Deputy Commissioner of Income-tax, V. Shri Jayprakash P. Shroff,

ITA 145/PUN/2014

• Counselvise Citation: 14524514 RSA 2014
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 22-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V L JAIN
• Keywords: Capital asset; Depreciation
• Section: 143(3); 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.145/PN/2014 (ASSESSMENT YEAR: 2010-11) THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 3, PUNE . APPELLANT VS. SHRI JAYPRAKASH P SHROFF 1215/2, APTE ROAD, PUNE 411004 PAN: ACEPS9112P . RESPONDENT APPELLANT BY : SHRI RAVI PRAKASH RESPONDENT BY : SHRI V.L. JAIN DATE OF HEARING : 06-01-2015 DATE OF PRONOUNCEMENT : 19-01-2015 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A)-II, PUNE DATED 10.09.2013 RELATING TO ASSESSMENT YEAR 2010- 11 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN ALLOWING THE EXEMPTION U/S.54 OF THE ACT ON SALE OF PROP ERTY USED FOR COMMERCIAL PURPOSES DE HORS THE SPECIFIC HEADING OF THE SECTION. 2) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN ALLOWING THE EXEMPTION NOT APPRECIATING THAT THE INVEST MENT MADE IN THE NEW ASSET BEING AN OFFICE AT APTE ROAD DID NO T SATISFY THE REQUIREMENTS OF SEC.54 OF THE ACT. 3) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN ALLOWING EXEMPTION U/S.54 OF THE ACT ON SALE OF TWO LONG TERM ITA NO.145/PN/2014 SHRI JAYPRAKASH P SHROFF 2 CAPITAL ASSETS VIZ. OFFICE AT DHAVALSHREE AND RESIDENTIA L FLAT AT SUPRIYA CLASSIC WHEN THE EXEMPTION U/S.54 IS ALLOWABLE ON TRANSFER OF A SINGLE ASSET. 4) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL. 3. THE ISSUE RAISED BY THE REVENUE IN THE PRESENT APPE AL IS AGAINST THE ALLOWANCE OF EXEMPTION UNDER SECTION 54 OF THE ACT. THE GRIEVANCE OF THE REVENUE IS THREE-FOLD THAT THE EXEMPTION UNDER SE CTION 54 OF THE ACT HAS BEEN ALLOWED ON SALE OF PROPERTY USED FOR COMMER CIAL PURPOSE, AND AGAINST THE INVESTMENT MADE IN THE NEW ASSET BEING AN OFFICE AT APTE ROAD AND FURTHER IN ALLOWING EXEMPTION UNDER SECTION 54 OF THE ACT ON SALE OF TWO LONG TERM CAPITAL ASSETS I.E. TWO DIFFERENT FLATS. 4. THE BRIEF FACTS OF THE CASE ARE THAT, FOR THE YEAR U NDER CONSIDERATION, THE ASSESSEE HAD DECLARED INCOME FROM CAPIT AL GAINS ON SALE OF OFFICE AT DHAVALSHREE AT RS.24,92,062/- AND THE SALE OF FLAT AT SUPRIYA CLASSIC AT RS.20,38,789/-. AGAINST THE SAID CAPITA L GAINS, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 54 AND 54F OF THE ACT AT RS.45,30,851/-, AGAINST INVESTMENT IN OFFICE BOOKED AT APT E ROAD. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PRO CEEDINGS SHOW CAUSED THE ASSESSEE TO EXPLAIN AS TO WHY DEDUCTI ON UNDER SECTION 54F OF THE ACT IS ALLOWABLE AS THE ASSESSEE HAD A BUNGALOW AND FARM HOUSE AT LAVALE IN ADDITION TO THE NEW ASSET. FURTH ER, THE ASSESSING OFFICER ALSO CONFRONTED THE ASSESSEE THAT THE C LAIM FOR DEDUCTION UNDER SECTION 54 OF THE ACT WAS TO BE RESTRIC TED TO ONLY THE CAPITAL GAINS ARISING FROM THE SALE OF FLAT AT SUPRIYA CLASSIC AS THE SECTION MENTIONED THAT DEDUCTION FOR SALE OF RESIDENTIAL HOU SE WAS TO BE ALLOWED ONLY AGAINST ONE ASSET. THE ASSESSEE IN REPL Y, DID NOT FURNISH ANY EXPLANATION WITH REGARD TO THE APPLICABILITY OF SE CTION 54F OF THE ACT. HOWEVER, WITH REGARD TO THE APPLICABILITY OF SEC TION 54 OF ITA NO.145/PN/2014 SHRI JAYPRAKASH P SHROFF 3 THE ACT, THE ASSESSEE SUBMITTED THAT MORE THAN ONE RE SIDENTIAL HOUSE COULD BE SOLD AND THE CAPITAL GAINS ARISING THEREFROM COULD BE RE- INVESTED IN THE PURCHASE OF ANOTHER RESIDENTIAL HOUSE PRO PERTY. RELIANCE IN THIS REGARD WAS PLACED ON THE RATIO LAID DOWN B Y HONBLE KARNATAKA HIGH COURT IN CIT VS K.G. RUKHMINI AMMA (2011) 33 1 ITR 211 (KAR) AND SPECIAL BENCH DECISION OF MUMBAI TRIBUNAL IN ITO VS. SUSHILA M JHAVERI (2007) 107 ITD 321 (SB, MUM). THE ASSESSIN G OFFICER HELD THAT THE ASSESSEE WAS NOT ENTITLED TO ANY DE DUCTION UNDER SECTION 54F OF THE ACT AS ON THE DATE OF TRANSFER AND T ILL THE DATE OF PASSING OF THE ASSESSMENT ORDER, THE ASSESSEE WAS OWNE R OF BUNGALOW AND FARM HOUSE AT LAVALE IN ADDITION TO THE NEW ASSET. W ITH REGARD TO THE APPLICATION OF SECTION 54 OF THE ACT, THE ASSESSING OFFIC ER HELD THAT FROM THE READING OF SECTION ITSELF, IT IS CLEAR THAT THE PR OVISION WAS APPLICABLE FOR THE TRANSFER OF A LONG TERM CAPITAL ASSETS. THUS, THE DEDUCTION WOULD BE APPLICABLE ONLY WITH REGARD TO TRANSF ER OF ONE CAPITAL ASSET AND NOT TWO, AND THE CAPITAL GAINS ARISING FRO M THE OTHER ASSET WOULD BE TAXABLE. THE ASSESSING OFFICER FURTHER HELD THAT THERE WAS NO MERIT IN THE RELIANCE ON THE DECISION OF CIT VS K.G . RUKHMINI AMMA (SUPRA), BUT RELIANCE IS TO BE PLACED ON ITO VS. SUSHILA M JHAVERI (SUPRA) WHEREIN, IT WAS CLEARLY HELD THAT WHERE TH E LEGISLATURE USED THE WORD A, IT MEANS ONLY ONE. SO ALSO IN THE PH RASE TRANSFER OF A LONG TERM CAPITAL ASSET, THE DEDUCTION IS INTENDED FOR TRANSFER OF ONLY ONE ASSET. IT WAS FURTHER OBSERVED BY THE ASSESSING O FFICER THAT SECONDLY, THE OTHER ASSET BEING TRANSFERRED WAS AN OFFICE AT DHAVALSHREE AND THE SECTION CLEARLY TALKS ABOUT TRANSFER OF A RESIDENTIAL HOUSE AND NOT AN OFFICE. THE ASSESSING OFFICER FUR THER NOTED THAT THE ASSESSEE HIMSELF HAD RECOGNIZED THE PROP ERTY AT DHAVALSHREE AS OFFICE SPACE AND SINCE THE TITLE OF SECTION 5 4 OF THE ACT ITA NO.145/PN/2014 SHRI JAYPRAKASH P SHROFF 4 READ AS PROFIT ON SALE OF PROPERTY USED FOR RESIDENCE, THEN THE P ROPERTY SHOULD NOT ONLY BE RESIDENTIAL BUT ALSO FOR USE OF RESIDENC E. THE ASSESSING OFFICER THUS, HELD THAT THE ASSESSEE WAS NOT EN TITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 54 OF THE ACT. IN RESPE CT OF GAIN ON SALE OF OFFICE AT DHAVALSHREE, ANOTHER ASPECT NOTED BY THE ASSESSING OFFICER WAS THAT THE INVESTMENT MADE BY THE ASSESSEE IN THE NEW ASSET WAS OFFICE BOOKED AT APTE ROAD. HOWEVER, UNDER THE PROV ISIONS OF SECTION 54 OF THE ACT, THE SAID BENEFIT WAS ALLOWABLE WHERE THE NEW ASSET WAS A RESIDENTIAL HOUSE AND NOT AN OFFICE AND HENCE , THE CLAIM OF DEDUCTION UNDER SECTION 54 OF THE ACT WAS REJECTED. TH E ASSESSING OFFICER THUS, RECOMPUTED THE DEDUCTION ALLOWABLE TO THE ASS ESSEE UNDER SECTION 54 OF THE ACT. 5. THE CIT(A) VIDE PARA 3.4 HAS GIVEN THE FOLLOWING FACTUAL FINDING. 3.4 I HAVE CONSIDERED THE SUBMISSION MADE BY THE AP PELLANT AND PERUSED MATERIAL ON RECORD. THE APPELLANT DURING TH E YEAR UNDER CONSIDERATION HAS SOLD TWO PROPERTIES AND CLAIM ED EXEMPTION U/S 54 OF THE ACT OF RS. 45,30,851/- TOWARDS THE INVESTMENT IN A RESIDENTIAL FLAT. THE ASSESSING OFFICER HELD THAT THE APPELLANT HAD CLAIMED EXEMPTION U/S 54 ON SALE OF OFFICE AT DHAVALSHREE APARTMENTS AND SALE OF FLAT AT SUPRIYA CLA SSIC BY INVESTING IN AN OFFICE AT APTE ROAD. THE ASSESSING OFFICER HELD THAT THE EXEMPTION U/S 54 IS NOT ALLOWABLE, AS CLAIM U/S 54 IS AVAILABLE ONLY ON TRANSFER OF A SINGLE RESIDENTIAL UNIT A ND THAT ONE OF THE PROPERTIES SOLD IS AN OFFICE AND THAT THE NE W INVESTMENT IS IN AN OFFICE PROPERTY AND NOT A RESIDENTIAL PROPERTY . THE COPIES OF THE SALE DOCUMENTS OF THE PROPERTY AT DHAVALSHREE APA RTMENT REVEAL THE SAID PROPERTY TO BE A RESIDENTIAL PROPERTY AND NOT AN OFFICE AND I AGREE WITH THE CONTENTION RAISED THAT M ERE NOMENCLATURE OF THE PROPERTY AS AN 'OFFICE' CANNOT MAKE THE PROPERTY AS AN OFFICE PROPERTY. MOREOVER, THE SAID PR OPERTY AT DHAVALSHREE APARTMENT WAS LET OUT AND INCOME THEREFRO M CHARGED UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHICH THE APPELLANT HAD BEEN REFLECTING IT FOR THE PAST THREE YE ARS. THE SAID 'OFFICE' AS STATED WAS NEVER THE BUSINESS ASSET AND NO DEPRECIATION CLAIMED BY THE APPELLANT IN THE PREVIOUS YEARS. THUS, MERELY BECAUSE THE TENANT USED THE SAME AS AN OFFIC E CANNOT BY ANY STRETCH OF IMAGINATION CHANGE THE TRUE NATURE AND CHARACTER OF THE PROPERTY. FURTHER ON PERUSAL OF THE COPY OF T HE AGREEMENT DATED 3-8-2010 WITH RESPECT TO THE NEW INVESTMENT MADE BY THE APPELLANT HAS BEEN FOR A RESIDENTIAL FLAT AS IS EVIDEN T FROM THE AGREEMENT AND ALSO THE COMMENCEMENT CERTIFICATE OF T HE LOCAL ITA NO.145/PN/2014 SHRI JAYPRAKASH P SHROFF 5 AUTHORITY FORMING PART OF THE AGREEMENT REFERS THE B UILDING AS RESIDENTIAL BUILDING. 6. THE CIT(A) FURTHER HELD THAT THE LEGISLATURE HAD GIVEN CONCESSION FOR THE RESIDENTIAL PROPERTY UNDER VARIOUS SEC TIONS OF THE ACT, WHERE THE PROPERTY WAS BUILT AS RESIDENTIAL PROPERT Y BUT WAS USED BY THE TENANT FOR HIS BUSINESS PURPOSE, DOES NOT CHANGE THE NATURE OF THE RESIDENTIAL PROPERTY. RELIANCE IN THIS REGARD WAS PLACE D ON DECISION IN CIT VS. PURSHOTTAM DAS (2001) 247 ITR 516 (DEL) , WHEREIN THE HONBLE DELHI HIGH COURT CONSIDERING THE PROPERTY CO NSTRUCTED AS RESIDENTIAL UNIT, SITUATED IN RESIDENTIAL AREA WAS LET OUT TO THE GOVERNMENT DEPARTMENT, WHICH IN TURN USED FOR OFFICE PURP OSE, HELD THAT SUCH USE CANNOT CHANGE THE NATURE OF PROPERTY A ND THE SAME HAS TO BE TREATED AS RESIDENTIAL PROPERTY. THE CIT(A) VIDE P ARA 3.7 FURTHER HELD AS UNDER:- 3.7 SO FAR AS THE ISSUE OF CLAIM U/S 54 IS CONCERNED, THE ASSESSING OFFICER HAVING PLACED RELIANCE ON THE DECI SION OF THE MUMBAI ITAT IN THE CASE OF ITO VS SUSHILA JHAVERI (C ITED SUPRA) HAS HELD THAT THE EXEMPTION U/S 54 IS AVAILABLE IN TH E CASE OF TRANSFER OF ASSESSEE'S LONG TERM CAPITAL ASSET. THE AFO RESAID DECISION RELIED UPON BY THE ASSESSING OFFICER WAS I N THE CONTEXT OF NEW INVESTMENT WHEREAS THE PRESENT IS OF TRANSFER O F CAPITAL ASSET AND NOT FRESH INVESTMENT AS THE APPELLANT HAS TRANSF ERRED TWO PROPERTIES AND MADE INVESTMENT IN ONE RESIDENTIAL UNIT . IN THIS REGARD THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS RUKMINIAMMA, 331 ITR 211 HELD THAT THE EXPRESSION 'A' RESIDENTIAL HOUSE, 'A' REFERS TO THE NATURE OF THE RES IDENTIAL BUILDING AND NOT TO THE SINGULAR NUMBER. SECTION 54 PROVIDES AN EXEMPTION FROM CAPITAL GAINS IN THE CASE OF GAIN ARIS ING FROM SALE, OF RESIDENTIAL HOUSE PROPERTY AND RE-INVESTMENT THERE OF IN A RESIDENTIAL PROPERTY. THUS IMPLIEDLY MORE THAN ONE RES IDENTIAL HOUSE PROPERTY CAN BE SOLD AND CAPITAL GAINS ARISING T HEREFROM CAN BE RE-INVESTED IN THE PURCHASE OF ANOTHER RESID ENTIAL PROPERTY. 7. IN VIEW THEREOF, THE CIT(A) FOUND THE CLAIM OF THE ASSES SEE UNDER SECTION 54 OF THE ACT TO BE ALLOWABLE IN THE HANDS OF THE ASSESSEE AND THE ORDER OF ASSESSING OFFICER WAS THUS, REVERSED. ITA NO.145/PN/2014 SHRI JAYPRAKASH P SHROFF 6 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLA CED RELIANCE ON THE ORDER OF ASSESSING OFFICER AND POINTED OUT THAT IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD SOLD TWO PR OPERTIES, ONE OF WHICH WAS FOR COMMERCIAL USE AND THE INVESTMENT WAS MADE IN A PROPERTY WHICH WAS NOT RESIDENTIAL AS THE SAME WAS USED FOR OFFICE PURPOSE. THE PLEA OF THE LEARNED DEPARTMENTAL REPRESENT ATIVE FOR THE REVENUE WAS THAT THE SAID EXEMPTION UNDER SECTION 54 O F THE ACT WAS NOT ALLOWABLE TO THE ASSESSEE, WHERE UNDER THE SAID SECT ION, IT HAS CLEARLY BEEN PROVIDED THAT ON THE SALE OF RESIDENTIAL PROP ERTY, THE GAIN ARISING THEREFROM CAN BE INVESTED IN A RESIDENTIAL HOUSE ONLY. 9. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE POINTED OUT THAT THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECT ION 54 OF THE ACT AGAINST THE PROPERTY AT DHAVALSHREE WHICH WAS A RE SIDENTIAL FLAT, BUT WAS BEING USED FOR OFFICE PURPOSE BY THE TENANTS. OU R ATTENTION WAS DRAWN TO THE SALE DEED IN RESPECT OF THE SAID PROPE RTY PLACED AT PAGES 11 TO 19 OF THE PAPER BOOK AND THE DECLARATION AT PAGES 26 TO 30 OF THE PAPER BOOK. IT WAS FURTHER POINTED OUT BY TH E LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT WHAT H AD BEEN PURCHASED WAS A RESIDENTIAL FLAT AS IS EVIDENT FROM THE CO PY OF THE SALE DEED PLACED AT PAGES 38 TO 71 OF THE PAPER BOOK. OUR ATTENTION WAS FURTHER DRAWN TO THE CERTIFICATE ISSUED BY THE PUNE MUNIC IPAL CORPORATION, IN WHICH THE PROPOSAL WAS FOR THE CONSTRUCTIO N OF RESIDENTIAL BUILDING. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER STATED THAT THERE WAS NO PROHIBITION U NDER SECTION 54 OF THE ACT, WHERE THE GAIN ARISING ON THE SALE OF TWO FLATS WAS INVESTED IN RESIDENTIAL UNIT. RELIANCE IN THIS REGARD, WAS PLACED ON TH E RATIO ITA NO.145/PN/2014 SHRI JAYPRAKASH P SHROFF 7 LAID DOWN BY THE MUMBAI BENCH OF THE TRIBUNAL IN RAJESH KE SHAV PILLAI VS. ITO REPORTED IN (2011) 60 DTR 412 (MUM) AND IN DCI T VS. RANJIT VITHALDAS REPORTED IN (2012) 79 DTR (MUMBAI)(TRIB) 377 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE DREW OUR ATTENTION TO THE DECISION OF MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN I TO VS. SUSHILA M JHAVERI (SUPRA) AND POINTED OUT THAT THE SAME WAS OVER- TURNED BY THE HONBLE KARNATAKA HIGH COURT IN CIT VS K .G. RUKHMINI AMMA (SUPRA). 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD DECLARED INCOME FROM LONG TERM CAPITAL GAINS ON SALE OF OFFICE AT DHAVA LSHREE AT RS.24,92,062/- AND ALSO SALE OF FLAT IN SUPRIYA CLASSIC AT RS.20,38,789/-. AGAINST THE SAID GAIN ARISING FROM THE SALE O F TWO FLATS, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 54 OF THE ACT ON ACCOUNT OF INVESTMENT IN A FLAT BOOKED AT APTE ROAD FO R RS.45,30,851/-. 11. THE FIRST ASPECT OF THE ISSUE WAS THAT THE FLAT AT DH AVALSHREE WHICH ADMITTEDLY, WAS BEING USED FOR OFFICE PURPOSE BY THE TENANT OF THE ASSESSEE. THE SAID FLAT WAS SOLD BY THE ASSESSEE ON 10.08.2009 AND CONSTITUTED OF AN APARTMENT NO.2A ON SECOND FLOOR, ADMEASURING BUILT UP AREA ABOUT 725 SQ. FT. THE COPY OF DEED OF APAR TMENT IS PLACED AT PAGES 11 TO 19 OF THE PAPER BOOK. FURTHER, T HE ASSESSEE HAS PLACED ON RECORD THE DECLARATION MADE ON 26.05.2008, IN WH ICH THE NATURE OF ASSET IS DECLARED AS FLAT / APARTMENT NO.2A ON SECOND FLOOR, HAVING AREA OF 725 SQ. FT. ITA NO.145/PN/2014 SHRI JAYPRAKASH P SHROFF 8 12. UNDER THE PROVISIONS OF SECTION 54 OF THE ACT, WHERE THE ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, DECLARES CAPITA L GAINS ARISING FROM THE TRANSFER OF LONG TERM CAPITAL ASSET, BEING B UILDING OR LAND APPURTENANT THERETO AND BEING A RESIDENTIAL HOUSE, T HE INCOME FROM WHICH WAS CHARGEABLE UNDER THE HEAD INCOME FROM H OUSE PROPERTY AND IN CASE THE ASSESSEE WITHIN STIPULATED PE RIOD AS PROVIDED IN THE SECTION PURCHASES OR CONSTRUCTS A RESIDENTIAL HOU SE, THEN THE CAPITAL GAIN CHARGEABLE TO TAX IN THE PREVIOUS YEAR IN WHIC H, THE TRANSFER TOOK PLACE, SHALL BE SET OFF AGAINST THE INVESTMEN T IN THE NEW RESIDENTIAL PROPERTY, AS PER THE FORMULA PROVIDED IN THE SE CTION ITSELF. THE REQUIREMENT OF SECTION IS THE CAPITAL GAIN ARISING FROM THE TRANSFER OF A LONG TERM CAPITAL ASSET, WHICH IS IN THE NATURE OF BUILDIN G OR LAND APPURTENANT THERETO, AND THE SAME SHOULD BE RESIDENTIAL HOUSE, INCOME FROM WHICH WAS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. FURTHER, THE NEW ASSET PURCHASED BY THE ASSESSEE SHOULD BE A RESIDENTIAL HOUSE WITHIN THE STIPULATED PERIOD A S PROVIDED IN THE SECTION, THEN THE CAPITAL GAIN ARISING ON THE SALE O F ORIGINAL ASSET SHALL BE SET OFF AGAINST THE INVESTMENT MADE IN THE NEW R ESIDENTIAL PROPERTY. THE SAID SECTION IS THUS, APPLICABLE TO ANY BUILD ING OR LAND APPURTENANT THERETO, WHICH IS A RESIDENTIAL HOUSE AND TH E INCOME FROM WHICH, IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 13. IN THE FACTS OF THE PRESENT CASE, ONE OF THE ASSET S SOLD BY THE ASSESSEE WAS DECLARED TO BE AN OFFICE AT DHAVALSHREE. TH E SAID PREMISES WAS ADMITTEDLY BEING USED FOR OFFICE PURPOSE BY T HE TENANT OF THE ASSESSEE. HOWEVER, THE NATURE OF THE ASSET WAS A RESIDENTIAL FLAT, WHICH WAS SOLD BY THE ASSESSEE AND THE CAPITAL GAINS ARIS ING FROM SUCH ASSET, WHICH ADMITTEDLY, WAS A RESIDENTIAL PROPERTY A ND THE ITA NO.145/PN/2014 SHRI JAYPRAKASH P SHROFF 9 RENTAL INCOME ARISING THEREFROM, WAS DECLARED UNDER THE HE AD INCOME FROM HOUSE PROPERTY, WAS AN ASSET AGAINST WHICH THE BE NEFIT OF INVESTMENT IN ANOTHER RESIDENTIAL PROPERTY COULD BE AVAILE D BY THE ASSESSEE, SUBJECT TO FULFILLMENT OF THE OTHER CONDITIONS LAID D OWN IN SECTION 54 OF THE ACT. MERELY BECAUSE, THE PROPERTY WA S BEING USED FOR OFFICE PURPOSE DOES NOT DIS-ENTITLES THE ASSESSEE FROM THE CLAIM OF EXEMPTION UNDER SECTION 54 OF THE ACT, WHERE THE SAID AS SET WAS RESIDENTIAL ASSET. THE CIT(A) VIDE PARA 3.4 HAS GIVEN A FIND ING THAT FROM THE PERUSAL OF THE DOCUMENTS OF THE PROPERTY AT DHAVALSHREE APARTMENT REVEAL THAT THE SAID PROPERTY WAS RESIDENT IAL PROPERTY AND NOT AN OFFICE AND THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS FAILED TO CONTROVERT THE SAME AND CONSEQUE NTLY, WE FIND NO MERIT IN THE PLEA RAISED BY THE LEARNED DEPARTMENTAL REPRESENTAT IVE FOR THE REVENUE. 14. THE NEXT ASPECT OF THE ISSUE ARISING IN THE PRESENT A PPEAL IS THE NATURE OF ASSET PURCHASED BY THE ASSESSEE. THE CASE OF THE ASSESSING OFFICER WAS THAT SINCE THE ASSESSEE PURCHASED OFFICE SPAC E AT APTE ROAD, HENCE, THE ASSESSEE WAS NOT ENTITLED TO THE CLAIM OF SET OFF OF CAPITAL GAIN AS BEING INVESTED IN A RESIDENTIAL PROPERTY. TH E ASSESSEE HAS PLACED ON RECORD THE COPY OF SALE DEED AT PAGES 38 TO 71 OF THE PAPER BOOK AND ALSO THE CERTIFICATE ISSUED BY THE PMC FO R THE PROPOSED PROJECT BEING RESIDENTIAL IN NATURE, WE FIND MERIT IN THE PLEA OF THE ASSESSEE THAT THE NEW ASSET PURCHASED BY THE ASSESSEE WAS A RESIDENTIAL ASSET. THE SAID ASSET WAS ADMITTEDLY, ALSO USE D FOR THE OFFICE PURPOSE WOULD NOT CHANGE THE NATURE OF THE ASSET BEING A RESIDENTIAL FLAT. FURTHER, THE CIT(A) VIDE PARA 3.4 HAS GIVEN A FINDING IN THIS REGARD AND THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS FAILED TO CONTROVERT THE SAID FINDING OF THE CI T(A). IN VIEW ITA NO.145/PN/2014 SHRI JAYPRAKASH P SHROFF 10 THEREOF, WE HOLD THAT THE ASSESSEE HAVING INVESTED IN A R ESIDENTIAL FLAT DURING THE YEAR UNDER CONSIDERATION, IS ENTITLED TO THE BE NEFIT OF DEDUCTION AVAILABLE UNDER SECTION 54 OF THE ACT. 15. ANOTHER ISSUE RAISED BY THE ASSESSING OFFICER WAS VIS- -VIS THE SET OFF OF CAPITAL GAIN ARISING ON SALE OF TWO DIFFERENT FLATS AND THE CLAIM OF DEDUCTION UNDER SECTION 54 OF THE ACT IN RESPECT OF T HE TWO FLATS WHERE THE GAIN ARISING ON THE TRANSFER OF TWO FLATS WAS CLAIMED AGAINST THE INVESTMENT IN PURCHASE OF ONE NEW RESIDENTIAL UNIT. TH E PERUSAL OF THE PROVISIONS OF THE ACT I.E. 54 OF THE ACT REFLECTS THAT THE LANGUAGE USED IN THE SECTION IS THE CAPITAL GAIN ARISES FROM THE T RANSFER OF A LONG TERM CAPITAL ASSET ... THE SPECIAL BENCH OF MUMBAI T RIBUNAL IN ITO VS. SUSHILA M JHAVERI (SUPRA) WHILE ADJUDICATING THE IS SUE OF CLAIM OF DEDUCTION UNDER SECTION 54 OF THE ACT AND ON CAP ITAL GAIN ARISING ON TRANSFER OF LONG TERM CAPITAL ASSET BEING INVESTE D IN THE PURCHASE OF A RESIDENTIAL HOUSE, HAD HELD THAT WHERE THE ASSESSEE HAD PURCHASED MORE THAN ONE RESIDENTIAL HOUSE, THEN THE CHO ICE WOULD BE WITH THE ASSESSEE TO AVAIL THE EXEMPTION IN RESPECT OF E ITHER OF THE HOUSES PROVIDED, OTHER CONDITIONS ARE FULFILLED. WHERE, MORE THAN ONE UNIT WERE PURCHASED WHICH WERE ADJACENT TO EACH OTHER AND CONVERTED INTO ONE HOUSE FOR THE PURPOSE OF RESIDENCE BY HAVING CO MMON PASSAGE, KITCHEN, ETC., THEN IT WOULD BE THE CASE OF INVESTM ENT IN ONE RESIDENTIAL HOUSE AND THE ASSESSEE WOULD BE ENTITLED TO THE EXEMPTION UNDER SECTION 54 OF THE ACT. 16. THE HONBLE KARNATAKA HIGH COURT IN CIT VS K.G. RUKHM INI AMMA (SUPRA) WHILE CONSIDERING THE IMPORT OF A RESIDENTIAL H OUSE USED IN SECTION 54 OF THE ACT, HELD THAT IT WAS NOT THE INTENTION OF THE ITA NO.145/PN/2014 SHRI JAYPRAKASH P SHROFF 11 LEGISLATION TO CONVEY THE MEANING THAT IT REFERS TO A SING LE RESIDENTIAL HOUSE AND IF THAT WAS THE INTENTION, THE LEGISLATURE WOULD HAVE USED THE WORD ONE. IT WAS FURTHER HELD BY THE HONBLE KAR NATAKA HIGH COURT WITH REFERENCE TO THE PROVISION OF SECTION 54 OF THE ACT THAT AS IN THE EARLIER PART, THE WORDS USED ARE BUILDINGS OR LANDS WHICH ARE PLU RAL IN NUMBER AND THAT IS REFERRED TO AS A RESIDENTIAL HOUSE , THE ORIGINAL ASSET. AN ASSET NEWLY ACQUIRED AFTER THE SALE OF THE OR IGINAL ASSET ALSO CAN BE BUILDINGS OR LANDS APPURTENANT THERETO, WHICH ALSO SHOULD BE A RESIDENTIAL HOUSE. THEREFORE THE LETTER A IN THE CO NTEXT IT IS USED SHOULD NOT BE CONSTRUED AS MEANING SINGULAR. BUT, BEING AN INDEFINITE ARTICLE, THE SAID EXPRESSION SHOULD BE READ IN CONS ONANCE WITH THE OTHER WORDS BUILDINGS AND LANDS AND, THEREFORE, THE SIN GULAR A RESIDENTIAL HOUSE ALSO PERMITS USE OF PLURAL BY VIRTUE O F SECTION 13(2) OF THE GENERAL CLAUSES ACT. THIS WAS THE VIEW WHICH WAS TAKEN BY THE HONBLE HIGH COURT IN THE AFORESAID CASE IN IT AP PEAL NO.113 OF 2004, DISPOSED OF ON 20 TH SEPT., 2008 [REPORTED AS CIT VS. D. ANANDA BASAPPA (2009) 223 CTR (KAR) 186 : (2009) 20 DTR (KAR) 266 ED.]. 17. APPLYING THE SAID PRINCIPLE LAID DOWN BY THE HONBLE KAR NATAKA HIGH COURT TO THE FACTS AND ISSUE BEFORE US, WE HOLD THA T WHERE THE ASSESSEE HAS SOLD TWO FLATS AT DIFFERENT LOCATIONS AND THE CAPITAL GAINS ARISING ON THE TRANSFER OF SUCH FLATS, WHICH WERE RESIDENTIAL FLATS, CAN BE SET OFF CUMULATIVELY AGAINST THE INVESTMENT IN THE PURC HASE OF ONE RESIDENTIAL UNIT AND THERE IS NO PROHIBITION IN SECTION 54 OF THE ACT IN THIS REGARD. ACCORDINGLY, WE HOLD THAT THE ASSESSEE IS E NTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 54 OF THE ACT IN RESPECT OF THE GAIN ARISING ON THE SALE OF TWO RESIDENTIAL FLATS, ONE OF WHICH WAS USED FOR OFFICE PURPOSE BY THE TENANT OF THE ASSESSEE; HOWEVER, INC OME FROM ITA NO.145/PN/2014 SHRI JAYPRAKASH P SHROFF 12 WHICH WAS DECLARED UNDER THE HEAD INCOME FROM HOUSE P ROPERTY AND FURTHER, THE INVESTMENT IN RESIDENTIAL UNIT, WHICH IN TURN W AS ALSO USED FOR OFFICE PURPOSE. UPHOLDING THE ORDER OF CIT(A), WE D ISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 18. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF JANUARY, 2015. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 19 TH JANUARY, 2015. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE DEPARTMENT; 2) THE ASSESSEE; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE