TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 220
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....g purchased. (ii) The largest available flat under one agreement in terms of area was a maximum of a four bedroom flat, which alone was insufficient for the family members comprising 10 members. Accordingly, two adjacent flats of 3 bedroom each, which suited the requirements of the family of Your Appellants were decided to be acquired with the intention and pre - condition of being permitted to make and use the same as one residential unit. (iii) It is a recorded fact that as part of the composite transaction, a confirmation was received from the builder stating that the two adjacent flats are in fact one single residential unit. 2. During the AY under consideration, the assessee has sold the residential flat for Rs. 8.5 crores and had claimed exemption under section 54 of the Income Tax Act (for short 'the Act') by investing in two residential properties at 3103 & 3104 in Tower T-4, Crescent Bay, Parel, Mumbai. The Assessing Officer (AO) has given the show-cause notice and asked the assessee why the benefit of section 54 be given to the assessee after the amendment 01.04.2015. The assessee filed the reply, after considering the reply of the assessee, the AO had denied the ben....
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.... to the assessee under section 54 of the Act. 6. Feeling aggrieved by the assessment order passed by the AO, the assessee preferred the appeal before the CIT(A), CIT(A) had considered the submission made by the assessee, however, the same were rejected by the CIT(A) , in the order it was mentioned as under : "6.1 The assessee has entered into two separate Agreements for purchase of flat Mo. 3104 & 3103 at Crescent Bay, T-4, Parel, Mumbai. 6.2. The assesee's A.R. has stated that section 54 was amended w.e.f. A.Y.2015-16, that itself states that the assessee was aware of the amendment in the Act. .... 6.3.It is seen from the attachment enclosed vide letter dtd. 4/12/2017 that the assessee had received allotment letters on 24/01/2015 and on 13th January, 2015 in respect of flat bearing No. 3103 & 3104 in Tower T-4 in Crescent Bay, Parel, Mumbai i.e. after section 54(1) was substituted by the Finance (No. 2) Act, 2014. W.e.f. 01.04.2015. 6.4. As per the Approved plan, the flats are having two separate kitchen and two separate entrance. The assessee was well aware of this fact while entering in to the agreement. 6.5. During the assessment proceedings the assessee furnished a ....
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....plaining the amendment to sec. 54(1) by Finance Act, 2014 w.e.f. 01.04.2015. A bare reading of the memorandum will absolutely leave no doubt as to the clear intention of the legislature. The same is extracted below: Extract of memorandum explaining amendment to sec.54(1) "Capital gains exemption in case o investment in a residential house property. The benefit was intended for investment in one residential house within India. Accordingly, it is proposed to amend the aforesaid subsection (1) of section 54 so as to provide that the rollover relief under the said section is available if the investment is made in one residential house situated in India. It is further proposed to amend the aforesaid sub-section (1) of section 54F so as to provide that the exemption is available, if the investment is made in one residential house situated in India. 5.8. It is also pertinent to note that it is a trite law that wherever the intention of the legislature is clear and unambiguous, then in such a case the RULE OF LITERAL CONSTRUCTION, has to be applied which states that the expressions used in a statute have to be given their ordinary meaning. In the instant case after the amendmen....
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....earlier law relating to the liberal interpretation of the provisions now stands overruled. Moreover, it is also pertinent to note that it is a trite law that each judicial decision is rendered in the very peculiar and factual matrix of that case and therefore it is not either judicially expedient or prudent to superimpose the facts of the various case laws cited. In this sense, each case is undisputedly unique and stands on different pedestal. 5.12 Further, it would be pertinent to note that where the language is clear the intention of the Legislature is to be gathered from the language used. A construction which requires, for 'its support, addition or substitution of words or which results in rejection of words, has to be avoided, unless it is covered by the rule of exception, including that of necessity (see Gwallor Rayon Silk Mfg. (Wug.) Co. Ltd. v. Custodian of Vested Forests, Palghat A/R 1990 SC 1747; Smt. Shyam Kishori Devi v. Patna Municipal Corporation AIR 1966 SC 1678; A.R. Antulay v. Ramdas Sriniwas Nayak [1984] 2 SCR 914). Indeed the Court cannot reframe the legislation as it has no power to legislate (State of Kerala v. Mathai Verghese[1987] 1 SCR 317; Union of India ....
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....interpreted is somewhat fitted; they are not entitled to usurp legislative function under the disguise of interpretation (D.R. Venkatachalam v. Deputy Transport Commissioner 1977 SC 842);. 5.15. In view of the above factual and legal matrix, I find that the action of the AO in making the impugned disallowance cannot be faulted and as such the restriction of the deduction u/s.54(1) to only one residential house is upheld. Consequently, the ground nos. 1,2 & 3 stand DISMSISED." 8. Now filling aggrieved by the order passed by the CIT(A), the assessee is in appeal before us for the grounds mentioned herein above 9. At the time of hearing, the ld. AR for the assessee has submitted that the issue is covered in favour of the assessee by virtue of the decision of the Hon'ble Bombay High Court in the matter of CIT Vs. Devdas Naik in ITA No. 2483/2011 wherein our attention was drawn to para-4 of the assessment order to the following effect: "4. We are unable to agree. We found that the evidence based on which the claim was granted by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal has been noted by the Tribunal in paragraph 4 of its order. Prior thereto, ....
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....held as under: "7. We have heard the rival contentions of both the parties and perused the materials available on records. There is no dispute to the facts of the case as discussed above. Therefore, we are not inclined to repeat the same for the sake of brevity. The issue in the present case relates whether the assessee is eligible for exemption under section 54F of the Act against the long-term capital gain for the investment made in the two properties which are adjacent to each other and used as one residential unit. Indeed, the provision of law requires that the exemption will be available to the assessee under section 54F of the Act for the investment in one residential unit. 7.1. Admittedly, there are 2 units bearing separate numbers which were purchased by the assessee out of the long-term capital gain income. Both the units are adjacent to each other and the same are used single residential unit. Thus the question arises, exemption provided under section 54F of the Act can be denied to the assessee merely on the ground that there were two registries of the properties. In our considered view, the answer stands in favour of the assessee in the present facts and circumstanc....
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....of capital gain tax. However, the proviso to section 54 of the Income-tax Act, lays down that if the assessee has already one residential building, he is not entitled to exemption of capital gains tax, when he invests the capital gain in purchase of additional residential building." 7.4. In view of the above and after considering the facts in totality, we are of the view that the assessee is entitled for the exemption provided under section 54F of the Act in the present facts of circumstances. Hence, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Thus, the ground of appeal of the assessee is allowed." 11. It was submitted by the ld. AR that the assessee though had purchased two adjacent units, however, later on he had converted the said two adjacent units into one unit for the purposes of making the space available to the large family of the assessee . At this point of time, the Bench had directed the ld. AR to file the following three documents: (i) The sanctioned plan, if any approved by the local municipal authority permitting the assessee to merge the two residential units into one. (ii) The current layout plan of t....
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.... law has been amended. The amended provision reads as under: "54. (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date 3 constructed, one residential house in India, ........ A perusal of the above, would clearly reveal that the amendment has been only substitution of the words 'a residential house' by the words 'one residential house' Now, reverting back to facts, as stated earlier, the assesse has purchased two adjacent units viz. 3103 & 3104 and converted the same into one residential house. In other words, the assesse purchased one residential house consisting of two units and therefore, the requirements of the provisions ....
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....oses and therefore, deduction u/s. 54 was allowable, being a finding of fact, did not give rise to a substantial of law." 6 CIT v. Syed Ali Adil(AP) (HC) (2013) 260 CTR 219 The Honorable High Court of Andhra Pradesh held that "he is entitled to exemption u/s. 54 in respect of capital gains on sale of its property on purchase of both flats, more so, when the flats are situated side by side and the builder has effected modification of the flats to make it as one unit, despite the fact that the flats were purchased by separate sale deeds." 7 Commissioner of Income Tax vs. Devdas Naik (2014) 366 ITR 0012 (BOM) The Honorable Bombay High Court held that "Deduction u/s. 54 can be allowed if flats are a single unit and a house for purpose of residence even if acquisition of flats where done independently." 8 Joseph J Mudaliar Vs. Assistant commissioner of Income Tax, Central Circle 21 Mumbai (2014) 47 Taxmann.com 169 The Honorable Mumbai Tribunal held that "claim us 54/54F may be allowable in case of purchase of more than one new flats when said flats constitute one residential house." In all the above cases, it has been held that two adjacent 1lats convertible into one house sho....
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....we set aside the order passed by Ld CIT(A) on this issue and hold that the house property received by the assessee is "one residential house" only within the meaning of sec.54F of the Act. Accordingly, we are of the view that the reasoning given by the AO to reject the claim for deduction u/s 54F is not justified." 3 Bhatkal Ramarao Prakash Vs. ITO (ITA No. 2692/Bang/2018 In respect of purchase of two properties under an Agreement, the Honorable ITAT allowing the appeal held that "The entire property constitutes single house but was bifurcated with two door numbers for the ground and first floor with common entrance in the ground floor only to earmark the share of each beneficiaries. The property otherwise constitutes a single property, though they have two different door nos. In such circumstances, the assessee has purchased only one property and not two properties. In this regard, the decisions cited by the Id Counsel for the assessee before us supports the plea of the assessee viz., the decision of the Delhi High Court in the case of CIT Vs. Gita Duggal (2013 30 taxmann.com 230 (Delhi)." Copies of the aforesaid decisions are enclosed for Your Honor's immediate reference.....
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....e benefit of section 54 would be given to assessee, if the assessee within a period of one year before or two years after the date on which the transfer took place purchased or within a period of three years thereafter had constructed one residential house in India. 15. In the present case, admittedly, the assessee had sold a residential flat for a sum of Rs. 8.5 crores and thereafter the appellant had invested the amount in purchasing two flats. The allotment letter for two houses were received by the assessee on 13.01.2015 & 24.01.2015 in respect to flat no. 3104 & 3103 in Tower T-4, Crescent Bay, Parel, Mumbai, in the name of the assessee and her husband. Thus, it is clear that the assessee has invested in two residential flats within one year of the sale of the property. As per the requirement of section 54, the Long Term Capital Gain (LTCG) arising on account of transfer of Long Term Capital Assets is not chargeable to the income, if the assessee purchases one residential house in India. Importantly and relevant date for the purpose of section 54 is the date of investment in residential house. To put in other words it is the duty of revenue to find out whether the assessee ha....
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....2.2021 was filed by the assessee. In para-4 of the said affidavit, it was mentioned that the developer expressed their inability to provide/allot one single larger unit of a particular area as the sanctioned/approved plans did not permit such larger unit. 16.3 In the said affidavit, it was mentioned that the assessee converted two units namely 3103 & 3104 to be into one residential house by removing the common wall. 16.4 As the assessee failed to file any approval/sanctioned plan from the local municipal authority, it cannot be said that the assessee had purchased one single unit at the time of purchasing the property. Further, the letter placed on record clearly shows that the permission to convert in one single unit was given subject to obtaining the requisite approval/permission from the concerned authorities. 16.5 In the absence of any supporting documents authorizing amalgamation of two flats, the adverse inference is required to be drawn against the assessee. 17. In view of the above, we are of the view that there was no sanction or approval/permission from the concerned authorities to amalgamate by removing the any wall. Assuming the permission is there to remove wall, t....
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....ee years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the Previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section. 11. From close scrutiny of the aforesaid provision, it is axiomatic that property sold is referred to as original asset and the original asset is prescribed as buildings and lands appurtenant thereto and being a residential house. The expression 'a residential house' therefore, includes building or lands appurtenant thereto. It cannot be construed as one residential house. 12. A Bench of this court in case of Smt. KG Rukminiamma (supra) dealt with the meaning of expression 'a residential house' used in Section 54(1) of the Act while taking into account Section 13(2) of the General Clauses Act, 1897 held that unless there is anything repugnant in the subject or context, the words in singular shall include the plural and vice versa. It was further held that context in which the expression 'a residential house' is used in Section 54 makes it evident that it is not the intention of the legisla....
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....st April, 2015 and will accordingly apply in relation to Assessment year 2015-16 and subsequent Assessment years. Thus it is axiomatic that the aforesaid amendment was specifically applied only prospectively with effect from Assessment year 2015-16. ( emphasis supplied by us ) 14. The subsequent amendment of Section 54(1) also fortifies the fact that the legislature felt the need of amending the provisions of the Act with a view to give a definite meaning to the expression 'a residential house', which was interpreted as plural by various courts by taking into account the context in which the aforesaid expression was used. The subsequent amendment of the Act also fortifies the view taken by this court as well as Madras High Court and Delhi High Court. It is trite law that the principle underlying the decision would be binding as precedent in a case. In Halsbury Laws of England, Volume 22, Para 1682, Page 796, the relevant extract reads as under: The enunciation of the reasons or principle on which a question before a court has been decided is alone binding as a precedent. This underlying principle is often termed the ratio decided, that is to say, the general reasons g....