M/S PRAMOD SAHAI BHATNAGAR HUF, BANGALORE V. ASSISTANT COMMISSIONER OF INCOME TAX, JAIPUR

ITA 517/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8684 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 17-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI
• Assessee Lawyers: P C SHARMA
• Keywords: Capital asset; Set aside
• Section: 54F; 54; 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,A JAIPUR JH JESK LH0 KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PA L RAO, JM VK;DJ VIHY LA- @ ITA NO. 517/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2014-15 M/S PRAMOD SAHAI BHATNAGAR, HUF 2C-703, AKME HARMONY, SARJAPUR, OUTER RING ROAD, BELLANDUR, BANGALORE-560103. CUKE VS. THE ACIT, CIRCLE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAKHP 3841 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. SHARMA (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI J.C. KULHARI (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 22/01/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 03/04/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 12.02.2018 OF LD. CIT(A), UDAIPUR FOR THE ASSESSMEN T YEAR 2014-15. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. THE LEARNED CIT APPEALS-2, UDAIPUR HAS GROSSLY ERRED IN CONFIRMING THE RESTRICTION OF CLAIM U/S 54 OF THE I NCOME TAX ACT, 1961 TO RS. 2,50,00,003/- OUT OF THE TOTAL INVESTME NT OF RS. ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 2 5,00,00,007/- CLAIMED BY THE ASSESSEE FOR INVESTMEN T IN TWO FLATS, ONE ABOVE THE OTHER IN THE SAME BUILDING FOR FLAT N O. 7103 AND 7113 ADJACENT BY ROOF UNDER THE FACTS AND CIRCUMSTA NCES OF THE CASE. THE EXEMPTION CLAIM U/S 54 COVERED BY VARIOUS PRONOUNCEMENTS OF APEX COURT, HIGH COURTS AND COORD INATE BENCH MAY PLEASE BE ALLOWED FOR THE FULL AMOUNT OF RS. 5,00,00,007/- AS CLAIMED BY THE ASSESSEE IN THE RET URN OF INCOME AND RELIEF MAY PLEASE BE GRANTED. 2. THE AO AS WELL AS THE LEARNED CIT APPEALS-2, UDA IPUR HAVE ALSO ERRED IN NOT ALLOWING DEDUCTION FOR THE DEPOSI T IN CAPITAL GAIN SCHEME ACCOUNT AMOUNTING TO RS. 28177656/- INV ESTED BEFORE THE DUE DATE OF FILING OF RETURN UNDER THE F ACTS AND CIRCUMSTANCES OF THE CASE BEING CONTRARY TO THE PRO VISIONS OF THE SEC. 54 OF THE INCOME TAX ACT, 1961. 3. THE LEARNED AO AS WELL AS HONBLE CIT APPEALS HA VE GROSSLY ERRED IN APPLYING THE AMENDED PROVISIONS OF THE INC OME TAX ACT, 1961 IN SECTION 54(1) APPLICABLE W.E.F. 01/04/2015 I.E. FOR ASSESSMENT YEAR 2015-16 ONWARDS IN THE ASSESSMENT Y EAR 2014- 15 WITHOUT CONSIDERING THE FACT THAT THE AMENDED LA W WAS APPLICABLE IN THE SUBSEQUENT ASSESSMENT YEAR AS CLE ARLY SPELT OUT IN THE SECTION ITSELF UNDER THE FACTS AND CIRCUMSTA NCES OF THE CASE. THE ADDITION OF RS. 2,50,00,003/- MAY PLEASE BE DELETED. 4. THE ASSESSEE MAY PLEASE BE PERMITTED TO RAISE MO RE/ADDITIONAL GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. THE ASSESSEE IS HUF AND FILED E-RETURN OF INCOME ON 21.07.2014 DECLARING TOTAL INCOME OF RS. 5,62,58,190/- WHICH I NCLUDES NET LONG TERM CAPITAL GAIN OF RS. 5,55,30,511/- AFTER CLAIMING EX EMPTION U/S 54 OF THE IT ACT AT RS. 5,00,00,007/- AND DEDUCTION U/S 54EC AT RS. 50 LACS. THE ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 3 EXEMPTION CLAIMED U/S 54 OF THE IT ACT IS IN RESPEC T OF THE INVESTMENT MADE IN TWO NEW FLATS. THE AO RESTRICTED EXEMPTION U/S 54 OF THE ACT TO HALF OF THE INVESTMENT I.E. FOR ONE FLAT AND ACC ORDINGLY MADE AN ADDITION OF RS. 2,50,00,003/- IN THE LONG TERM CAPI TAL GAIN. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT( A) BUT COULD NOT SUCCEED. 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE HAS PURCHASED TWO FLATS AT 10 TH AND 11 TH FLOOR OF THE BUILDING WITH THE PURPOSE TO MAKE A DUPLEX FLAT IN THE SAME BUILDING UNDER CONSTRUCTION AT BANGALURU, THEREFORE, THE FLATS WER E PURCHASED WITH THE INTENTION TO MAKE THEM ONE UNIT. THE LD. AR HAS REF ERRED TO THE PURCHASE DOCUMENTS AND SUBMITTED THAT THE ASSESSEE HAS BOOKED FLAT NOS. 7103 AND 7113 WHICH ARE ON 10 TH AND 11 TH FLOORS OF THE TOWER OF THE GARDENIA AT BANGALURU. THE ASSESSEE BOOKED THES E TWO FLATS DURING THE CONSTRUCTION OF THE SAID BUILDING SO THAT THESE TWO FLATS CAN BE USED AS A SINGLE HOUSE BY JOINING THEM THROUGH STAIRS. I N SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF HON BLE DELHI HIGH COURT IN CASE OF CIT VS. GITA DUGGAL 214 TAXMAN 51 AND SU BMITTED THAT THE SLP FILED BY THE DEPARTMENT HAS BEEN DISMISSED BY T HE HONBLE SUPREME COURT REPORTED IN 228 TAXMAN 62. THUS, THE HONBLE DELHI ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 4 HIGH COURT HAS HELD THAT MERELY BECAUSE A RESIDENTI AL HOUSE CONSISTS OF SEVERAL INDEPENDENT RESIDENTIAL UNIT DEDUCTION U/S 54/54F OF THE ACT COULD NOT BE DISALLOWED. HE HAS ALSO RELIED UPON TH E DECISION OF COORDINATE BENCHES OF THIS TRIBUNAL DATED 18.03.201 6 IN CASE OF SURENDRA SHARMA VS. ITO IN ITA NO. 606/JP/2013 AS W ELL AS DECISION IN CASE OF JAG MOHAN SHARMA VS. ITO DATED 13.03.2018 I N ITA NO. 1089/JP/2016 AND SUBMITTED THAT THE TRIBUNAL HAS HE LD THAT IF TWO PROPERTIES ARE ADJACENT TO EACH OTHER AND TO BE USE D BY THE ASSESSEE FOR RESIDENTIAL PURPOSE THE BENEFIT OF SECTION 54F OF THE ACT CANNOT BE DENIED. THE LD. AR HAS THEN REFERRED TO A SERIES OF DECISIONS ON THE POINT AND SUBMITTED THAT WHEN THE ASSESSEE HAS PURC HASED TWO FLATS WHICH ARE ADJACENT TO EACH OTHER AND WITH THE PURPO SE TO USE AS DUPLEX FLATS THEN THE DEDUCTION IN RESPECT OF THE INVESTME NT MADE IN THESE TWO FLATS IS ELIGIBLE FOR DEDUCTION U/S 54 OF THE ACT. HE HAS FURTHER CONTENDED THAT THE LD. CIT(A) HAS ERRED IN APPLYING THE AMENDED PROVISIONS OF SECTION 54 OF THE ACT WITHOUT CONSIDE RING THE FACT THAT THE SAID AMENDMENT IS PROSPECTIVE IN NATURE AND W.E.F. 01.04.2015 AND THEREFORE, NOT APPLICABLE FOR THE ASSESSMENT YEAR U NDER CONSIDERATION BUT IT IS APPLICABLE FROM THE SUBSEQUENT ASSESSMENT YEAR. THUS, THE LD. ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 5 AR HAS SUBMITTED THAT THE DEDUCTION U/S 54 OF THE A CT TO THE EXTENT OF RS. 5,00,00,00/- MAY BE ALLOWED INSTEAD OF RESTRICT ED TO ONLY ONE FLAT. 4. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSEE PURCHASE TWO SEPARATE FLATS WHICH ARE INDEPENDENT U NITS IN THE BUILDING AND PURCHASE THROUGH TWO SEPARATE TRANSFER DOCUMENT S. FURTHER, IN THE PLAN OF THE BUILDING THERE IS NO PROVISIONS FOR PAS SAGE OR ANY OTHER INTERCONNECTION BETWEEN THESE TWO FLATS WHICH ARE T WO SEPARATE RESIDENTIAL UNITS AND THEREFORE, DO NOT SATISFY THE REQUIREMENT OF A SINGLE DWELLING UNIT. THE DECISION RELIED BY THE LD . AR ARE NOT APPLICABLE IN THE PRESENT CASE WHEN THE ASSESSEE HAS FAILED TO ESTABLISH THAT THESE TWO FLATS ARE HAVING COMMON PASSAGE, COMMON KITCHEN AND TO BE USED AS A SINGLE RESIDENTIAL HOUSE. HE HAS RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS SOLD ONE HOUSE PROPERTY AND ONE PIECE OF LAND. THE LONG TERM CAPITAL GAIN COMPUTED ON SALE OF HOUSE PROPERTY AND ON SALE OF LAND OF RS. 7,32,34,204/- AND RS. 3,72,96,314/- RESPECTIVELY. THE ASSESSEE CLAIMED EXEMPTION U/S 54 OF THE ACT IN RESPECT OF THE CAPITAL GAIN ARISING FROM SALE OF HO USE PROPERTY AGAINST THE INVESTMENT OF RS. 5,00,00,007/- MADE IN TWO FLA TS BEARING NO. 7103 ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 6 AND 7113 SITUATED AT 10 TH AND 11 TH FLOORS OF TOWER GARDENIA AT BENGALURU. THE DISPUTED IS ONLY REGARDING THE DEDUC TION CLAIMED U/S 54 OF THE ACT AGAINST THE INVESTMENT IN TWO FLATS WAS RESTRICTED BY THE AO TO ONE FLAT. THEREFORE, THE OTHER TRANSACTION ON SA LE OF LAND AND CAPITAL GAIN IS NOT THE ISSUE GERMAINE IN THE PRESENT APPEA L. THE AO WHILE RESTRICTING THE CLAIM TO ONE FLAT HAS RELIED UPON T HE DECISION OF SPECIAL BENCH OF THE MUMBAI TRIBUNAL IN CASE OF ITO VS. M/S SUSHILA M. JHAVERY 107 ITD 327. THERE IS NO QUARREL ON THE POINT THAT THE AMENDMENT BROUGHT IN SECTION 54(1) OF THE ACT IS PROSPECTIVE IN NATURE AND IS APPLICABLE FROM THE ASSESSMENT YEAR 2015-16 ONWARDS AND NOT FOR THE YEAR UNDER CONSIDERATION. HOWEVER, THE DISPUTE HAS TO BE CONSIDERED ON THE BASIS OF EXISTING PROVISIONS OF SECTION 54 OF T HE I.T. ACT. FOR READY REFERENCE THE PROVISIONS OF SECTION 54 IS QUOTED AS UNDER: 54. 24 [(1)] 25 [ 26 [SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), WHER E, IN THE CASE OF AN ASSESSEE 27 BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET 28 [***], BEING BUILDINGS OR 29 LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE 29 , THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' (HEREAFTER IN THIS SEC TION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERIOD OF 30 [ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRA NSFER TOOK PLACE PURCHASED 31 ], OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE 31A [ CONSTRUCTED, A RESIDENTIAL HOUSE ] , THEN], INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME-TAX AS INCOME OF THE P REVIOUS YEAR IN ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 7 WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WI TH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS T O SAY, (I) IF THE AMOUNT OF THE CAPITAL GAIN 32 [IS GREATER THAN THE COST OF 33 [THE RESIDENTIAL HOUSE] SO PURCHASED OR CONSTRUCTED (HER EAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET)], THE DIFFERE NCE BETWEEN THE AMOUNT OF THE CAPITAL GAIN AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PER IOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE , THE COST SHALL BE NIL; 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 CHARGE D UNDER SECTION 45 ; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF TH E 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. 34 [***] 35 [(2) THE AMOUNT OF THE CAPITAL GAIN WHICH IS NOT AP PROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGIN AL ASSET TOOK PLACE, OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CO NSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF I NCOME UNDER SECTION 139 , SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RETURN [SUCH DEPOSIT BEING MADE IN ANY CASE NOT LATER THAN THE D UE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB- SECTION (1) OF SECTION 139 ] IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN, AND UTILISED IN ACCORDANCE WITH, ANY SCHEME 36 WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RET URN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT; AND, FOR THE PURPOSES OF SUB- SECTION (1), THE AMOUNT, IF ANY, ALREADY UTILISED B Y THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET TOGETHER WITH THE AMOUNT SO DEPOSITED SHALL BE DEEMED TO BE THE COST OF THE NEW ASSET : ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 8 PROVIDED THAT IF THE AMOUNT DEPOSITED UNDER THIS SUB-SECTIO N IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OR CONST RUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1 ), THEN, (I) THE AMOUNT NOT SO UTILISED SHALL BE CHARGED UND ER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET EXPIRES; AND (II) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW SUC H AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. IT IS ALSO SETTLED PROPOSITION OF LAW THAT THE FISC AL STATUTE HAS TO BE INTERPRETED STRICTLY AND FURTHER THE EXEMPTION PROV ISIONS ARE REQUIRED TO BE INTERPRETED AS PER THE STRICT LANGUAGE OF STATUT E AND THERE IS NO SCOPE OF GIVING ANY DIFFERENT MEANING TO WHAT IS IN DENT BY THE LEGISLATURE. THE LANGUAGE OF SECTION 54 OF THE ACT IS PLAN AND UNAMBIGUOUS AND THE TERM USESED A RESIDENTIAL HOUS E CAN BE UNDERSTOOD AS A RESIDENTIAL DWELLING. THEREFORE, IF MORE THAN ONE SMALLER UNITS ARE ADJACENT TO EACH OTHER AND ARE CO NVERTED INTO ONE HOUSE FOR THE PURPOSE OF RESIDENCE, HAVING COMMON P ASSAGE, COMMON KITCHEN THEN EVEN MORE THAN ONE SMALLER UNITS WHICH ARE SO CONTIGUOUS AND ADJACENT TO EACH OTHER CAN BE USED AS ONE RESID ENTIAL HOUSE ARE REGARDED AS A RESIDENTIAL HOUSE AS INTENDED BY THE LEGISLATURE. THE SPECIAL BENCH OF THE MUMBAI TRIBUNAL IN CASE OF TH E ITO VS. M/S ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 9 SUSHILA M. JHAVERI (SUPRA) HAS CONSIDERED THIS ISSU E IN PARA 11 AND 12 AS UNDER:- 11. IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THAT E XEMPTION UNDER SECTIONS 54 AND 54F OF THE ACT WOULD BE ALLOW ABLE IN RESPECT OF ONE RESIDENTIAL HOUSE ONLY. IF THE ASSES SEE HAS PURCHASED MORE THAN ONE RESIDENTIAL HOUSE, THEN THE CHOICE WOULD BE WITH ASSESSEE TO AVAIL THE EXEMPTION IN RE SPECT OF EITHER OF THE HOUSES PROVIDED THE OTHER CONDITIONS ARE FUL FILLED. HOWEVER, WHERE MORE THAN ONE UNIT ARE PURCHASED WHI CH ARE ADJACENT TO EACH OTHER AND ARE CONVERTED INTO ONE H OUSE FOR THE PURPOSE OF RESIDENCE BY HAVING COMMON PASSAGE, COMM ON KITCHEN, ETC., THEN, IT WOULD BE A CASE OF INVESTME NT IN ONE RESIDENTIAL HOUSE AND CONSEQUENTLY, THE ASSESSEE WO ULD BE ENTITLED TO EXEMPTION. 12. COMING TO THE FACTS OF THE PRESENT CASE, WE FIND T HAT INVEST- MENT WAS MADE IN TWO FLATS LOCATED AT DIFFERENT LOC ALITIES IN MUMBAI. ACCORDINGLY, THE ASSESSEE WAS ENTITLED TO E XEMPTION IN RESPECT OF INVESTMENT IN ONE HOUSE ONLY OF HER CHOI CE. THE ASSESSING OFFICER HAS ALREADY ALLOWED EXEMPTION IN RESPECT OF HOUSE WHICH PERMITTED HIGHER DEDUCTION. THEREFORE, ON THE BASIS OF OPINION EXPRESSED BY US, WE REVERSE THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE ORDER OF ASSES SING OFFICER. THEREFORE, AS PER THE PLAN AND UNAMBIGUOUS LANGUAG E OF THE SECTION 54 OF THE ACT THE EXEMPTION IS AVAILABLE ONLY IN RE SPECT OF ONE RESIDENTIAL HOUSE. WHAT CONSTITUTES A RESIDENTIAL H OUSE DEPENDS ON THE PECULIAR FACTS OF EACH CASE. THE FUNDAMENTAL QUESTI ON IS THAT A RESIDENTIAL HOUSE VARIES FROM PERSON TO PERSON AND REQUIREMENT OF EACH ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 10 PERSON HOWEVER, THE SCHEME AND OBJECT OF THE PROVIS IONS OF SECTION 54 OF THE ACT TO PROVIDE INCENTIVE TO THE ASSESSEE IS NOT IN DISPUTE THAT THE CAPITAL GAIN ARISING FROM SALE OF RESIDENTIAL HOUSE IS EXEMPT FROM TAX IF THE SAME IS INVESTED FOR PURCHASE OF ANOTHER RESIDE NTIAL HOUSE. WHICH MEANS THE CAPITAL GAIN ARISING FROM THE SALE OF THE EXISTING ASSET BEING RESIDENTIAL HOUSE IS USED FOR PURCHASE OR CONSTRUCT ION OF A NEW RESIDENTIAL HOUSE WITHIN THE PERIOD PRESCRIBED U/S 54(1) OF THE ACT. THEREFORE, THE PURCHASE OR THE CONSTRUCTION OF A HO USE PROPERTY FOR ASSESSEES OWN RESIDENCE IS THE PRIMARY REQUIREMENT FOR AVAILING INCENTIVE U/S 54 OF THE ACT AND HENCE, WHILE CONSID ERING THE RESIDENTIAL HOUSE THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OR CONSTRUCTION OF THE PROPERTY IS RELEVANT. THE RESID ENTIAL HOUSE IS DISTINCT FROM A RESIDENTIAL BUILDING AND THE DISTINCTION IS ONLY USE AND PURPOSE OF THE RESIDENTIAL BUILDING. THE HONBLE BOMBAY HIGH C OURT IN CASE OF K.C. KAUSHIK VS. P.B. RANE, FIFTH INCOME TAX OFFICER 185 ITR 499 WHILE CONSIDERING THE TERM A RESIDENTIAL HOUSE U/S 54 OF THE ACT AND HAS HELD AS UNDER:- EVIDENTLY, RELIEF IS NOT AVAILABLE UNDER THE SECTI ON IN RESPECT OF CAPITAL GAINS ARISING ON THE TRANSFER OF ANY AND EV ERY CAPITAL ASSET. RELIEF IS AVAILABLE ONLY IF THE CAPITAL ASSE T IS SUCH THAT ITS INCOME IS CHARGEABLE UNDER THE HEAD INCOME FROM HO USE PROPERTY AND WHICH IN THE TWO YEARS IMMEDIATELY PR ECEDING THE ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 11 TRANSFER WAS BEING USED BY THE ASSESSEE OR A PARENT OF HIS FOR THE PURPOSE OF HIS OWN OR THE PARENTS OWN RESIDENCE. T HERE IS NO DISPUTE THAT THIS CONDITION IS SATISFIED IN THE PRE SENT CASE AS THE FLAT IN SUVARNADEEP WAS USED BY THE PETITIONER FROM 1973 TO 1979M FOR HIS OWN RESIDENCE AND INCOME FROM IT, IF ANY, WOULD HAVE BEEN CHARGEABLE UNDER THE HEAD INCOME FROM HO USE PROPERTY. THE SECOND CONDITION FOR AVAILING OF THE RELIEF IS THAT THE ASSESSEE MUST WITHIN A PERIOD OF ONE YEAR BEFOR E OR AFTER THE DATE OF TRANSFER OF SUCH A CAPITAL ASSET, PURCHASE OR WITHIN A PERIOD OF TWO YEARS AFTER THAT DATE, CONSTRUCT A HO USE PROPERTY FOR HIS OWN RESIDENCE. IN THIS CASE, BOTH THE HOUSE PROPERTIES, I.E. THE FLAT IN PRIYADARSHINI AND THE FLAT IN KALPANA, WERE PURCHASE BY THE PETITIONER WITHIN ONE YEAR OF THE DATE OF THE S ALE OF THE FLAT IN SURVARNADEEP AND BOTH THE FLATS WERE PURCHASED FOR THE PURPOSE OF RESIDENCE. IN THE ABSENCE OF ANY PROVISION TO TH E CONTRARY, IN MY JUDGMENT, THE PETITIONER IS ENTITLED TO AVAIL OF THE RELIEF IN RESPECT OF THE CAPITAL GAIN ARISING ON THE SALE OF HIS FLAT IN 1979 AGAINST THE FLAT PURCHASED IN THAT YEAR AS ALSO AGA INST THE FLAT PURCHASED ON JULY 26, 1980, AND, AS HELD BY THE COM MISSIONER IN HIS ORDER UNDER SECTION 264 OF THE INCOME-TAX ACT F OR THE ASSESSMENT YEAR 1980-81, I AM INCLINED TO HOLD THAT IT IS FOR THE PETITIONER TO CLAIM RELIEF UNDER THIS SECTION AGAIN ST THE PURCHASE OF ANY ONE OF THE FLATS PROVIDED THAT THE OTHER CON DITIONS MENTIONED IN THE SECTION ARE SATISFIED. THERE BEING NO DISPUTE THAT THE FLAT PURCHASED BY THE PETITIONER IN KALPAN A ON JULY 26, 1980, SATISFIES THE CONDITIONS LAID DOWN IN SECTION 54, I.E. IT WAS PURCHASED WITHIN ONE YEAR OF THE SALE OF THE SUVARN ADEEP FLAT AND FOR THE PURPOSE OF HIS OWN RESIDENCE, THE PETIT IONER IS ENTITLED TO SEEK ADJUSTMENT OF CAPITAL GAINS AGAINS T THE PURCHASE OF THIS FLAT. HOWEVER, CLAUSE (I) PROVIDES THAT IF THE NEW ASSET FOR THE PURCHASE OF WHICH THE ASSESSEE SOUGHT RELIEF OF CAP ITAL GAINS UNDER SECTION 54 IS SOLD WITHIN A PERIOD OF THREE Y EARS OF ITS PURCHASE OR CONSTRUCTION, THE COST OF THE NEW ASSET WILL BE ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 12 REQUIRED TO BE REDUCED TO THE EXTENT OF RELIEF AVAI LED OF ON ACCOUNT OF CAPITAL GAINS EARNED BUT ADJUSTED. IT IS FOR THIS REASON THAT IT HAS BECOME IMPORTANT TO CONSIDER WHETHER TH E NEW ASSET, I.E., THE FLAT IN KALPANA PURCHASED BY THE PETITION ON JULY 26, 1980, WHICH WAS ADMITTEDLY LET OUT BY THE PETITIONE R TO HIS EMPLOYER, BANK OF BARODA, ON AND FROM 27, 1982, ON HIS TRANSFER TO BARODA CAN BE SAID TO BE A FACTOR THAT WOULD BRI NG THE PETITIONER WITHIN THE MISCHIEF OF CLAUSE (I). IN TH IS CONTEXT, IT IS DESIRABLE TO REFER TO THE GUJARAT HIGH COURT DECISI ON IN THE CAST, CIT VS. TIKYOMAL JASANMAL [1971] 82 ITR 95. THE FAC TS IN THAT CASE WERE THAT OUT OF THE TOTAL CONSTRUCTED PORTION OF THE HOUSE ADMEASURING 1,389 SQ.FT, THE ASSESSEE HAD LET OUT A N AREA OF 734 SQ. FT., I.E., MORE THAN HALF, IMMEDIATELY ON COMPL ETION OF THE CONSTRUCTION. IT WAS HELD THAT THE NEW HOUSE WAS NO T CONSTRUCTED BY THE ASSESSEE FOR THE PURPOSE OF HIS OWN RESIDENC E. THE COURT, HOWEVER, OBSERVED THAT IT WAS NOT THE CASE OF THE A SSESSEE THAT THE HOUSE WAS ORIGINALLY CONSTRUCTED BY HIM FOR THE PURPOSE OF HIS OWN RESIDENCE BUT BY REASON OF SUBSEQUENT EVENT S OR SUPERVENING CIRCUMSTANCES, IT BECAME IMPOSSIBLE OR IMPRACTICABLE FOR HIM TO OCCUPY A PART OF THE HOUSE FOR THE PURPO SE OF HIS OWN RESIDENCE AND WAS LET OUT TO TENANTS FOR THAT REASO N. SUCH INDEED COULD NOT BE THE CASE OF THE ASSESSEE SINCE NO PERI OD OF TIME ELAPSED BETWEEN THE COMPLETION OF CONSTRUCTION OF T HE GROUND FLOOR AND THE LETTING OUT OF A MAJOR PORTION OF IT TO TENANTS. IN THE SECOND DECISION IN THE CASE OF CIT VS. NATU HANSRAJ [1976] 105 ITR 43, THE GUJARAT HIGH COURT HELD THAT NO SINGLE FACTOR INCLUDING WHETHER OR NOT THE PROPERTY NEWLY ACQUIRED BY THE A SSESSEE WAS WHOLLY OR SUBSTANTIALLY ACQUIRED BY HIM FOR THE PUR POSE OF HIS OWN RESIDENCE AFTER PURCHASE OR CONSTRUCTION, AS THE CA SE MAY BE, WOULD BE DETERMINATIVE OF THE MATTER. EVEN IF THE N EW PROPERTY WAS NOT SUBSTANTIALLY PUT TO USE FOR HIS OWN RESIDE NTIAL PURPOSES BY THE ASSESSEE WITHIN A REASONABLE TIME AND IF THE FAILURE TO DO SO WAS WITHOUT ANY FAULT ON HIS PART, THAT IS, BY R EASON OF SOME UNFORESEEN SUBSEQUENT EVENTS OR SUPERVENING CIRCUMS TANCES, IT MIGHT STILL BE POSSIBLE TO HOLD IN A GIVEN CASE, PR OVIDED OTHER ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 13 CIRCUMSTANCES POINT IN THAT DIRECTION, THAT THE REA L RELIEF, INTENTION OR MOTIVE ENTERTAINED BY THE ASSESSEE AT OR ABOUT T HE TIME OF PURCHASE OR CONSTRUCTION AS REGARDS THE USE OF THE NEWLY ACQUIRED HOUSE PROPERTY WAS TO OCCUPY IT HIMSELF. THEREFORE, THE PRIMARY REQUIREMENT FOR TREATING A S TRUCTURE AS RESIDENTIAL HOUSE IS THE PURPOSE FOR WHICH THE SAME IS ACQUIRED OR CONSTRUCTED BY THE ASSESSEE FOR THE PURPOSE OF HIS OWN RESIDENCE. HENCE, IF A RESIDENTIAL UNIT IS PURCHASE BY THE ASS ESSEE BUT NOT WHOLLY AND SUBSTANTIALLY FOR HIS OWN RESIDENTIAL PURPOSE T HEN, THE SAID RESIDENTIAL UNIT CANNOT BE REGARDED A RESIDENTIAL H OUSE. THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF RAJESH SURANA VS. CIT 306 ITR 368 HAD THE OCCASION TO DEAL WITH THE TERM OF RESIDENCE USED IN SECTION 53 AND HAS HELD IN PARA 13 TO 15 AS UNDER:- 13. THE OTHER ASPECT OF THE MATTER IS, THAT THE WORD 'R ESIDENCE' HAS BEEN DEFINED IN THE BLACKS LAW DICTIONARY, SIXT H EDITION, AT P. 1308, AS 'PLACE WHERE ONE ACTUALLY LIVES OR HAS HIS HOUSE; A PERSONS DWELLING PLACE OR PLACE OF HABITATION; AN ABODE, HOUSE WHERE ONES HOME IS, A DWELLING HOUSE'. IT HAS FURT HER BEEN DESCRIBED THAT RESIDENCE IMPLIES SOMETHING MORE THA N MERE PHYSICAL PRESENCE, AND SOMETHING LESS THAN DOMICILE . THEN, FOR THE PRESENT PURPOSES THE TERM 'HOUSE' HAS BEEN DEFI NED AT P. 739 TO MEAN 'STRUCTURE THAT SERVES AS LIVING QUARTE RS FOR ONE OR MORE PERSONS OR FAMILIES'. THEN, THE SHORTER OXFORD DICTIONARY, THUMB INDEX EDITION, DEFINES THE WORD 'HOUSE' FOR T HE PRESENT PURPOSES, TO MEAN 'BUILDING FOR HUMAN HABITATION; A DWELLING, A HOME, A SELF-CONTAINED UNIT HAVING A GROUND FLOOR A ND ONE OR MORE UPPER STOREYS; OR PART OF A BUILDING OCCUPIED BY ONE TENANT ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 14 OR FAMILY, AND SO ON. THEN, THE EXPRESSION 'RESIDEN CE' HAS BEEN DEFINED IN THE SAID SHORTER OXFORD DICTIONARY TO ME AN, A CERTAIN PLACE USED AS RESIDENCE SUITABLE FOR OR CHARACTERIZ ED AS PRIVATE HOUSE, AND SO ON. 14. IN OUR VIEW, EVEN WITHOUT ANY INVOCATION OF MUCH LO GIC, ON THE FACE OF THE DICTIONARY MEANING ALSO, THE CONSTR UCTION CAN POSSIBLY NOT BE SAID TO BE FULFILLING THE CHARACTER OF RESIDENTIAL HOUSE. MAY BE THAT SOME PERSON MIGHT BE LIVING THER E, BEING CHOWKIDAR, BUT THEN HE CANNOT MEAN TO BE DWELLING T HEREIN, EVEN IF CONSIDERED ON THE COMMON SENSE, TO THE EFFECT, T HAT ANY PERSON COULD HAVE LIVED ANYWHERE UNDER COMPULSION, OR CIRCUMSTANCES, AND AT TIMES SUCH RESIDENCE EVEN MAY NOT REQUIRE BUILDING, OR EVEN A STRUCTURE, AS FOOTPATH DWELLERS ARE NOT IN SCARCITY IN INDIA, BUT THEREBY THE FOOTPATH WOULD N OT BE THEIR RESIDENTIAL HOUSE. LIKEWISE NOMADS DO LIVE IN THEIR MOBILE BULLOCK CART, BUT THEN THE BULLOCK CART CANNOT BE SAID TO B E FALLING WITHIN EXPRESSION 'RESIDENTIAL HOUSE'. THUS, IN ABSENCE OF ANY STATUTORY DEFINITION IN THE ACT, EVEN EMPLOYING DICTIONARY ME ANING, AND/OR THE COMMON SENSE APPROACH, IN ORDER TO DESCRIBE THE ASSET AS RESIDENTIAL HOUSE, IT SHOULD BE FULFILLING THE CHAR ACTERISTICS OF A RESIDENTIAL HOUSE AS DEFINED ABOVE. ADMITTEDLY THER E IS ONLY ONE GARAGE-CUM-ROOM, WITH NO KITCHEN OR TOILET, ETC. MA Y BE THAT THE ASSESSEE MIGHT NOT BE PHYSICALLY LIVING THERE AT A GIVEN POINT OF TIME, BUT THEN THE CONSTRUCTION IS NOT EVEN FIT FOR DWELLING BY THE ASSESSEE. IN OUR VIEW, THE LANGUAGE OF S. 53 COMPRE HENDS, THAT THE ASSETS SHOULD BE PREDOMINANTLY RESIDENTIAL BUIL DING, AND MAY HAVE LAND APPURTENANT THERETO, AND NOT, THAT IT BE A OPEN PLOT OF LAND, HAVING SOME INSIGNIFICANT STRUCTURE, WHICH MI GHT UNDER SOME CONSTRAINTS, BE USED FOR RESIDENCE, OR WHICH M IGHT BE ACTUALLY USED BY SOME EMPLOYEE, AS A PERSON TAKING CARE OF PROTECTION OF THE PLOT. THUS CONSIDERING FROM ANY S TANDPOINT, IT CANNOT BE SAID, THAT THE ASSET FULFILLS THE CHARACT ER OF RESIDENTIAL HOUSE, WITHIN THE MEANING OF S. 53 OF THE ACT. ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 15 15. THERE IS YET ANOTHER ASPECT, WHICH HAS NOT BEEN GON E INTO BY THE LEARNED AUTHORITIES BELOW, BUT IT CANNOT BE LOS T SIGHT OF. THAT BEING, THAT THE PURPOSE OF S. 53 WAS NOT TO ENTIREL Y EXEMPT THE LONG-TERM CAPITAL GAIN, DERIVED FROM THE RESIDENTIA L BUILDING. IF THE INTERPRETATION AS SUGGESTED BY THE ASSESSEE WER E TAKEN, A PERSON MAY ENGAGE HIMSELF, IN PROPERTY DEALING, AND WOULD BE DISPOSING OF THE PROPERTY AFTER ALLOWING IT TO BECO ME A LONG-TERM ASSET, AND THEN, MAY BE THAT HE MIGHT BE RAISING CO NSTRUCTION, AS FOUND IN THE PRESENT CASE, OR EVEN MAY BE, HE MIGHT BE WORKING AS A REGULAR BUILDER, HAVING MORE THAN ONE PLOT, AN D CONSTRUCTING MORE THAN ONE HOUSE ON SUCH PLOTS, AND THEN SELLING THEM, AND THEREBY EARNING INCOME. MAY BE A SMART DEALER MIGHT BE LIVING FOR A SHORT WHILE IN EACH OF SUCH BUILDING, BUT THE N, THE QUESTION THAT WOULD ARISE IS, AS TO WHETHER S. 53 AT ALL COM PREHENDS PROVIDING ABSOLUTE HOLIDAY IN PAYMENT OF TAX TO SUC H PERSON, AND IN OUR VIEW, THE ANSWER HAS TO BE IN THE NEGATIVE. INASMUCH AS THE PURPOSE OF PROVISIONS OF S. 53 CLEARLY IS, TO P ROVIDE RELIEF TO THE ASSESSEE, WHO MIGHT LIKE TO SHIFT RESIDENCE FRO M ONE PLACE TO ANOTHER, MAY BE FOR VARIETY OF REASONS, AS MAY BE T HOUGHT PROPER BY THE ASSESSEE, AND WHICH NEED NOT BE PUT IN ANY S TRAIGHTJACKET FORMULAE. IT IS NOT INTENDED TO PROVIDE EXEMPTION T O THE ASSESSEE, WHO IS RESIDING SOMEWHERE ELSE, ACQUIRES SOME OTHER RESIDENTIAL BUILDING, RETAINS IT, SO AS TO ALLOW IT TO BECOME L ONG-TERM ASSET, AND THEN SELL IT. THUS, MERELY DEALING IN PURCHASE AND SALE OF RESIDE NTIAL BUILDING/PROPERTY WILL NOT BE REGARDED AS A RESIDEN TIAL HOUSE BUT ONLY WHEN A RESIDENTIAL UNIT IS PURCHASED FOR THE ASSESS EES OWN RESIDENTIAL PURPOSE THEN, IT WILL BE TREATED AS A RESIDENTIAL H OUSE FOR THE PURPOSE OF SECTION 54 OF THE I.T. ACT. IN THE CASE IN HAND, TH ERE IS NO DISPUTE THAT THE ASSESSEE HAS PURCHASED TWO SEPARATE FLATS AT TW O FLOORS 10 TH AND ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 16 11 TH OF THE BUILDING. THEREFORE, FOR CONSIDERING THE TW O FLATS AS A RESIDENTIAL HOUSE THE VARIOUS ASPECTS ARE TO BE TAK EN INTO CONSIDERATION AS DISCUSSED BY US IN THE FOREGOING PART OF THIS OR DER AS WELL AS THE TERM RESIDENTIAL HOUSE DISCUSSED IN THE VARIOUS DEC ISIONS. ACCORDINGLY, WE FIND THAT THE ISSUE REQUIRES A PROPER VERIFICATI ON AND EXAMINATION IN LIGHT OF THE ABOVE DISCUSSION AND OBSERVATION. ACCO RDINGLY, THE MATTER IS SET ASIDE TO THE RECORD OF THE ASSESSING OFFICER FO R PROPER EXAMINATION AND VERIFICATION OF THE RELEVANT FACTS AND THEN DEC IDE THE SAME IN LIGHT OF THE OBSERVATION DISCUSSED BY US IN THIS ORDER. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 03/04/2019. SD/- SD/- JESK LH0 KEKZ FOT; IKY JKO (RAMESH. C. SHARMA) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 03/04/2019. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S PRAMOD SAHAI BHATNAGAR, HUF, BANGALORE. 2. IZR;FKHZ@ THE RESPONDENT- ACIT, CIRCLE-6, JAIPUR. 3. VK;DJ VK;QDR@ CIT ITA NO. 517/JP/2018 M/S PRAMOD SAHAI BHATNAGAR, HUF VS. ACIT 17 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 517/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR