TaxTMI 
TaxTMI 
2026 (6) TMI 42
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....share received out of the sales consideration on sale of an immovable property jointly held with the mother of the assessee. While computing LTCG, in addition to the deduction claimed under section (u/s.) 54 and 54EC of the Income Tax Act, 1961 (in short the 'Act') as also other expenses, the assessee claimed expenditure on account of cost of improvement of Rs. 40,44,105/- in respect of a newly acquired property. In course of assessment proceedings, the Assessing Officer (AO) called upon the assessee to furnish supporting evidence qua the claim. In response, the assessee furnished certain documentary evidences including invoices raised by the interior decorator M/s Farida Green Design Services. After verifying the supporting evidences, the AO was of the view that the expenditure included air conditioning, painting and polishing, preferably new furniture, kitchen cabinet, bedroom furniture and kitchen appliances etc. which were not required for making the house habitable. Thus, he held that assessee's claim cannot be accepted. However, based on the invoice raised by the interior decorator, the AO on estimate basis allowed deduction to the extent of Rs. 20,00,000/- while disallowing ....
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....2) of the Act. 8. Briefly the facts are, as discussed earlier, the assessee and his mother were joint owners of an immovable property. In the year under consideration, the said property was sold and the assessee received an amount of Rs. 23,76,00,000/-, being his 50% share in the sale consideration. Thereafter, the assessee purchased a new immovable property at Raj Classic for a consideration of Rs. 4,90,00,000/- after incurring some expenditure out of the sales consideration of the old property, cost of improvement of the newly acquired property and claiming deduction u/s. 54EC and 54(1) of the Act, the left out of amount of Rs. 8,43,00,000/- was invested in Capital Gain Account Scheme. Subsequently, the assessee withdrew the amount and invested in purchasing a plot of land at Mhow for Rs. 12,20,700/- wherein he started constructing a new house and another property at Sylvanus for cost of Rs. 25,74,673/-. While examining assessee's claim of deduction, the AO observed that in respect of a newly acquired property at Raj Classic the assessee has claimed deduction u/s. 54 of the Act within was one year of the date of sale of the old property. Thus, he observed, since, the assessee ....
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....vable property sold in the impugned assessment year. Out of his 50% share, in the sales consideration, the assessee invested in purchase of a new property and deposited the unspent amount in the Capital Gains Account Scheme. Subsequently, the assessee had made investment in two more immovable properties, being a plot of land and a house after withdrawing from capital gains account scheme. 12. The Departmental Authorities have disallowed assessee's claim of deduction u/s. 54(2) of the Act in respect of the capital gain kept in capital gain account scheme and also the investment made in other two properties, on the reasoning that the assessee having already claimed deduction u/s. 54 of the Act in respect of property acquired in Raj Classic building no further deduction is available to the assessee. It is a fact on record that unspent amount out of the sale consideration was kept by the assessee in capital gain account scheme in terms with Section 54(2) of the Act. Hence, the said amount is not taxable in the impugned assessment year as per the plain meaning of the provision. The only reason, based on which, the deduction u/s. 54(2) of the Act has been disallowed, the assessee havi....
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....ansfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,..." (emphasis supplied) 11) After amendment by Finance (No. 2) Act, 2014, provisions of Section 54 (1) of the Act read thus: "54. Profit on sale of property used for residence. (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 constructed, one residential house in India, 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, that is to sa....
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....d residential house (brought in 1980) was sought to the set off by the Assessee against the capital gains earned from the sale of original residential property. The Assessing Officer permitted set off for the cost of the first residential house and not the second residential house, and accordingly, granted partial relief under Section 54 of the Act. In a revision application filed under Section 264 of the Act by the Assessee, the Commissioner held that the Assessee was right in claiming set off with respect to the second house. However, since the second house was not occupied by the Assessee and was rented out within 3 years after its purchase, the Assessee was held not entitled to claim relief under Section 54 (1) of the Act. It was this finding of the Commissioner, which became subject matter of challenge in a writ petition filed by the Assessee before the learned Single Judge of this Court. This Court was not called upon to consider correctness of decision of the Commissioner in holding that the Assessee was entitled to set off the cost of acquisition of the second residential house purchased against the capital gains arising out of the sale of the original residential property.....
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....ncludes 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 legislature to convey the meaning that it refers to a single residential house. It was also held that an asset newly acquired after sale of original asset can also be buildings or lands appurtenant thereto, which also should be residential house, therefore, the letter 'a' in the context it is used should not be construed as meaning singular, but the expression should be read in consonance with other words viz., buildings and lands. Accordingly, the contention raised by the revenue was rejected. Similar view was taken by a bench of this court in Khoob....
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....us 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 given for the decision or the general grounds on which it is based, detached or abstracted from the specific peculiarities of the particular case which gives rise to the decision. 15. This Court as well as Madras and Delhi High Court have interpreted the expression 'a residential house' and have held that the aforesaid expression includes plural. The ratio of the decisions rendered by coordinate bench of this court are binding on us and we respectively agree with the view taken by this court while interpreting the expression ....
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....s employed under Section 54 prior to its amendment and substitution by the words 'one' with effect from 01.04.2015 could not include plural units of residential houses, there was no need to amend the said provisions by Finance Act No.2 of 2014 with effect from 01.04.2015 which the Legislature specifically made it clear to operate only prospectively from A.Y. 2015-2016. Once we can hold that the word 'a' employed can include plural residential houses also in Section 54 prior to its amendment such interpretations will not change merely because the purchase of new assets in the form of residential houses is at different addresses which would depend upon the facts and circumstances of each case. So long as the same Assessee (HUF) purchased one or more residential houses out of the sale consideration for which the capital gain tax liability is in question in its own name, the same Assessee should be held entitled to the benefit of deduction under Section 54 of the Act, subject to the purchase or construction being within the stipulated time limit in respect of the plural number of residential houses also. The said provision also envisages an investment in the prescribed ....
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....e number of residential houses purchased against capital gains. The words 'a residential house' were merely descriptive nature of the assets sold/purchased and not restrictive of the number of assets sold or purchased. The position got modified by the Legislature only w.e.f. 01 April 2015. 20) Mr. Sharma has strenuously relied on the judgment of Special Bench of ITAT in ITO Vs. Ms. Sushila M. Jhaveri(supra) which does not bind this Court, and therefore, it is not necessary to discuss the ratio of the said judgment. We have already distinguished the judgment of Single Judge of this Court in K. C. Kaushik which was relied upon by the Special Bench of ITAT in Sushila M. Jhaveri. Also, as against the Special Bench judgment of ITAT, there are subsequent judgments of Division Benches of Karnataka and Madras High Court, which squarely answer the issue involved in the present appeal. 21) Also of relevance is the fact that the provisions of Section 54(1) of the Act are beneficial in nature. The benevolent provision is aimed at encouraging the house purchase activities. It therefore needs to be read literally and reasonably. Therefore, even though two interpretations of the....
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....in unamended Section 54(1) of the Act would also include multiple houses as well. (c) The judgment of this Court in CIT Vs. Devdas Naik (supra) is again rendered considering peculiar facts where two flats were purchased under two distinct agreements from different sellers but there was a common kitchen for both the flats and the flats were converted into one unit for the purpose of residence of the Assessee. 23) Considering the overall conspectus of the case, we are of the view that the issue involved in the present case is squarely covered by the judgments of Karnataka High Court in Arun K. Thiagarajan and of Madras High Court in Tilokchand & Sons. We are in respectful agreement with the view expressed therein that the expression 'a residential house' in unamended Section 54(1) of the Act includes more than one residential house." 14. As could be seen from the aforesaid observations of the Hon'ble Jurisdictional High Court, claim of deduction u/s. 54 of the Act under the unamended Section 54 of the Act cannot be restricted to one residential house and is available for investment in multiple houses. Notably, while deciding identical nature of dispute in case of....