Shri Nishit Pravinchandra Patel, Vadodara V. The ACIT,(International Taxation.), Vadodara

ITA 2097/AHD/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6128 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 09-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Capital asset; Question of law; Benefit of exemption; Capital Gains
• Section: 54F; 13(2); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER) [THROUGH VIRTUAL COURT] ITA. NOS: 1894 & 2097/AHD/2018 (ASSESSMENT YEARS: 2012-13) SHRI NISHIT PRAVINCHANDRA PATEL A-301, SAFALAYA PARK LANE, B/H. AAKASHWANI, GOTRI SEVASI ROAD, VADODARA-390021 PAN NO. AEIPP4732N THE DCIT, INTERNATIONAL TAXATION, BARODA (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MS. AMRIN PATHAN, A.R. RESPONDENT BY : SHRI LALIT P. JAIN, SR. D.R. ( )/ ORDER DATE OF HEARING : 27-08-2021 DATE OF PRONOUNCEMENT : 10 -09-2021 PER MAHAVIR PRASAD, J.M. 1. THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (HEREINAFTER CALLED CIT(A)) ORDER NO. CIT(A)-13/INTL. ITA NOS. 1894 & 2097/AHD/2018 . A.Y. 2012-13 2 TAXN./AHD/34/2017-18 ORDER DATED 30/07/2018 ARISING OUT OF ASSESSMENT ORDER DATED 26.12.2014. 2. THERE IS A DELAY OF SEVEN DAYS FOR FILING OF APPEAL AND IN SUPPORT OF ITS CONTENTION ON BEHALF OF THE ASSESSEE AN APPLICATION ALONG WITH AFFIDAVIT HAVE BEEN FILED AND REASONS HAVE BEEN MENTIONED THEREIN. WE ARE SATISFIED WITH THE REASON AND CONDONE THE DELAY AND PROCEED WITH THE APPEAL. 3. ASSESSEE HAS TAKEN SOLELY GROUND THAT LD. CIT(A) HAS ERRED IN LAW AND ON FACTS DISALLOWANCE EXEMPTION U/S. 54 OF THE ACT OF RS. 44,05,610/-. 4. IN THIS CASE, ASSESSEE INVESTED CAPITAL GAIN IN TWO ADJACENT FLATS AND CLAIM THE BENEFIT OF CAPITAL GAIN BUT LOWER AUTHORITIES DID NOT ALLOW THE CLAIM OF THE ASSESSEE BY HOLDING THAT LEGISLATURE HAS ALLOWED INVESTMENT IN ONE RESIDENTIAL HOUSE AND LD. A.O. DID NOT ALLOW DEDUCTION U/S. 54 OF THE ACT. 5. THEREAFTER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ACTION OF THE ASSESSEE. 6. NOW ASSESSEE HAS COME BEFORE US BY WAY OF SECOND STATUTORY APPEAL. 7. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGNED ORDER. UNDISPUTEDLY, ASSESSEE HAS INVESTED HIS CAPITAL GAIN IN TWO ADJACENT FLATS. NOW QUESTION IS BEFORE US IS WHETHER BENEFIT OF SECTION 54 OF THE ACT CAN BE GIVEN TO THE ASSESSEE OR NOT. 8. BEFORE US IS ASSESSMENT YEAR 2012-13 AND ASSESSEE HAS CITED AN ORDER OF CO-ORDINATE BENCH WHEREIN IN SIMILAR FACTS AND CIRCUMSTANCES CO-ORDINATE BENCH GRANTED RELIEF TO THE ASSESSEE WITH FOLLOWING OBSERVATIONS: ITA NOS. 1894 & 2097/AHD/2018 . A.Y. 2012-13 3 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE LIMITED ISSUE BEFORE US ARISES FOR OUR ADJUDICATION WHETHER THE ASSESSEE CAN CLAIMED DEDUCTION/EXEMPTION UNDER SECTION 54F OF THE ACT AS APPLICABLE FOR THE YEAR UNDER CONSIDERATION FOR THE INVESTMENT MADE IN MORE THAN 1 RESIDENTIAL UNITS. THE PROVISIONS OF SECTION 54F OF THE ACT AS APPLICABLE FOR THE YEAR UNDER CONSIDERATION READS AS UNDER: 54F. (1) 31[SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG- TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR 32[TWO YEARS] AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE 32A[CONSTRUCTED, A RESIDENTIAL HOUSE] (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY,-- 8.1 A PLAIN READING OF THE ABOVE PROVISION REVEALS THAT, SUBJECT TO THE CONDITIONS AS SPECIFIED UNDER SECTION 54F OF THE ACT, THE ASSESSEE CAN CLAIM EXEMPTION FOR THE INVESTMENT MADE IN A RESIDENTIAL HOUSE. THE QUESTION ARISES WHETHER 'A RESIDENTIAL HOUSE' READS AS ONE RESIDENTIAL HOUSE. TO RESOLVE THE CONTROVERSY, WE NOTE THAT DIFFERENT COURTS HAVE TAKEN DIFFERENT VIEWS. SOME OF THEM HAVE INTERPRETED THE INVESTMENT IN 'A RESIDENTIAL HOUSE' AS LIMITED TO ONE HOUSE ONLY WHEREAS SOME OF THE COURTS HAVE TAKEN A VIEW THE WORD 'A RESIDENTIAL HOUSE' USES UNDER SECTION 54F OF THE ACT DOES NOT REFER TO ONE RESIDENTIAL UNIT. IN THIS REGARD WE FIND THAT HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SMT. K.G. RUKMINIAMMA REPORTED IN [2011] 331 ITR 211 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WHEREIN IT WAS HELD AS UNDER: ITA NOS. 1894 & 2097/AHD/2018 . A.Y. 2012-13 4 THE CONTEXT IN WHICH THE EXPRESSION 'A RESIDENTIAL HOUSE' IS USED IN SECTION 54 MAKES IT CLEAR THAT IT WAS NOT THE INTENTION OF THE LEGISLATION TO CONVEY THE MEANING THAT IT REFERS TO A SINGLE RESIDENTIAL HOUSE. IF THAT WAS THE INTENTION, THEY WOULD HAVE USED THE WORD 'ONE'. AS IN THE EARLIER PART, THE WORDS USED ARE BUILDINGS OR LANDS WHICH ARE PLURAL IN NUMBER AND THAT IS REFERRED TO AS 'A RESIDENTIAL HOUSE', THE ORIGINAL ASSET, AN ASSET NEWLY ACQUIRED AFTER THE SALE OF THE ORIGINAL ASSET ALSO CAN BE BUILDINGS OR LANDS APPURTENANT THERETO, WHICH ALSO SHOULD BE 'A RESIDENTIAL HOUSE'. THEREFORE, THE LETTER 'A' IN THE CONTEXT IT IS USED SHOULD NOT BE CONSTRUED AS MEANING 'SINGULAR'. BUT, BEING AN INDEFINITE ARTICLE, THE SAID EXPRESSION SHOULD BE READ IN CONSONANCE WITH THE OTHER WORDS 'BUILDINGS' AND 'LANDS' AND, THEREFORE, THE SINGULAR 'A RESIDENTIAL HOUSE' ALSO PERMITS USE OF PLURAL BY VIRTUE OF SECTION 13(2) OF THE GENERAL CLAUSES ACT. [PARA 10] 8.2 WE FURTHER FIND THAT THERE WAS AN AMENDMENT UNDER THE PROVISIONS OF SECTION 54F OF THE ACT WHEREIN THE WORD 'A RESIDENTIAL HOUSE' WAS REPLACED WITH 'ONE RESIDENTIAL HOUSE'. SUCH AMENDMENT WAS BROUGHT BY THE FINANCE ACT 2014 WHICH IS EFFECTIVE FROM 1 APRIL 2015 CORRESPONDING TO ASSESSMENT YEAR 2015-16. THIS FACT CAN BE VERIFIED FROM THE EXPLANATORY MEMORANDUM TO AMENDMENT IN FINANCE ACT 2014 WHICH READS AS UNDER: THE EXISTING PROVISIONS CONTAINED IN SUB-SECTION (1) OF SECTION 54F, INTER ALIA, PROVIDE THAT WHERE CAPITAL GAINS ARISES FROM TRANSFER OF A LONG-TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE, AND THE ASSESSEE WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE OF TRANSFER, PURCHASES, OR WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER CONSTRUCTS, A RESIDENTIAL HOUSE THEN THE PORTION OF CAPITAL GAINS IN THE RATIO OF COST OF NEW ASSET TO THE NET CONSIDERATION RECEIVED ON TRANSFER IS NOT CHARGEABLE TO TAX. THE BENEFIT WAS INTENDED FOR INVESTMENT IN ONE ITA NOS. 1894 & 2097/AHD/2018 . A.Y. 2012-13 5 RESIDENTIAL HOUSE WITHIN INDIA. ACCORDINGLY, IT IS PROPOSED TO AMEND THE AFORESAID SUB-SECTION (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. THESE AMENDMENTS WILL TAKE EFFECT FROM 1ST APRIL, 2015 AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2015-16 AND SUBSEQUENT ASSESSMENT YEARS. 8.3 THUS THE CONTROVERSY WHETHER A RESIDENTIAL HOUSE SHOULD BE READ AS ONE RESIDENTIAL HOUSE PRIOR TO SUCH AMENDMENT HAS BEEN PUT TO REST BY CHANGING THE LANGUAGE IN THE PROVISIONS OF THE ACT BUT THE SAME IS EFFECTIVE FROM THE ASSESSMENT YEAR 2015-16. THUS IN SUCH A SITUATION WE CAN SAFELY CONCLUDE THAT THE ASSESSEE PRIOR TO SUCH AMENDMENT WAS ELIGIBLE FOR EXEMPTION UNDER SECTION 54F OF THE ACT EVEN HE MAKES THE INVESTMENT IN MORE THAN ONE RESIDENTIAL PROPERTIES. THERE IS NO AMBIGUITY THAT THE CASE BEFORE US PERTAINS TO THE ASSESSMENT YEAR 2014-15 PRIOR TO THE AMENDMENT BROUGHT UNDER THE PROVISIONS OF SECTION 54F OF THE ACT. ACCORDINGLY, WE DIRECT THE AO TO ALLOW THE ASSESSEE THE BENEFIT OF EXEMPTION UNDER SECTION 54F OF THE ACT FOR THE INVESTMENT MADE IN BOTH THE PROPERTIES. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 9. LD. A.R. MS. AMRIN PATHAN ALSO CITED A JUDGMENT OF ANDHRA PRADESH HIGH COURT IN THE MATTER OF CIT VS. SYED ALI ADIL AND ARGUED THAT HER CASE IS SQUARELY COVERED BY THE JUDGMENT AND RELEVANT PORTION OF THE ANDHRA PRADESH HIGH COURT IS REPRODUCED HEREUNDER: 10. WE SEE NO FORCE IN THE SAID CONTENTION. AS HELD IN D. ANANDA BASAPPA'S CASE (SUPRA) BY THE KARNATAKA HIGH COURT, THE EXPRESSION 'A RESIDENTIAL HOUSE' IN SECTION 54 (1) OF THE ACT HAS TO BE UNDERSTOOD IN A SENSE THAT THE BUILDING SHOULD BE OF RESIDENTIAL NATURE AND ITA NOS. 1894 & 2097/AHD/2018 . A.Y. 2012-13 6 'A' SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NUMBER AND WHERE AN ASSESSEE HAD PURCHASED TWO RESIDENTIAL FLATS, HE IS ENTITLED TO EXEMPTION UNDER SECTION 54 IN RESPECT OF CAPITAL GAINS ON SALE OF ITS PROPERTY ON PURCHASE OF BOTH THE 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. THIS DECISION WAS FOLLOWED BY THE KARNATAKA HIGH COURT IN CITV. SMT. K.G. RUHNINIAMMA [2011] 196 TAXMAN 87/[2010] 8 TAXMANN.COM 121 (KAR.) WHERE A RESIDENTIAL HOUSE WAS TRANSFERRED AND FOUR FLATS IN A SINGLE RESIDENTIAL COMPLEX WERE PURCHASED BY THE ASSESSEE, IT WAS HELD THAT ALL FOUR RESIDENTIAL FLATS CONSTITUTED 'A RESIDENTIAL HOUSE' FOR THE PURPOSE OF SECTION 54 AND THAT THE FOUR RESIDENTIAL FLATS CANNOT BE CONSTRUED AS FOUR RESIDENTIAL HOUSES FOR THE PURPOSE OF SECTION 54. ADMITTEDLY THE TWO FLATS PURCHASED BY THE ASSESSEE ARE ADJACENT TO ONE ANOTHER AND HAVE A COMMON MEETING POINT. IN THE IMPUGNED ORDER, THE TRIBUNAL HAS ALSO RELIED UPON THE DECISIONS IN K.G. VYAS'S CASE (SUPRA), P.C. RAMAKRISHNA, HUF'S CASE (SUPRA) AND PREMPRAKASH BHUTANI'S CASE (SUPRA) WHEREIN IT WAS HELD THAT EXEMPTION UNDER SECTION 54 ONLY REQUIRES THAT THE PROPERTY SHOULD BE OF RESIDENTIAL NATURE AND THE FACT THAT THE RESIDENTIAL HOUSE CONSISTS OF SEVERAL INDEPENDENT UNITS CANNOT BE AN IMPEDIMENT TO GRANT RELIEF UNDER SECTION 54 EVEN IF SUCH INDEPENDENT UNITS WERE ON DIFFERENT FLOORS. THE DECISION IN MS.SUSEELA M.JHAVERI'S CASE (SUPRA) HOLDING THAT ONLY ONE RESIDENTIAL HOUSE SHOULD BE GIVEN THE RELIEF UNDER SECTION 54 DOES NOT APPEAR TO BE CORRECT AND WE DISAPPROVE OF IT. WE AGREE WITH THE INTERPRETATION PLACED ON SECTION 54 BY THE HIGH COURT OF KARNATAKA IN D. ANANDA BASAPPA'S CASE (SUPRA) AND SMT. K.G. RUKMINIAMMA'S CASE (SUPRA) AND THE DECISIONS OF THE MUMBAI, CHENNAI AND DELHI BENCHES OF THE TRIBUNAL IN K.G. VYAS (SUPRA), P.C. RAMAKRISHNA, HUF (SUPRA) AND PRAKASH BHUTANI (SUPRA). WE THEREFORE HOLD THAT THE CIT (APPEALS) WAS CORRECT IN SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER AND THE TRIBUNAL RIGHTLY CONFIRMED THE DECISION OF THE CIT (APPEALS). 11. WE HELD THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION IN THIS APPEAL AND THE SAME IS ACCORDINGLY DISMISSED. NO CASTS. 10. SINCE OUR CO-ORDINATE BENCH AS WELL AS ANDHRA PRADESH HIGH COURT IN SIMILAR FACTS AND CIRCUMSTANCES HAS GRANTED RELIEF TO THE ASSESSEE. THUS IN PARITY WITH THE ITAT ORDER AND RESPECTFULLY FOLLOWING THE ANDHRA PRADESH HIGH COURT, WE ALLOW THE APPEAL OF THE ASSESSEE. 11. SO FAR GROUND NOS. 3 TO 6 ARE CONCERNED SAME ARE CONSEQUENTIAL AND NEEDS NOT TO BE ADJUDICATED AT THIS STAGE. ITA NOS. 1894 & 2097/AHD/2018 . A.Y. 2012-13 7 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. 13. SO FAR ITA NO. 1894/AHD/2018 IS CONCERNED THAT RELATING TO PENALTY PROCEEDING U/S. 271(1)(C). SINCE ALREADY WE HAVE GRANTED RELIEF TO THE ASSESSEE IN QUANTUM PROCEEDING AND PENALTY PROCEEDING ARE CONSEQUENTIAL TO THE QUANTUM PROCEEDING. SO, WE DO NOT THINK DEEM AND PROPER TO ADJUDICATE SEPARATELY PENALTY APPEAL. 14. IN THE RESULT, THIS APPEAL IS ALSO ALLOWED IN FAVOUR OF THE ASSESSEE. 15. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 10 - 09- 2021 SD/- SD/- (AMARJIT SINGH) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 10 /09/2021 RAJESH COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD