ASST CIT CIR 3, THANE V. YOGESH S. RATHOD, THANE

ITA 7225/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2523 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 13-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 04-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Gift
• Section: 54F; 56(2); 54; 56; 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH G, MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.7225/MUM/2014 FOR ASSESSMENT YEAR: 2010-11 ACIT CIRCLE-3, ROOM NO. 02, 6 TH FLOOR, ASHAR IT PARK, B-WING, WAGLE INDL. ESTATE, THANE(W) -400604. VS. YOGESH S. RATHOD, BC RAJLAXMI COMMERCIAL COMPLEX, OPP. DURGESH PARK, THANE BHIWANDI ROAD, KALHER, THANE. PAN: AAAPR5986L (APPELLANT) (RESPONDENT) REVENUE BY : SHRI MAURYA PRATAP (DR) ASSESSEE BY : SHRI HARESH P. KHUNADIA (AR) DATE OF HEARING : 13.07.2016 DATE OF PRONOUNCEMENT : 20.07.2016 O R D E R PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-I, THANE DATED 18.08.2014 FOR AY 2010 -11. THE REVENUE HAS R AISED FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A)-I, THANE IS CORRECT IN HOLDING THAT THE LONG TERM CAPITAL GAIN AND EXEMPTION CLAIMED U/S 54 THEREON IS ALLOWA BLE EXEMPTION UNDER THE I.T. ACT, 1961 ? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A)-I, THANE IS CORRECT IN DELETING THE ADDITION ON ACCOUNT OF CESSATION OF LIABILITY OF UNSECURED LOAN ? 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED ITS RETURN OF INCOME FOR RELEVANT AY ON 06.07.2010 SHOWING TOTAL INCOME OF R S. 15,70,601/-. THE RETURN OF INCOME AS SELECTED FOR SCRUTINY. WHILE FRAMING ASSESSMENT ORDER, THE ASSESSING OFFICER (AO) DISALLOWED EXEMPTION HOLDIN G THAT ASSESSEE SOLD FOUR FLATS BEARING NOS. 1201A, 1201B, 1201C AND 1201D IN BUILDING KNOWN AS EVITA AT HIRANANDANI GARDEN, POWAI, MUMBAI, ON 23 /06/2009 AND PURCHASED 2 ITA NO. 7225/M/2014 - YOGESH S. RATHOD. RESIDENTIAL FLATS I.E. 2203A, 2203B & 2203C IN RI CHMOND HIRANANDANI GARDEN, POWAI, MUMBAI ON 11/12/2009. AFTER DENYING EXEMPTION U/S 54 OF THE ACT, THE AO ASSESSED THE INCOME OF ASSESSEE AT RS.3 ,71,60,094/-. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE FILED APPEAL BEFORE T HE CIT(A) WHEREIN THE ASSESSEE WAS GRANTED EXEMPTION U/S. 54 OF THE ACT I N THE IMPUGNED ORDER DATED 18.08.2014. AGGRIEVED BY WHICH THE REVENUE HAS FILE D THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD LD DR FOR REVENUE AND LD AR FOR ASSES SEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. DEPARTMENTAL REPRESEN TATIVE (DR) FOR REVENUE ARGUED THAT THE ASSESSEE WAS NOT ENTITLED FOR THE E XEMPTION U/S 54 OF THE ACT. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION SO LD FOUR RESIDENTIAL FLAT WHICH WERE FOUR DIFFERENT UNITS IN EVITA AT HIRANANDANI GARDEN, POWAI, MUMBAI. THERE WERE FOUR ELECTRICITY METER AND AFTER SALE OF THE FLATS ASSESSEE PURCHASED THREE RESIDENTIAL FLAT NO. 2203A, 2203B & 2203C IN RICHMOND AT HIRANANDANI GARDEN, POWAI, MUMBAI AND THUS WAS NOT ENTITLED FOR EXEMPTION U/S 54 OF THE ACT, AS THE EXEMPTION WAS RESTRICTED ON THE SALE FL AT NO. 1201A AT EVITA AND THE INVESTMENT IN FLAT NO. 2203A AT RICHMOND AND THUS THE ASSESSEE WAS LIABLE TO CAPITAL GAIN ON THE SALE-PROCEED OF REMAINING TH REE FLATS. ON THE OTHER HAND, LD. AR FOR ASSESSEE ARGUED THAT FLAT NO. 1201 WAS A SINGLE RESIDENTIAL HOUSE CONSISTING FOUR UNITS ON THE SAME FLOOR BEARING NO. 1201A, 1201B, 1201C AND 1201D, THOUGH THERE WAS FOUR DIFFERENT AGREEMENT FO R ACQUIRING THE SAID RESIDENTIAL UNIT BUT IT WAS ONE RESIDENTIAL HOUSE. ALL FOUR UNITS COMPRISE ONE FLAT HAVING A KITCHEN, COMMON PASSAGE AND SINGLE ENTRANC E AND EVEN AS PER SOCIETY RECORD, IT WAS ONE RESIDENTIAL HOUSE ON 12 TH FLOOR OF THE BUILDING. THE ASSESSEE PURCHASED ONE RESIDENTIAL UNIT I.E. FLAT NO. 2203 A ND BUILDING KNOWN AT RICHMOND AT HIRANANDANI GARDEN, POWAI, THE SAID R ESIDENTIAL UNIT ARE DIVIDED INTO THREE RESIDENTIAL UNIT OF THE SAME FLOOR BEARI NG NO. 2203A, 2203B, 2203C AND THREE DIFFERENT AGREEMENT FOR ONE RESIDENTIAL H OUSE WERE EXECUTED. ALL THREE UNITS COMPRISE ONE FLAT HAVING ANY KITCHEN, COMMON PASSAGE AND SINGLE ENTRANCE. LD. AR FURTHER ARGUED THAT EVEN AS PER TH E SOCIETY RECORD IT IS NOTHING BUT ONE RESIDENTIAL HOUSE OWNED BY ASSESSEE ON 22 ND FLOOR. THERE IS ONLY ONE 3 ITA NO. 7225/M/2014 - YOGESH S. RATHOD. ELECTRICITY METER IN THE SAID RESIDENTIAL UNIT. LD. AR OF ASSESSEE FURTHER RELIED UPON THE DECISION OF SPECIAL BENCH OF MUMBAI TRIBUN AL IN CASE OF ITO VS. MS. SUSHILA M. JHAVERI [2000] 107 ITD 327 (MUM)(SB) AND FURTHER IN K.G.VYAS VS. SEVENTH INCOME TAX OFFICER. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SECTION 54 OF THE INCOME-TAX A CT DEALS WITH THE PROVISIONS FOR PROFIT ON SALE OF PROPERTY USED FOR RESIDENCE W HICH MAY BE READ AS UNDER: 54. [SUBJECT TO THE PROVISION 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 BUILDIN GS 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 SEC TION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERIOD OF [ON E 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, A RESIDENTIAL HOUSE ] , 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 SAY, ( I ) IF THE AMOUNT OF THE CAPITAL GAIN [IS GREATER THAN THE COST OF [THE RESIDENTIAL HOUSE] SO PURCHASED OR CONSTRUCTED (HEREAFTER IN TH IS SECTION REFERRED TO AS THE NEW ASSET)], THE DIFFERENCE BETWEEN THE AMOUNT OF THE C APITAL 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 PERIOD 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 CHARGED UNDER SECTION 45 ; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL G AIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR C ONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE REDUCED BY THE AMOUNT OF THE CAPI TAL GAIN. [(2) THE AMOUNT OF THE CAPITAL GAIN WHICH IS NOT AP PROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN O NE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGINAL ASSET TOOK PLACE , OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET B EFORE THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 139 , SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RETURN [SUCH DEPOSIT BEING MADE IN ANY CASE NO T LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHI NG 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 WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZ ETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH D EPOSIT; AND, FOR THE PURPOSES OF SUB-SECTION (1), THE AMOUNT, IF ANY, ALREADY UTILIS ED BY 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 : PROVIDED THAT IF THE AMOUNT DEPOSITED UNDER THIS SUB-SECTIO N IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OR CONSTRUCTION OF THE N EW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1), THEN, 4 ITA NO. 7225/M/2014 - YOGESH S. RATHOD. (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 FR OM 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. 5. NOW WE MAY EXAMINE THE FACTS OF THE PRESENT APPEAL. THE ASSESSEE PURCHASED FOUR FLATS ON 09.08.2005 AND WAS SOLD ON 23.06.2009 . SIMULTANEOUSLY, THE ASSESSEE PURCHASED THREE FLATS ON 11.12.2009. AS A RESULT, SALE OF RESIDENTIAL HOUSE CONSISTING FOUR FLATS AND PURCHASE OF NEW RES IDENTIAL HOUSE (CONSISTING OF THREE FLATS), THE AMOUNT OF RS. 14,93,942/- WAS OFF ERED AS LTCG AND AFTER CLAIMING THE EXEMPTION U/S 54 OF THE ACT, HOWEVER, THE AO DENIED THE EXEMPTION THAT FOUR UNITS SOLD THROUGH DIFFERENT AG REEMENTS AND ALL UNITS WERE TREATED AS SEPARATE UNIT CONTRARY TO THE CLAIM ASSE RTED BY ASSESSEE. FURTHER, THE ASSESSEE HAS OBTAINED THE LOAN FROM PURCHASED UNITS (4) IN THE YEAR 2005 AND AT THE TIME OF SALE OF THESE UNITS THE OUTSTANDING AMO UNT ON ACCOUNT OF REPAYMENT OF LOAN, THE LOAN WAS PAID THROUGH FOUR DIFFERENT C HEQUES, THUS THE AO TREATED THE AMOUNT OF CONSIDERATION AS TAXABLE LTCG. BEFORE THE FIRST APPELLATE AUTHORITY (FAA), THE ASSESSEE MADE THE SIMILAR ARGU MENT AS ADVANCED BEFORE US AND AFTER CONSIDERING THE CASE OF ASSESSEE, THE LD. CIT(A) PASSED THE FOLLOWING ORDER: 14. I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SU BMISSIONS, THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER AND THE FACTS OF THE CASE. THE APPELLANT DURING THE YEAR UNDER CONSIDERATION H AD SOLD FOUR UNITS I.E. FLAT NO. 1201A, 1201B, 1201C & 1201D. THESE UNITS H AD BEEN SOLD THROUGH FOUR DIFFERENT SALE-DEEDS AND HAD BEEN PURC HASED FROM THE BUILDER THROUGH FOUR DIFFERENT AGREEMENTS. THE APPE LLANT HAS SUBMITTED THAT THOUGH THESE UNITS HAD BEEN PURCHASED AND SOLD THROUGH FOUR DIFFERENT AGREEMENTS / DEEDS BUT THESE BEING ON THE SAME FLOOR AND BEING CONTIGUOUS, WERE USED AS ONE RESIDENTIAL FLAT BY TH E APPELLANT HAVING COMMON KITCHEN, ONE COMMON ENTRANCE AND ONE ELECTRI CITY BILL. THE APPELLANT HAS ALSO PURCHASED THREE DIFFERENT UNITS NO. 2201B, 2203C & 2203D IN 'RICHMOND', POWAI, MUMBAI. IN RESPECT OF T HESE THREE UNITS, IT WAS SUBMITTED THAT THESE WERE ALSO BEING USED BY TH E APPELLANT AS ONE RESIDENTIAL FLAT BEING ON THE SAME FLOOR AND BEING CONTIGUOUS HAVING ONE COMMON KITCHEN, A COMMON PASSAGE AND ONE ELECTRICIT Y METER. THE AO, HOWEVER, TREATED BOTH THE SOLD UNITS AS WELL AS THE PURCHASED UNITS AS DIFFERENT INDEPENDENT UNITS. THE DETAILED REASONS O F THE AO FOR DOING SO, HAVE ALREADY BEEN REPRODUCED ABOVE. THE AO THEREFOR E, RESTRICTED EXEMPTION U/S. 54 OF THE LT. ACT TO SALE AND PURCHA SE OF ONLY ONE UNIT. IN THIS REGARD, IT IS SEEN THAT THE APPELLANT HAD PLAC ED ON RECORD OF THE AO 5 ITA NO. 7225/M/2014 - YOGESH S. RATHOD. AND HAS AGAIN FILED A COPY OF TYPICAL FLOOR PLAN OF THE UNITS PURCHASED AND SOLD, WHICH SHOWS THAT THE UNITS PURCHASED AS W ELL AS SOLD WERE ON THE SAME FLOOR AND WERE CONTIGUOUS. FROM THE COPY O F ELECTRICITY BILL PLACED AT PAGE NO.146 OF THE PAPER BOOK, IT IS SEEN THAT THE ELECTRICITY BILL WAS IN THE NAME OF THE DEVELOPER NAMELY LAKE VIEW D EVELOPERS, IN THE ADDRESS OF ONE COMBINED UNIT 1201 EVITA BUILDING, H IRANANDANI GARDEN, POWAI AND NOT IN THE ADDRESS OF FOUR DIFFERENT UNIT S I.E. 1201A,1201B, 1201C AND 1201D. SIMILARLY, FROM A COPY OF THE ELEC TRICITY BILL PLACED AT PAGE NO. 149 OF THE PAPER BOOK, IT IS SEEN THAT THE ELECTRICITY BILL IS IN THE NAME OF THE APPELLANT IN THE ADDRESS 2203, RICHMOND TOWER, CLIFF AVENUE, HIRANANDANI GARDENS, POWAI AND NOT SEPARATE LY IN THE ADDRESS OF THREE DIFFERENT UNITS OF 2203A, 2203B & 2203C. T HUS BOTH THE UNITS PURCHASED AND SOLD WERE ON THE SAME FLOOR AND WERE CONTIGUOUS HAVING ONE COMMON ELECTRICITY METER, ONE KITCHEN AND ONE E NTRANCE AS CONFIRMED BY THE BUILDER. THEREFORE, THOUGH THERE W ERE DIFFERENT AGREEMENTS/DEEDS OF PURCHASE AND SALE IN RESPECT OF THESE UNITS BUT THEY WERE BEING USED BY THE APPELLANT AS ONE RESIDENTIAL FLAT HAVING ONE COMMON ELECTRICITY METER. MOREOVER, THE INSPECTOR O F THE CIRCLE HAD ALSO VISITED THE SPOT AND HE DID NOT BRING ON RECORD ANY EVIDENCE TO SHOW THAT THESE UNITS WERE NOT BEING USED AS ONE RESIDENTIAL FLAT.THE ONLY EVIDENCE BROUGHT ON RECORD BY THE INSPECTOR BY HIS VISIT IS A COPY OF MONTH-WISE MAINTENANCE BILLS IN RESPECT OF UNIT NO. 1201A, 120 1B, 1201C & 1201D, WHICH WAS BEING CHARGED BY THE BUILDING SOCIETY SEP ARATELY. AS THERE WERE DIFFERENT AGREEMENTS/DEEDS FOR PURCHASING THES E UNITS, THE MONTHLY MAINTENANCE BILLS WERE ALSO IN THE SEPARATE NAME OF THE UNITS. HOWEVER, THESE MAINTENANCE BILLS ALONE DO NOT IN ANY WAY EST ABLISH THAT THE FOUR UNITS WERE NOT USED BY THE APPELLANT AS ONE RESIDEN TIAL FLAT. 15. WITH REGARD TO AO'S OBSERVATION THAT THE REPAYM ENT OF LOAN TO CITIBANK HAD BEEN MADE THROUGH FOUR DIFFERENT CHEQU ES, AS MENTIONED IN FOUR DIFFERENT SALE-DEEDS OF THE UNITS, IT IS SEEN THAT THE LOAN ACCOUNT IS BEARING A COMMON ACCOUNT NO. I.E. 216931. THE APPEL LANT HAS PLACED ON RECORD A COPY OF LOAN SANCTION LETTER AT PAGE NO. 1 50 OF THE PAPER BOOK, ACCORDING TO WHICH ONE COMMON LOAN OF RS.1,94,50,00 0/- WAS SANCTIONED TO THE APPELLANT IN RESPECT OF THE PROPERTY BEARING FLAT NO. 1201, 12 TH FLOOR, 'EVITA', HIRANANDANI GARDEN, POWAI, MUMBAI. THE AO HAS MADE AN OBSERVATION IN THE ASSESSMENT ORDER THAT THE FLA TS WERE SOLD TO DIFFERENT PERSONS AND THEREFORE, COULD NOT HAVE BEE N USED AS ONE RESIDENTIAL FLAT. IN THIS REGARD, FROM THE COPIES O F SALE-DEEDS PLACED ON RECORD, IT IS SEEN THAT UNIT NO. 1201A & 1201B HAVE BEEN SOLD TO MR. RAJAISH BAJPAEE AND UNITS NO. 1201C & 1201D HAVE BE EN SOLD TO MRS. VANDANA BAJPAEE. THUS, THE UNITS HAVE NOT BEEN SOLD NOT TO TWO DIFFERENT PERSONS BUT TO HUSBAND AND WIFE. THE PRICE OF THE P ROPERTY SOLD BEING VERY HIGH, THERE IS NOTHING WRONG WITH THE REGISTRA TION OF THE PROPERTY BEING DONE IN THE NAME OF HUSBAND AND WIFE PARTLY R ATHER THAN THE WHOLE OF THE PROPERTY BEING SOLD TO ONLY ONE PERSON. 6. THE CO-ORDINATE BENCH OF MUMBAI TRIBUNAL IN CASE OF ITO VS. SUSHILA M. JHAVERI (SUPRA) HELD AS UNDER: 6 ITA NO. 7225/M/2014 - YOGESH S. RATHOD. 9. HAVING HELD THAT INTENTION OF THE LEGISLATURE W AS TO ALLOW EXEMPTION UNDER SS. 54 AND 54F IN RESPECT OF INVESTMENT IN ON E SINGLE RESIDENTIAL HOUSE, IT IS NOT NECESSARY FOR US TO DEAL WITH THE OTHER SUBMISSIONS OF THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE SINCE THEY LOSE THEIR SIGNIFICANCE IN VIEW OF THE ABOVE FINDING. 10. HOWEVER, WE ARE IN AGREEMENT WITH CERTAIN DECIS IONS OF THE TRIBUNAL RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE W HEREIN EXEMPTION WAS ALLOWED IN RESPECT OF INVESTMENTS IN TWO ADJACENT O R CONTIGUOUS UNITS CONVERTED INTO ONE RESIDENTIAL HOUSE BY HAVING COMM ON PASSAGE/STAIR CASE, COMMON KITCHEN, ETC. INTENDED TO BE USED AS S INGLE HOUSE FOR THE RESIDENCE OF THE FAMILY. FURTHER, THE KARNATAKA HIGH COURT IN CASE OF D. ANA NDA BASAPPA HELD AS UNDER: SEC. 13 OF THE GENERAL CLAUSES ACT DECLARES THAT W HENEVER THE SINGULAR IS USED FOR A WORD, IT IS PERMISSIBLE TO INCLUDE TH E PLURAL. THE CONTENTION OF THE REVENUE THAT THE PHRASE 'A RESIDENTIAL HOUSE ' WOULD MEAN ONE RESIDENTIAL HOUSE DOES NOT APPEAR TO THE CORRECT UN DERSTANDING. THE EXPRESSION 'A' RESIDENTIAL HOUSE SHOULD BE UNDERSTO OD IN A SENSE THAT BUILDING SHOULD BE OF RESIDENTIAL IN NATURE AND 'A' SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NUMBER. WHEN AN H UF'S RESIDENTIAL HOUSE IS SOLD, THE CAPITAL GAIN SHOULD BE INVESTED FOR THE PURCHASE OF ONLY ONE RESIDENTIAL HOUSE IS AN INCORRECT PROPOSITION. AFTER ALL, THE HUF PROPERTY IS HELD BY THE MEMBERS AS JOINT TENANTS. T HE MEMBERS KEEPING IN VIEW THE FUTURE NEEDS IN EVENT OF SEPARATION, PURCH ASE MORE THAN ONE RESIDENTIAL BUILDING, IT CANNOT BE SAID THAT THE BE NEFIT OF EXEMPTION IS TO BE DENIED UNDER S. 54(1). ON FACTS, IT IS SHOWN BY THE ASSESSEE THAT THE APARTMENTS ARE SITUATED SIDE BY SIDE. THE BUILDER H AS ALSO STATED THAT HE HAS EFFECTED MODIFICATION OF THE FLATS TO MAKE IT A S ONE UNIT BY OPENING THE DOOR IN BETWEEN TWO APARTMENTS. THE FACT THAT AT TH E TIME WHEN THE INSPECTOR INSPECTED THE PREMISES, THE FLATS WERE OC CUPIED BY TWO DIFFERENT TENANTS IS NOT THE GROUND TO HOLD THAT THE APARTMEN T IS NOT A ONE RESIDENTIAL UNIT. THE FACT THAT THE ASSESSEE COULD HAVE PURCHASED BOTH THE FLATS IN ONE SINGLE SALE DEED OR COULD HAVE NARRATE D THE PURCHASE OF TWO PREMISES AS ONE UNIT IN THE SALE DEED IS NOT THE GR OUND TO HOLD THAT THE ASSESSEE HAD NO INTENTION TO PURCHASE THE TWO FLATS AS ONE UNIT. THUS, DEDUCTION IN RESPECT OF BOTH THESE FLATS IS ALLOWAB LE IN ACCORDANCE WITH S. 54 R/W S. 54F. FURTHER, THE HONBLE JURISDICTIONAL HIGH COURT IN C ASE OF CIT VS. RAMANKUMAR SURI HELD THAT EXEMPTION CAN BE CLAIMED FOR DIFFERE NT FLATS JOINED TOGETHER TREATING ONE FLAT ONLY AND HELD AS UNDER: WE FIND NO FAULT WITH THE ORDER OF THE TRIBUNAL W HICH HAS UPHELD THE FINDING OF FACT OF THE COMMISSIONER OF INCOME TAX ( APPEALS) TO THE EFFECT THOUGH THE RESPONDENT- ASSESSEE HAD PURCHASED FLAT NOS. 416A AND 516A IT WAS ONLY PURCHASE OF ONE RESIDENTIAL HOUSE. FURT HER, THE TRIBUNAL HELD THAT TWO FLATS WERE JOINED TOGETHER BEFORE THE RESP ONDENT ASSESSEE BECAME THE OWNER OF THE TWO FLATS. THE CERTIFICATE FROM THE SOCIETY ALSO 7 ITA NO. 7225/M/2014 - YOGESH S. RATHOD. ESTABLISHED THE FACT THAT TWO FLAT NOS. 416A AND 51 6A WERE JOINED TOGETHER AND WERE CONSIDERED AS ONE RESIDENTIAL HOU SE. THESE CONCURRENT FINDINGS OF FACT BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE TRIBUNAL HAVE NOT BEEN SHOWN TO BE PERVERSE OR ARBI TRARY. FURTHER, SECTION 54 OF THE ACT EXEMPTS CAPITAL GAIN TO THE E XTENT THE CONSIDERATION IS PAID FOR THE PURPOSE OF A RESIDENTIAL HOUSE: CON SEQUENTLY, WHERE RESPONDENT-ASSESSEE HAS ACQUIRED ONE RESIDENTIAL HO USE CONSISTING OF TWO FLATS, IT CANNOT BE SAID THE RESPONDENT ASSESSEE HA D PURCHASED TWO RESIDENTIAL HOUSES. 7. IN VIEW OF THE ABOVE FACTUAL AND LEGAL DISCUSSION N ARRATED ABOVE, WE MAY CONCLUDE THAT THE ASSESSEE INFACT USING ONE RESIDEN TIAL UNIT CONSISTING OF FOUR FLATS AND THEREFORE, ON SALE OF SUCH RESIDENTIAL UN IT, THE LTCG FROM THE SALE OF RESIDENTIAL UNIT OF FLAT NO. 1201A IN EVITA BUILD ING WAS ELIGIBLE FOR EXEMPTION U/S 54 OF THE ACT IN PURCHASING THE RESIDENTIAL UNI T (3 FLATS) 2203A, 2203B, 2203C & 2203D IN RICHMOND. THUS, WE DO NOT FIND A NY ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY THE CIT(A), HENCE, THIS GROU ND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 8. NEXT GROUND FOR OUR CONSIDERATION IS DELETION OF AD DITION ON ACCOUNT OF CESSATION OF LIABILITY OF UNSECURED LOAN. LD AR OF ASSESSEE ARGUED THAT ASSESSEE AVAILED UNSECURED LOAN OF RS. 7,88,000/- FROM HIS CLOSE R ELATIVE MRS MANUBEN RATHOD WHO WAS REAL SISTER OF HIS FATHER AND SHE HAS EXPI RED ON 22.11.2009 LEAVING BEHIND NO LEGAL HEIR, THUS THE LIABILITY OF THE ASS ESSEE CEASED. LD DR FOR REVENUE SUPPORTED THE ORDER OF AO. WE HAVE SEEN THAT DURING THE ASSESSMENT PROCEEDING, THE AO OBSERVED THAT CONFIRMATION OF UN SECURED LOAN, WAS UNSIGNED, THE ASSESSEE WAS ASKED TO EXPLAIN TO GIVE THE EXPLANATION ABOUT THE UNSECURED LOAN FROM MRS. MANUBEN RATHOD. THE ASSESS EE CONTENDED THAT MRS. MANUBEN RATHOD WAS HER FATHERS SISTER. SHE EXPIRED ON 22.11.2009 LEAVING BEHIND NO LEGAL HEIR AND HER INCOME-TAX RECORDS ARE NOT TRACEABLE, SHE HAS GIVEN A LOAN OF RS. 7,88,000/- ON 14.12.2007. THE SAME IS SUE WAS RAISED DURING THE ASSESSMENT PROCEEDING FOR AY-2008-09 AND THE SAME W AS ACCEPTED ON THE CONTENTION OF ASSESSEE. THE ASSESSEE FURTHER CONTEN DED THAT SHE WAS UNMARRIED AND WAS STAYED WITH ASSESSEE DURING LAST 2-3 YEARS OF HER LIFE AND HER INTENTION WAS TO GIVE HER SAVINGS TO THE ASSESSEE. AS SHE H AS EXPIRED THUS ASSESSEE IS NOT REQUIRED TO BE PAID BACK AND THUS HIS LIABILITY HAS CESSED. THE CONTENTION OF 8 ITA NO. 7225/M/2014 - YOGESH S. RATHOD. ASSESSEE WAS NOT ACCEPTED AND IT WAS CONCLUDED THAT THE ASSESSEE IS NOT REQUIRED TO PAY UNSECURED LOAN BACK THUS, THE INCOME WAS ASS ESSED AS INCOME FROM OTHER SOURCES. DURING THE FAA, THE SIMILAR CONTENT ION WAS RAISED. LD. CIT(A) AFTER CONSIDERING THE CASE OF ASSESSEE CONCLUDED TH AT UNSECURED LOAN IS NO MORE PAYABLE AND DID NOT FALL WITHIN THE CATEGORY OF LIA BILITY AS EXPLAINED IN SECTION 41(1) OF I.T. ACT. AND CONSIDERING THE CONTENTION OF THE ASSESSEE IS THAT THE CREDITOR COULD BE CONSIDERED AS A DONOR OF GIFT U/S 56(2) OF THE ACT, THE CLAIM OF THE ASSESSEE WAS ALLOWED. THE CIT(A) FURTHER CONCLU DED THAT THE AMOUNT HAS BEEN RECEIVED AS TO TREAT LIABILITY AS NO ALLOWANCE /DEDUCTION HAS BEEN MADE FOR THIS AMOUNT IN RESPECT OF EARLIER YEARS. THUS, SECT ION 41(1) OF THE ACT IS NOT APPLICABLE IN ASSESSEES CASE AND THE CONTENTION OF ASSESSEE WAS ACCEPTED AND ADDITION OF RS. 7,88,000/- WAS DELETED. 9. WE HAVE SEEN THAT THE CIT(A) AFTER APPRECIATING THE FACT OF THE CASE RIGHTLY COME TO THE CONCLUSION THAT ASSESSEE WAS NOT HAVING TRAD ING LIABILITY U/S 41(1) OF THE ACT. THE UNSECURED LOAN WAS GIVEN BY THE CLOSE RELA TIVE AND THE SAME IS DULY QUALIFIED AS RELATIVE AS PER CLAUSE (V) OF SUB-SECT ION (2) OF SECTION 56 OF THE ACT. THUS, WE HOLD THAT THE ORDER OF CIT(A) DOES NOT SUF FER FROM ANY ILLEGALITY OR INFIRMITY, THUS THIS GROUND OF APPEAL RAISED BY REV ENUE HAS ALSO NO FORCE AND THE SAME IS DISMISSED. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JULY 2016. SD/- SD/- (B. R. BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 20/07/2016 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITA T, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/