TaxTMI 
TaxTMI 
2022 (4) TMI 220
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....d 10 members, for the use of who, the said residence was being 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 ....
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....val/permission from the concerned authorities. " 5. However, despite the above-said, the AO has not granted any benefit 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 e....
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....ct: " 5.7. Further it is also pertinent to note one aspect that will totally clinch the issue in appeal before me. The same is in the form of the Explanatory Memorandum explaining 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 clea....
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.... be taken. Many judicial precedents were also cited. However, the Apex Court decision in case of M/s Dilip Kumar and Company and Ors (cited supra) makes it amply clear that the provisions of any deduction section have be to construed strictly and that the 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 Kish....
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....td. [2001] 2 WLR 337 (HL); [2002] 255 ITR 612). It is further of particular importance to note that the courts must avoid the danger of a priori determination of the meaning of a provision based on their pre-determined notions of ideological structure or scheme into which the provision to be 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 dra....
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....t raise any substantial question of law. The Appeal is devoid of any merit and is dismissed. No order as to costs. 10. Similarly he has also drawn our attention to the decision of the Tribunal for the AY 2015-16 in ITA No. 1797/Ahd/2018 wherein the identical issue was adjudicated by the Tribunal in para-7 to 7.4 were 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 e....
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....l 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 reading of sections 54(1) and 54F of the Income-tax Act discloses that, a non-residential building can be sold, the capital gain of which can be invested in a residential building to seek exemption 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 int....
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....uthorities and converted the same into one residential house to suit the requirements of the assessee. Based on the above factual matrix, the learned AO allowed the claim made u/s 54 of the act only in part mainly on the ground that the law has been amended. The order was appealed against to the learned CIT(A), who in turn confirmed the AO's order and dismissed the appeal mainly on the ground that 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 amen....
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....ngle residential premise should be treated as a residential house for the purpose of section 54." 5 CIT v. Smt. Sunita Aggarwal (2006) 284 ITR 20 (Delhi) The Honorable High Court of Delhi held that "finding of the Tribunal that execution of different sale deeds in respect of different portions of the property did not affect materially the nature of the property acquired by the assessee since it was being used by assessee for residential purposes 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....
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.... one residential house and hence he would be entitled for deduction u/s 54F of the Act for one residential unit only by adopting proportionate cost of construction of one residential house at one of one residential house at Rs. 27.10 lakhs and proportionate cost of land at Rs. 5.94 lakhs. It was held that - "Accordingly, we are unable to agree with the view taken by the tax authorities that each floor of the individual house/each portion in a floor is separate house property. Accordingly, 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 ....
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.... or construction, as the case may be, the cost shall be nit or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain. 14. The reading of section 54 made it abundantly clear that the 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....
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....r, you may combine the said units as a single one flats to be used as single residential house by removing the common wall between the said units which structurally position of such to obtain a requisite approvals from the concerned authorities". 16.2 The Bench had directed the assessee to produce the approval/permission from the concerned municipal authorities sanctioning the amalgamation of two flats. However, no such sanctions have been produced by the ld. AR despite the time granted by the Bench. However, an affidavit dated 06.12.2021 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....
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....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 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 constr....
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....evant extracts of Explanatory note to provisions of Finance (No. 2) Act, 2014 reads as under: 20.3 Certain courts had interpreted that the exemption is also available if investment is made in more than one residential house. The benefit was intended for investment in one residential house within India. Accordingly, sub-Section (1) of Section 54 of the Income-Tax Act has been amended to provide that the rollover relief under the said Section is available if the investment is made in one residential house situated in India. 20.5 Applicability:- These amendments take effect from 1st 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 ....