s. 54F (1) in respect of both the house properties purchased by the assessee on 25.04.2014 and 28.04.2014, we have to examine and decide the applicability of the proviso (a)(ii) to section 54F (1). For ready reference, we reproduce the proviso to section 54F (1). The same is as under. "Provided that nothing contained in this sub-section shall apply where- (a) the assessee,- (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; o....