MADHU B KHATRI, MUMBAI V. ITO WARD 32 (2)(2), MUMBAI

ITA 6613/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1919 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 22-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Capital Gains
• Section: 54F; 201; 13(2); 54

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 6613/MUM/2019 (ASSESSMENT YEAR 2013-14) MADHU B.KHATRI A-301, BATHIA BUILDING NO.1, S.V.ROAD BORIVALI(W) MUMBAI-400092 PAN : AITPK8826F VS. ITO,WARD - 32(2)(2) C-11, R.NO.304, 3 RD FLOOR PRATYAKSHKAR BHAVAN BKC, BANDRA(E) MUMBAI-400 051 ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI PRAKASH JHUNJHUNWALA DEPARTMENT BY MS. USHA GAIKWAD DATE OF HEARING 18 .05 .2021 DATE OF PRONOUNCEMENT 01.07 .2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-45 DATED 23.05.2019 AND PERTAINS TO ASSESSMENT YEAR 20 13-14. 2. THE GROUNDS OF APPEAL READ AS UNDER : 1.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF LONG TERM CAPITAL GAIN O F RS.37,47,819/- ON TRANSFER OF A RESIDENTIAL HOUSE ON ERRONEOUSLY CONS IDERING THE NOTIONAL SALE CONSIDERATION OF RS.92,11,288/- THOUGH THE MAR KET VALUE DETERMINED BY THE STAMP VALUATION DEPARTMENT U/S.50C IS OFRS.5 3,70,125/-; 2.0 THE LD. CIT(A), BEFORE CONFIRMING THE SALE CONSIDER ATION DETERMINED BY LD. AO ON ADOPTING THE MARKET VALUE OF 2 RESIDENTIA L FLATS, OUGHT TO HAVE CONSIDERED THE UNDERSTATED FACTS, BEING; A) THE LD, AO DETERMINED THE SALE CONSIDERATI ON ON CONSIDERING THE EXCESSIVE AREA OF 2 FLATS WHEREIN THE CARPET AREA H AD BEEN HYPOTHETICALLY CONVERTED INTO BUILT-UP AREA ON THE BASIS OF INCORR ECT PRESUMPTIONS; MADHU B.KHATRI. 2 B) THE SALE CONSIDERATION HAD BEEN DETERMINED ON CONSIDERING THE READY RECKONER RATE WITHOUT CONSIDERING THE LOCATIO NAL DISADVANTAGES, ETC; 3.0 THE LD. CIT(A) OUGHT TO HAVE OUGHT TO HAVE ADMITTED THE APPELLANT'S ALTERNATE PRAYER MADE U/S.50C(2) TO REFER THE VALUA TION MATTER TO DVO TO DETERMINE THE FAIR VALUE OF THE CAPITAL ASSET TRANS FERRED DURING THE YEAR; 4.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION U/S.54 OF RS.35,68,144/- IN RESPECT OF THE 2 ND FLAT ACQUIRED BY THE APPELLANT; 4.1 THE LD. CIT(A), BEFORE CONFIRMING THE DISAL LOWANCE OF DEDUCTION U/S.54 OF RS.35,68,144/-, OUGHT TO HAVE CONSIDERED THE UND ERSTATED VIAL FACTS BEING; A) THE 2 SMALL FLATS ACQUIRED BY THE APPELLANT IN SAME BUILDING CONSTITUTES AS ONE RESIDENTIAL HOUSE; B) THE AMENDMENT TO SEC 54 MADE IN FINANCE ACT 2014 W.E.F. 01/04/2015 WOULD NOT APPLY RETROSPECTIVELY. 3. BRIEF FACTS OF THE CASE ARE THAT IN THE ASSESSME NT ORDER, THE AO ALLOWED DEDUCTION U/S 54 ON ONE RESIDENTIAL HOUSE OF RS.35, 68,144. 4. AGAINST THE ABOVE ORDER, LD.CIT(A) NOTED THA T ELABORATE ASSESSEES SUBMISSION AS UNDER:- 'IN ASSESSMENT ORDER, LD, AO ALLOWED THE DEDUCTION U/S.54 ON ONE RESIDENTIAL HOUSE OF RS.35,63,244/- AND OUGHT TO HAVE ALLOWED THE DEDUCTION OF RS.71,36 ,288/-. THE APPELLANT HUMBLY SUBMITS THAT LD. AO OUGHT TO H AVE ALLOWED THE DEDUCTION IT/S.54 ON BOTH FLATS OF RS.71,36,288/- [INSTEAD OF 1 FLAT OF RS.35,68,144/-] AND IN THIS RESPECT, THE APPELLANT HUMBLY SUBMITS AS UNDER :- 3.1 THE APPELLANT HAD ACQUIRED A RESIDENTIAL HOUSE BEIN G FLATS NOS. 102&302 WHICH ARE SITUATED IN SAME RESIDENTIAL BUILDING. THE APPE LLANT, UNDER REDEVELOPMENT AGREEMENT, WAS ALLOTTED THE 2 FLATS BY THE DEVELOPER AND SINCE THE SIZE OF SUCH FLATS WERE VERY SMALL (CARPET AREA OF 492 SQ.FTS PER FLAT ), ACCORDINGLY THE APPELLANT HAD TREATED SUCH 2 FLATS AS A RESIDENTIAL HOUSE. THERE IS A COMMON KITCHEN SINCE THE APPELLANT HAD USED ONE SMALL SIZE FLAT AS HER KITCH EN AND ANOTHER FLAT HAD BEEN HELD AS BEDROOMS. THE LD. AO IS NOT JUSTIFIED IN CONSIDE RING THE 2 FLATS AS TWO RESIDENTIAL HOUSES AND OUGHT TO HAVE CONSIDERED AS A RESIDENTIA L HOUSE. MADHU B.KHATRI. 3 THE APPELLANT HAD ACQUIRED THE 2 FLATS UNDER THE SA ME DEVELOPMENT AGREEMENT EXECUTED WITH THE DEVELOPER ON 30/04/2012. THE APPELLANT, UNDER DEVELOPMENT AGREEMENT, HAD SURRENDERED HER OLD RESIDENTIAL HOUS E ALONG WITH PARCEL OF LAND AND HAD BEEN ALLOTTED THE 2 FLATS IN THE SAME BUILDING ON THE SAME PIECE OF LAND. THUS, THE 2 FLATS WOULD CONSTITUTE NS A RESIDENTIAL HOUSE AND WOULD BE ELIGIBLE FOR DEDUCTION U/S. 54 OF THE ACT. IN UNDERSTATED JUDICIAL DECISIONS, HON'BLE HIGH COURTS AND ITAT'S HAD DECIDED THAT 2 OR MORE FLATS IN SAME BUILDING WOULD STILL CONSTITUTE AS A RESIDENTIAL HOUSE : A) CIT VS. GUMANINALJAIN 8O TAXMANN.COM 21 (MAD-HC) 'THE 15 FLATS, EVEN IF THEY ARE LOCATED IN DIFFEREN T BLOCKS WOULD NOT DISENTITLE THE ASSESSEE FROM GETTING THE BENEFIT OF SECTION 541-. THE ORDER OF TRIBUNAL WHICH HAS BEEN CALLED IN QUESTIO N IS CORRECT, THERE IS NO INFIRMITY IN THE SAID ORDER IT DOES NOT CALL FOR A NY INTERFERENCE AND THE SAID ORDER DESERVES TO BE CONFIRMED. ONCE IT IS IN THE SAME LOCATION/ADDRESS, THE QUES TION OF WHETHER IT IS IN THE SAME BLOCK OR IN DIFFERENT BLOCKS DOES NOT ARISE FOR CON SIDERATION. AS LONG AS AIL (HE FLATS ARE IN THE SAME ADDRESS/LOCATION EVEN IF THEY/ ARE LOCATED IN SEPARATE BLOCKS OR TOWERS IT DOES NOT ALTER THE POSITION. IN THE INSTA NT CASE, AFTER ALL, ALL THE FLATS ARE A PRODUCT OF ONE DEVELOPMENT AGREEMENT OF THE SAME NI ECE OF LAND BEING SAID LAND. 'THEREFORE, EVEN IF FLATS/APARTMENTS ARE IN DIFFER ENT BLOCKS ANY DIFFERENT TOWERS AS LONG AS THEY ARE IN SAME ADDRESS/LOCATION IT DOES N OT DISENTITLE THE ASSESSEE FROM GETTING THE BENEFIT OF SECTION 54F. . THEREFORE, TILE SOLE AND SHEET ANCHOR SUBMISSION OF REVENUE THAT THE 15 FLATS IN THE INSTANT CASE ARE LOCATED IN THE DIFFERENT BLOCKS D OES NOT IMPRESS 'WILL NOT DISENTITLE THE ASSESSEE FROM GETTING THE HEM-FIT OF SECTION 54 F AS ALL FILE FLATS ARE IN THE SAME LOCATION /ADDRESS AND ALL FLATS ARE BY PRODUCTS O F ONE DEVELOPMENT AGREEMENT WITH THE SAME BUILDER. MAIN/ FLATS, GETS PROPORTIONATE UNDIVIDED SHARE IN LAND ONLY FOR THE SLIME PIECE OF LAND. THEREFORE, ASSESSEE DOES NOT BUY MORE THAN O NE PROPERTY IN THAT SENSE OF THE MATTER. FLATS, APARTMENTS ARE COMPLETELY BASED ON CO OWNERSHIP. IT IS CONCLUDED UNIT THE ASSESSEE IS ENTITLED TO TH E BENEFIT OF SECTION 54F.' B) ITO VS. SUREDDY VENKATA RAMANAMAMMA 83 TAXMANN.COM 99 (VISAKHAPATNAM- ITAT) 'THE ONLY ISSUE TO BE DECIDED IS WHETHER ON THE FAC TS AND IN THE IRCNMSTANI.ES OF THE CASE, THE ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 54F FOR ALL THE FLATS RECEIVED IN PURSUANCE OF A DEVELOPMENT AGREEMENT TH E ISSUE IS NO LONGER RES INTEGRA. THE CO-ORDINATE BENCH OF THE TRIBUNAL, VISHAKAPATNA M IN THE CASE OF ITO V. RAVURI KISHORE [ IT APPEAL NOS. 498 TO 500 (VIZAG.) OF 201 3, DATED 28-3-2017J, IT TEAS HELD THAT THE EXPRESSION 'A RESIDENTIAL HOUSE' IN ACTION 54F HAS TO BE UNDERSTOOD IN A MADHU B.KHATRI. 4 SENSE THAT BUILDING SHOULD BE OF A RESIDENTIAL NATU RE AND A SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGLE NUMBER AND WHERE AN ASSESSEE HAD PURCHASED TWO RESIDENTIAL FLATS, IS ENTITLED TO EXEMPTION UNDER S ECTION 54F, IN RESPECT OF CAPITAL GAINS ON SALE OF IT ITS PROPERTY ON PURCHASE OF BOT H FLATS. DEDUCTION UNDER SECTION 54F IS ALLOWABLE WITH RESPECT TO THE RESIDENTIAL HOUSE CONSISTING OF SEVERAL INDEPENDENT UNITS. WHERE ALL THE FLATS ARE A PRODU CT OF ONE DEVELOPMENT AGREEMENT OF THE SAME PIECE OF LAND EVEN IF FLATS ARE IN DIFF ERENT BLOCKS AND DIFFERENT TOWERS, AS LONG AS THEY ARE IN SAME ADDRESS/LOCATION, IT DOES NOT DISENTITLE THE ASSESSEE FROM GETTING THE BENEFIT OF SECTION 54F. I HE LEGAL PROPOSITION BEFO RE THE AMENDMENT OF SECTION 54F BY THE FINANCE ACT , 2014 WITH EFFECT FROM 1-4-2015, IN THE CASE OF DEVELOPMENT AGREEMENT, IS VERY CLEAR THAT IF THE LA ND OWNER RECEIVE* NUMBER OF FLATS, EVEN THOUGH THEY ARE LOCATED IN DIFFERENT BLOCKS ANY DIFFERENT TONER S, ONCE THEY ARE IN SAME ADDRESS/LOCATION ANT! ALL THE FLATS ARE A PROD UCT OF ONE DEVELOPMENT AGREEMENT, THEN THE ASSESSES IS ELIGIBLE FOR EXEMPTION UNDER S ECTION 541- IN RESPECT OF ALL THE FLAT*.' C) SANJAY B. PAHADIA ITA NO.6099/MUM/2014 'UNDOUBTEDLY, THE BENEFIT OF DEDUCTION IS AVAILABLE TO AN ASSESSEE IN RESPECT OF ONLY 'ONE' RESIDENTIAL HOUSE. BUT NO LIMIT HAS BEEN PRES CRIBED UNDER THE LAIC UPON THE SIZE, SHAPE AND NATURE OF THE RESIDENTIAL HOUSE PROPERTY. THUS, IT MM/ ALSO HAPPEN SOMETIMES THAT A SMALLER UNIT MAY NOT BE SUFFICIENT FOR USE OF AN ASSESSEE'S FAMILY AND THEREFORE, HE MAY CHOOSE TO COMBINE MORE THAN ONE U NIT SO AS TO MAKE IT USEFUL FOR HIM AND HIS FAMILY. NO SUCH EMBARGO HAS BEEN LAID D OWN BY THE LAW AS WOULD BE CLEAR FROM THE PLAIN READING OF SECTION 54 / 54F. U NDER THESE CIRCUMSTANCES, THE AO IS ALSO NOT PERMITTED TO READ ANY SUCH RESTRICTIONS UNDER THE LAW WHILE EXAMINING THE CLAIM OF THE ASSESSEE.' D) CIT VS. DEVDAS NAIK 49 TAXMANN.COM 30 (BOM-HC) 'ASSESSEE CLAIMED DEDUCTION UNDER SECTION 54 ON PUR CHASE OF TWO FLATS -THOUGH THESE FLATS MERE ACQUIRED UNDER DIFFERENT AGREEMENT BAT M AP OF GENERAL LAYOUT PLAN AND INTERNAL LAYOUT PLAN INDICATED THAT THERE WAS ONLY ONE COMMON KITCHEN FOR BOTH FLATS AND BOTH FLATS WERE USED AS A SINGLE UNIT - FLATS W ERE CONSTRUCTED IN SUCH U WAY THAT ADJACENT UNITS OR FLATS COULD BE COMBINED INTO ONE -WHETHER THOUGH ACQUISITION OF FLATS HAD BEEN DONE INDEPENDENTLY BUT EVENTUALLY TH EY WERE A SINGLE UNIT AND HOUSE FOR PURPOSE OF RESIDENCE, CLAIM UNDER SECTION 54 CO ULD NOT BE DENIED.' 3.2 WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT SUBMI TS THAT THE PROVISION OF SEC. 54 (PRIOR TO AMENDMENT IN FINANCE ACT, 2014)PERMITTED TO AVAIL THE DEDUCTION ON MORE THAN ONE RESIDENTIAL HOUSE. THE LD. AO ERRONEOUSLY HELD THAT THE DEDUCTION U/S 54 IS ELIGIBLE ONLY IN RESPECT OF ONE RESIDENTIAL HOUSE O N IGNORING THE FACT THAT THE AMENDED PROLUSION OF SEC. 54 IS APPLICABLE W.E.F. 01/04/2015 ONWARDS. THE PROVIS ION OF SEC. 54 (PRIOR TO AMENDMENT IN FINANCE ACT, 2014) IS REP RODUCED AS UNDER;- 'SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), INHE RE, 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 AP PURTENANT THERETO, AND BEING A MADHU B.KHATRI. 5 RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABL E 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 YEAR S AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED OR HAS WITHIN A PERIOD OF THRE E YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE THEN, INSTEAD OF THAT CAPITAL GAI N BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER T OOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE ..................' (I) IF THE AMOUNT OF THE CAPITAL GAIN IS GREATER THAN T HE COST OF THE RESIDENTIAL HOUSE SO PURCHASED OR CONSTRUCTED (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE DIFFERENCE BETWEEN THE AMOUNT OF THE CAPITAL GA IN AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCO ME 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 PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE NIL; OR IF THE A MOUNT OF THE CAPITAL GAIN IS EQUAL TO OR LESS THAN THE COST OF THE NEW ASSET, THE CAPI TAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45; 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 C OST SHALL BE. REDUCED BY THE AMOUNT OF THE / CAPITAL GAIN.'; THEREAFTER, THE FINANCE ACT, 2014 W.E.F. 01/04/2015 SUBSTITUTED THE WORDS' A RESIDENTIAL HOUSE' WITH 'ONE RESIDENTIAL HOUSE', HO WEVER IT IS MOST VITAL TO NOTE THAT SUCH AMENDMENT IS APPLICABLE FROM ASST. YEAR 2015-1 6 ONWARDS. ACCORDINGLY, PRIOR TO AMENDMENT IN SEC. 54 MADE W.E.F. 01/04/2015, THE DEDUCTION U/S 54 WOULD BE ELIGIBLE EVEN FOR PURCHASE/CONSTRUCTION OF MORE THA N ONE HOUSE. THE WORDS 'A RESIDENTIAL HOUSE' INCORPORATED IN SEC 54 (PRIOR TO AMENDMENT) CANNOT TO BE CONSTRUED AS A SINGLE RESIDENTIAL UNIT. THE WORDS ' BEING BUILDINGS OR LANDS APPURTENANT THERETO' ISSUED BEFORE THE WORDS 'A RES IDENTIAL HOUSE' WOULD MEAN THAT THE BUILDINGS OR LANDS (WHICH ARE 'PLURAL' TERMS) A RE ELIGIBLE FOR DEDUCTION U/S.54 OF THE ACT, THE WORDS 'A RESIDENTIAL HOUSE 'MEANS THAT THE BUILDINGS OR LANDS SHOULD BE IN THE NATURE OF A RESIDENTIAL HOUSE AND NOT OF COM MERCIAL NATURE. THE LEGISLATIVE INTENT (PRIOR TO AMENDMENT) OF ALLO WING THE DEDUCTION U/S 54 WAS TO PROVIDE AN INCENTIVE TO A SELLER OF THE RESIDENTIAL HOUSE TO RE-INVEST THE CAPITAL GAIN FOR REPURCHASE OF THE RESIDENTIAL HOUSE AND THE ONL Y CONDITION PRESCRIBED WAS THAT THE RE-INVESTMENT SHOULD BE MADE IN THE RESIDENTIAL HOU SE. THE STATUTE HAS NOT PRESCRIBED THE MANNER IN WINCH THE RESIDENTIAL HOUSE SHOULD BE PURCHASED AND THUS IT WOULD BE A SUFFICIENT COMPLIANCE IF THE CAPITAL GAIN IS RE-INVESTED IN THE RESIDENTIAL HOUSE IRRESPECTIVE WHETHER IT IS ONE HOUSE OR TWO HOUSES, IN CASE THE LEGISLATIVE INTENTION WOULD HAVE BEEN TO ALLOW THE DEDUCTION U/S 54 ONLY FOR ONE HOUSE, THERE THE WORDS USED IN SEC 54 WOULD HAVE BEER, 'A RESIDENTIAL UNIT ' OR 'ONE RESIDENTIAL HOUSE'. HOWEVER, THE WORDS INCORPORATED IN SEC. 54 (PRIOR TO AMENDMENT) WERE 'A RESIDENTIAL HOUSE', 'BEING BUILDINGS OR LANDS APPUR TENANT THERETO' , 'IF THE AMOUNT OF CAPITAL GAIN IS GREATER THAN THE COST OF THE RESIDE NTIAL HOUSE....... AND THE COST OF THE NEW ASSET .....',ACCORDINGLY THE APPELLANT IS ELIGI BLE TO CLAIM THE DEDUCTION U/S 54 IN RESPECT OF PURCHASE OF BOTH RESIDENTIAL HOUSE; MADHU B.KHATRI. 6 IN THIS RESPECT, THE APPELLANT RELIES ON UNDER STAT ED JUDICIAL DECISIONS :- (I) CIT VS. V.R. KARPAGAM 373 ITR 127 (MAD-HC) 'AN AMENDMENT WAS MADE TO SECTION 54F WITH REGARD TO THE WORD V BY THE FINANCE ('NO.2) ACT, 2014. THE SAID AMENDMENT TO SECTION 54F OF THE INCOME TAX ACT, WHICH WILL COME INTO EFFECT ONLY FROM 01.04.2015, MAKES I T VERY CLEAR THAT THE BENEFIT OF SECTION 54F OF THE INCOME TAX ACT WILL BE APPLICABL E TO CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA AND THAT CLARIFIES THE SITUATION IN THE PRESENT CASE, I.E, POST AMENDMENT, VIZ., FROM 01.04.2015, THE BENEFIT OF SE CTION 54F WILL BE APPLICABLE TO ONE RESIDENTIAL HOUSE IN INDIA. PRIOR TO THE SAID A MENDMENT, IT IS CLEAR THAT A RESIDENTIAL HOUSE WOULD INCLUDE MULTIPLE FLATS/RESI DENTIAL UNITS AS IN THE PRESENT CASE WHERE THE ASSESSEE HAS GOT FIVE RESIDENTIAL FLATS .' B) CIT VS. GITA DUGGAL 52TAXMANN.COM 246 (SC) 'HIGH COURT BY IMPUGNED ORDER HELD THAT MERELY BECA USE N RESIDENTIAL HOUSE CONSIST OF SEVERAL INDEPENDENT RESIDENTIAL UNIT, DEDUCTION UNDER SECTION 54/54F COULD NOT BE DISALLOWED - WHETHER SPECIAL LEAVE PETITION FILED A GAINST IMPUGNED ORDER WAS TO BE DISMISSED - HELD, YES .' CIT VS. GITA DUGGAL 30 TAXMANN.COM 230 (DEL-HC) 'ON APPEAL, THE COMMISSIONER (APPEALS), AS WELL AS THE TRIBUNAL HELD THAT THE WORDS 'A RESIDENTIAL HOUSE' APPEARING IN SECTION 54/54F CANNOT BE CONSTRUED TO MEAN A SINGLE RESIDENTIAL HOUSE SINCE UNDER SECTION 13(2) OF THE GENERAL CLAUSES ACT, A SINGULAR INCLUDES PLURAL. ............. SECTION 54/54F USES THE EXPRESSION 'A RESIDENTIAL HOUSE'. THE EXPR ESSION USED IS NOT A RESIDENTIAL UNIT'. THIS IS N NEW CONCEPT INTROD UCED BY THE ASSESSING OFFICER INTO THE SECTION. SECTION 54/54F REQUIRES THE ASSESSEE TO ACQUIRE A 'RESIDENTIAL HOU SE' AND SO LONG AS THE ASSESSEE ACQUIRES A BUILDING, WHICH MAY HE CONSTRUCTED, FOR THE SAKE OF CONVENIENCE, IN SUCH A MANNER AS TO CONSIST OF SERE ML UNITS WHICH CAN, IF THE NEED ARISES, HE CONVENIENTLY ANY INDEPENDENTLY USED AS A N INDEPENDENT RESIDENCE, THE REQUIREMENT OF THE SECTION SHOULD BE TAKEN TO HAVE BEEN SATISFIED, THERE IS NOTHING IN. THESE SECTIONS WHICH REQUIRE THE RESIDENTIAL HOUSE TO BE CONSTRUCTED IN N PARTICULAR MANNER. THE ONLY REQUIREMENT IS THAT IT SHOULD BE F OR THE RESIDENTIAL USE AND NOT FOR COMMERCIAL USE. IF THERE IS NOTHING IN THE SECTION REQUIRE* THAT THE RESIDENTIAL HOUSE SHOULD HE BUILT IN N PARTICULAR MANNER, IT SM.'/S THAT THE INCOME-TAX AUTHORITIES CANNOT INSIST UPON THAT REQUIREMENT.' C) CIT VS. K.C. RUKMINIAMMA 131 ITR 211 (KNR-HC) 'THE CONTEXT IN WHICH THE EXPRESSION 'A RESIDENTIAL HOUSE' IS USED IN S. 54 MAKES IT DEAR THAT IT WAS NOT THE INTENTION OF THE LEGISLATI ON TO CONVEY THE MEANING THAT IT REFERS TO A SINGLE RESIDENTIAL HOUSE. IF THAT WAS T HE INTENTION, THEY WOULD HAVE USED THE WORD 'ONE'. AS IN THE EARLIER PART, THE WORDS U SED ARE BUILDINGS OR LANDS WHICH ARE PLURAL IN NUMBER AND THAT IS REFERRED TO AS 'A RESIDENTIAL HOUSE', THE ORIGINAL ASSET. AN ASSET NEW NEWLY ACQUIRED AFTER THE SALE O F THE ORIGINAL ASSET ALSO CAN BE BUILDING OR LANDS APPURTENANT THERETO, WHICH ALSO S HOULD BE 'A RESIDENTIAL HOUSE'. MADHU B.KHATRI. 7 THEREFORE THE LETTER 'A' IN THE CONTEXT IT IS USED SHOULD NOT BE CONSTRUED AS MEANING 'SINGULAR'. BUT, BEING AN INDEFINITE ARTICLE, THE S AID EXPRESSION SHOULD BE READ IN CONSONANCE WITH THE OTHER WORDS 'BUILDINGS' AND 'LA NDS' AND, THEREFORE, THE SINGULAR 'A RESIDENTIAL HOUSE' ALSO PERMITS USE OF PLURAL BY VIRTUE OF S. 13(2) OF THE GENERAL CLAUSES ACT.-CIT VS.D. ANANDA BASAPPA (2009) 223 CTR (KAR) 186 : (2009) 20 PTR (KAR) 266 FOLLOWED.' D) CIT VS. D. ANANDARASAPPA 20 DTR 266 (KAR-HC) 'EXPRESSION 'N RESIDENTIAL HOUSE' SHOULD BE UNDERSTOOD IN A SENSE THAT THE BUILDING SHOULD BE OF RESIDENTIAL NATURE AND V SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR-NUMBER THAT APART, THE APARTMENTS PURCHASED IN/ THE ASSESS EE ARE SITUATED SIDE BY SIDE AND THE BUILDER HAS EFFECTED MODIFICATION OF THE FLATS TO MAKE IT AS ONE UNIT- FACT THAT THE FLATS WERE FOUND TO BE O CCUPIED BY TWO DIFFERENT TENANTS IS NO GROUND TO HOLD THAT THE APARTMENT IS NOT ONE RES IDENTIAL UNIT - THEREFORE, ASSESSEE IS ENTITLED TO EXEMPTION UNDER S. 54.' E) CIT VS. SYED ALL ADIL 33 TAXMANN.COM 212 (AP-HC) 'PROFIT ON SALE OF PROPERTY USED FOR RESIDENTIAL HO USE - WHETHER EXEMPTION UNDER SECTION 54 ONLY REQUIRES THAT PROPERTY PURCHASED BY ASSESSEE O UT OF SALE PROCEEDS SHOULD BE OF RESIDENTIAL NATURE AND FACT THAT RESID ENTIAL HOUSE CONSISTED OF SEVERAL INDEPENDENT UNITS COULD NOT BE AN IMPEDIMENT FOR GR ANTING RELIEF UNDER SAID SECTION, EVEN IF SUCH INDEPENDENT UNITS WERE SITUATED SIDE B Y SIDE, ON DIFFERENT FLOORS OR WERE PURCHASED UNDER SEPARATE SALE DEEDS - HELD, YES [PA RA 10] [IN FAVOUR OF ASSESSEE I,' F) VITTISHNA CONJEEVARAM VS. ITO 36 TAXMANN.COM 542 (HYD-LTAT) 'THE ASSESSING OFFICER AS WELL AS THE COMMISSIONER (APPEALS), WHILE INTERPRETING THE EXPRESSION 'A RESIDENTIAL HOUSE', HAVE COME TO A CO NCLUSION THAT SUCH EXPRESSION WOULD MEAN A SINGLE RESIDENTIAL UNIT... 'FLAT' AND NOT ALL THE SEVEN FLATS AND, ACCORDINGLY, HAVE RESTRICTED THE EXEMPTION UNDER SE CTION 54F TO THE COST OF ONE FLAT ONLY. HOWEVER, THE KARNNTAKA HIGH COURT, WHILE INTE RPRETING THE WORDS ''A RESIDENTIAL HOUSE' AS APPEARING IN SECTION 54 IN CA SE OF CITV. SUIT. K.G. RUKMINIAMNTA 120111 331 ITR 211/196 TALLINN 87/1201 0} 8 TAXMANN.COM 121 (KAR.) HAS HELD THAT THE EXPRESSION 'A RESIDENTIAL HOUSE' AS APPEARING IN SECTION 54 CANNOT BE INTERPRETED IN A MANNER TO SUGGEST THAT T HE EXEMPTION WOULD BE RESTRICTED TO A SINGLE RESIDENTIAL UNIT. THE KARNNTAKA HIGH CO URT HELD THAT 'A RESIDENTIAL HOUSE' AS MENTIONED IN SECTION 54(1) HAS TO BE UNDERSTOOD IN A SENSE THAT THE BUILDING SHOULD HE OF A RESIDENTIAL NATURE AND THE WORD 'A' SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NUMBER. THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. SYED ALI ADIL 12013] 352 ITR 418/215 TAXMAN 283/33 TAXMA IIN.COM 212 (A P) AGREED WITH THE AFORESAID VIEW OF THE KARNATAKA HIGH COURT . [PARA 8]. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES IN THE LIGHT OF CONSISTENT VIEW OF DIFFERENT HIGH COURTS INCLUDING THE JURISDICTION AL HIGH COURT, THE LOWER AUTHORITIES WERE NOT CORRECT IN RESTRICTING THE EXE MPTION UNDER SECTION 54F TO ONLY MADHU B.KHATRI. 8 ONE FLAT. IN THE AFORESAID VIEW OF THE MATTER, THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER SECTION 54F IN RESPECT OF ALL THE SEVEN FLATS.' G) MEHAR R. SURTI VS. ITO 37 CCH 213 (MUM-ITAT) 'DEDUCTION U/S 54 IS ELIGIBLE EVEN FOR PURCHASE OF MORE THAN ONE HOUS E. THE ASSESSEE HAS DEPOSITED RS.1.25 CRORE IN THE CAPITAL GAIN ACC OUNT WITHIN THE PROSCRIBED PERIOD AND FURTHER THE SAID AMOUNT HAS BEEN INVESTED IN AN OTHER FLAT THUS ELIGIBLE TO EXEMPTION U/S 54F.' H) PREM PRAKNSH BHUTANI VS. ACIT 31 SOT38 (DEL-ITAT) 'ASSESSING OFFICER HELD UNIT BENEFIT OF SECTION 54 COULD BE GIVEN ONLY IN RESPECT OF ONE RESIDENTIAL HOUSE ACQUIRED BY ASSESSEE AND NOT FOR A SPATE OF RESIDENTIAL HOUSES WHICH HE CONSTRUCTED OUT OF CONSIDERATION RECEIVED - ON APPEAL, COMMISSIONER (APPEALS) OPINED THAT EXEMPTION UNDER SECTION 54 WA S TO BE GIVEN IN RESPECT OF TWO FLATS WHICH COULD BE TAKEN US RESILIENCE OF ASSESSE E'S FAMILY AS WELL AS HIS SON'S FAMILY -WHETHER FACT THAT RESIDENTIAL HOUSE CONSISTS OF SE VERAL INDEPENDENT UNITS CANNOT BE MI IMPEDIMENT TO ALLOWANCE OF EXEMPTION ANTLER SECT ION 54 - HELD, YES-WHETHER; THEREFORE, COMMISSIONER (APPEALS), HAVING ACCEPTED ASSESSEE'S CASE IN PRINCIPLE, WAS NOT JUSTIFIED IN EXAMINING QUESTION QUESTION AS TO WHO COULD BE CONSIDERED AS MEMBER OF ASSESSEES FAMILY AND THEREBY RESTRICTING EXEMPTION CLAIMED UNDER SECTION 54 TO TWO FLATS-HELD, YES.' A HUMBLE PRAYER IS MADE TO DIRECT THE LI. AO TO ALL OW THE DEDUCTION U/S 54 OF RS. 71,36,288/- AS AGAINSTRS.35,68,144/- ALLOWED IN ASS ESSMENT.' 5. THEREAFTER, LD.CIT(A) OBSERVED THAT DISMISSAL OF SLP BY HONBLE SUPREME COURT WITHOUT ANY DISCUSSION ON MERITS IS NOT BINDING. H E REFERRED TO TWO HEAD NOTES OF ITAT DECIDING AGAINST ASSESSEE AND OBSERVED THAT HE IS BOUND TO FOLLOW THEM. 6. THEREAFTER, HE DIRECTED AS UNDER:- 5.3 IT CAN BE SEEN FROM BOTH THE DECISIONS IT IS HELD THAT UNDOUBTEDLY ONLY ONE RESIDENTIAL HOUSE IS ELIGIBLE FOR DEDUCTION. HOWEVE R, IT IS ALSO HELD THAT IN VIEW OF THE SMALLNESS OF THE FLATS, ADJACENT FLATS MAY BE COMBI NED TO MAKE SINGLE UNIT WITH COMMON KITCHEN AS PER THE PLAN, THEN THE DEDUCTION CAN BE CLAIMED FOR COMBINED UNIT CONSISTING OF MORE THAN ONE FLAT. THE DECISION OF I TAT MUMBAI AND BOMBAY HIGH COURT DO NOT EXPLICITLY STATE THAT THE ASSESSEE CAN CLAIM DEDUCTION UNDER THE SECTION FOR MULTIPLE UNITS IN DIFFERENT FLOORS OR DIFFERENT BLOCKS. ADJACENT FLATS COMBINED TO MAKE ONE UNIT AND BENEFIT MAY BE CLAIMED. HOWEVER I N THIS CASE, THE ASSESSEE RECEIVED FLAT NO.102 AND 302 IN 1 ST FLOOR AND 3 RD FLOOR. OBVIOUSLY THE FLATS IN SEPARATED MADHU B.KHATRI. 9 FLOORS (1 ST AND 3 RD FLOORS) CANNOT BE COMBINED TO MAKE A SINGLE UNIT. THE CLAIM OF THE ASSESSEE THAT ONE FLAT IS MADE KITCHEN AND OTHER FL AT USED AS BEDROOM IS NOT POSSIBLE IN PRACTICE AS THE SAME ARE NOT ADJACENT FLATS IN T HE SAME FLOOR. BE THAT AS IT MAY, THE APPELLANT HAS NOT FILED ANY FLOOR PLAN OF THE TWO F LATS TO DEMONSTRATE THAT THE UNITS WERE JOINED. THE A.O. ALSO HAS NOT MADE ANY VERIFIC ATION IN THIS REGARD. THEREFORE, THE A.O. IS DIRECTED TO VERIFY THE PLANS/FLOOR PLAN S WHETHER TWO UNITS ARE JOINED WITH PROPER APPROVALS TO MAKE A SINGLE RESIDENTIAL UNIT. IF BOTH THE FLATS ARE JOINED WITH APPROVALS ETC., HE IS DIRECTED TO GRANT THE DEDUCTI ON U/S 54 IN RESPECT OF BOTH THE UNITS. OTHERWISE, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION I N RESPECT OF ONLY ONE UNIT AS ALLOWED BY THE AO. THE GROUND IS ADJUDICATED AS ABO VE. THIS GROUND IS TREATED AS DISMISSED FOR STATISTICAL PURPOSE. IN THE RESULT, THE APPEAL IS DISMISSED. 7. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL B EFORE US. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE CLAIMED THAT THE ISSUE IS FULLY COVERED IN FAVOUR OF ASSESSEE. HE REFERRED TO FOLLOWING DECISIONS. 1. CIT VS. GUMANMAL JAIN 80 TAXMAN.COM 21 [MADRAS HI GH COURT) 2. CIT VS. SMT. K.G. RUKMINIAMMA 196 TAXMAN 87 [KARNAT AKA HIGH COURT) 3. CIT VS. SMT. V.R. KARPAGAM 50 TAXMAN.COM 55 [MADRAS HIGH COURT) 4. ITO VS. SMT SUREDDY VENKATA RAMANAMAMMA 83 TAXMAN.C OM 99 [VISHAKHAPATNAM - TRIB.) 5. CIT VS. GITA DUGGAL 30 TAXMAN.COM 230 [DELHI HIGH C OURT) 6. CITVS.SYED ALI ADIL 33 TAXMANN.COM 212 [AP HIGH COU RT) 7. ARUN K. THIAGARAJAN VS. CIT(A) 117 TAXMANN.COM (KAR NATAKA HIGH COURT) 8. CIT VS. D ANANDA BASPPA 180 TAXMAN 4 [KARNATAKA HIG H COURT) 9. PER CONTRA LD. DR RELIED UPON ORDER OF AUTHOR ITIES BELOW. 10. UPON CAREFUL CONSIDERATION, WE NOTE THAT THE ASSESSMENT YEAR INVOLVED IN THIS CASE IN PRIOR TO THE AMENDMENT RESTRICTING THE DEDU CTION UNDER SECTION 54 TO ONE FLAT/HOME. LD. CIT(A) DESPITE NOTING THAT THERE ARE VARIOUS HONBLE HIGH COURT DECISION IN FAVOUR OF ASSESSEE CHOSE TO FOLLOW THE ITAT DECISION TO THE CONTRARY, BY OBSERVING THAT HE MUST FOLLOW ITAT DECISION. HERE, WE NOTE THAT LD.CIT(A) HAS GROSSLY MISLED HIMSELF WITH RESPECT TO THE CANNONS OF JUDICIAL DISCIPLINE. IT IS SETTLED MADHU B.KHATRI. 10 LAW THAT WHEN ON AN ISSUE THERE IS NO JURISDICTIONA L HIGH COURT DECISION OTHER HONBLE HIGH COURT DECISION HAS TO BE FOLLOWED BY SUBORDINA TE COURTS AND TRIBUNALS. HENCE LD.CIT(A) SHOULD HAVE FOLLOWED THE HONBLE HIGH COU RT DECISIONS IN FAVOUR OF ASSESSEE. BY WRITING THAT HONBLE SUPREME COURT HAS DISMISSED THE SLP AGAINST THOSE ORDERS WITHOUT ANY DISCUSSION ON MERITS, LD.CIT(A) HAS FURTHER DISPLAYED HIS SCANT REGARD TO THE PRINCIPLE OF STARE DECISIS. THE DISMI SSAL OF S.L.P WITHOUT A SPEAKING ORDER BY HONBLE SUPREME COURT DOES NOT IN ANY MANN ER REDUCE THE PRECEDENTIAL VALUE OF HONBLE HIGH COURT DECISION. HENCE, WE SE T ASIDE THE ORDER OF LD.CIT(A) AND DIRECT THAT THE DEDUCTION U/S 54 CLAIMED BY THE ASSESSEE IS TO BE ALLOWED. 11. IN THE RESULT, THE ASSESSEES CLAIM OF DEDU CTION IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 01.07.2021 SD/- SD/- (AMARJIT SINGH) (SHAMIM YAH YA) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI; DATED : 01/07/2021 SR.PS. THIRUMALESH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) ITAT, MUMBAI