PRADIPKUMAR P. KANAKIA, MUMBAI V. DCIT CIR13(2), MUMBAI

ITA 7688/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1605 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 24-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRANDR
• Keywords: Capital asset
• Section: 54F; 54

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.7688/MUM/2014 ASSESSMENT YEAR: 2011-12 SHRI PRADIPKUMAR PURSHOTTAM KANAKIA, C/O- PRATAP RE-ROLLERS PVT. LTD 18, STEEL YARD HOUSE, IRON MARKET, SANT TUKARAM ROAD, MUMBAI-400009 / VS. DCIT, CIRCLE-13(2), AAYAKAR BHAVAN, MUMBAI-400020 ( ! ' /ASSESSEE) ( # / REVENUE) PAN. NO. AFVPK8451P #$ % ' & / DATE OF HEARING : 28/11/2016 % ' & / DATE OF ORDER: 02/12/2016 ! ' ! / ASSESSEE BY SHRI DALPAT SHAH # ! / REVENUE BY SHRI A. RAMACHANDRAN-DR ITA NO. 7688/MUM/2014 PRADIPKUMAR PURUSHOTTAM KANAKIA 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 31/10/2014 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED IN THE PRESENT APPEAL PERTAI NS TO DISALLOWING THE CLAIMED DEDUCTION U/S 54 OF THE INC OME TAX ACT, 1961 (HEREINAFTER THE ACT) AMOUNTING TO RS.63, 62,400/-. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI DALPAT SHAH, CLAIMED THAT THE IMPUGNED ISSUE I S COVERED BY THE DECISION OF THE COORDINATE BENCH IN THE CASE OF RAJESH KESHAV PILLAI VS INCOME TAX OFFICER 44 SOT 6 17 (MUM.), ASHOK SYAL VS CIT 209 TAXMAN 376 (P&H), KR ISHNA GOPAL NAGPAL VS DCIT 2 SOT 628 (PUNE). ON THE OTHER HAND, THE LD. DR, SHRI A. RAMACHANDRAN, THOUGH DEFENDED T HE ADDITION MADE BY THE LD. ASSESSING OFFICER BUT DID NOT CONTROVERT THAT THE IMPUGNED ISSUE IS COVERED IN FA VOUR OF THE ASSESSEE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION OF THE ORDER DATED 13/08/2010 (2011) 44 SOT 617 (MUM.) FOR READY REFERENCE AND ANALYSIS:- 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE OWNED TWO FLATS BEING THE FLAT NOS. 41 AND 51 IN SHIKHA B UILDING, PALI HILL, BANDRA (WEST). BOTH THE FLATS HAD BEEN PURCHASED ON 5TH JAN., 2001. THE FLAT NO. 41 WAS SOLD BY THE ASSESSEE ON 1 6TH JUNE, 2005 FOR A SUM OF RS. 1,01,00,000 AND THE FLAT NO. 51 HA D BEEN SOLD ON 29TH APRIL, 2005 FOR A SUM OF RS. 97,79,500. THE AS SESSEE HAD THUS EARNED INCOME ON ACCOUNT OF LONG-TERM CAPITAL GAIN FROM SALE OF TWO FLATS IN ASST. YR. 2006-07. THE INDEXED GAIN IN RESPECT OF FLAT NO. 41 WAS RS. 88,55,558 WHEREAS THE INDEXED GAIN I N RESPECT OF ITA NO. 7688/MUM/2014 PRADIPKUMAR PURUSHOTTAM KANAKIA 3 THE FLAT NO. 51 WAS RS. 85,55,508. THE ASSESSEE INV ESTED THE GAIN ON SALE OF FLATS IN TWO DIFFERENT FLATS I.E., FLAT IN SAI DHAM AT GOVIND PATIL ROAD FOR RS. 81,57,624 AND FLAT AT GIRNAR 55, PALI HILL FOR A SUM OF RS. 95,71,364. THE TOTAL INVESTMENT IN TWO F LATS WAS RS. 1,77,28,988 WHICH WAS MORE THAN THE TOTAL INDEX GAI N ON SALE OF TWO FLATS OF RS. 1,74,17,617. THE ASSESSEE, THEREFO RE, CLAIMED THE ENTIRE CAPITAL GAIN AS EXEMPT UNDER THE PROVISIONS OF S. 54. THE SAID PROVISIONS ARE REPRODUCED BELOW AS READY REFER ENCE. '54. (1) SUBJECT TO THE PROVISIONS OF SUB-S. (2), W HERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR AN HUF, THE C APITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASS ET, BEING BUILDINGS 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 SECTION REF ERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERI OD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRA NSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AF TER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE, THEN. INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIO US YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WI TH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, (I) IF THE AMOUNT OF THE CAPITAL GAIN IS GREATER TH AN THE COST OF THE RESIDENTIAL HOUSE SO PURCHASED OR CONSTRUCTED (HERE AFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET) THE DIFFERENC E BETWEEN THE AMOUNT OF THE CAPITAL GAIN AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER S. 45 AS THE INCOME OF THE PREVIOUS Y EAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSE T ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF T HREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE C OST 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 B E CHARGED UNDER S. 45; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WI THIN 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 CAPI TAL GAIN.' 2.1 THE AO OBSERVED THAT PHRASE USED IN S. 54(1) WAS ' CAPITAL GAIN ARISES FROM TRANSFER OF A LONG-TERM CAPITAL GAIN' A ND THAT THE USE OF THE WORD A SHOWED THAT EXEMPTION WAS AVAILABLE ON LY IN RESPECT OF SALE OF ONE CAPITAL ASSET. SIMILARLY THE ASSESSE E COULD PURCHASE OR CONSTRUCT ONLY ONE RESIDENTIAL HOUSE AS THE PHRA SE USED IN S. 54(1) WAS A RESIDENTIAL HOUSE. THE AO REFERRED TO T HE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN CASE OF ITO VS . MS. SUSHILA M. JHAVERI (2007) 109 TTJ (MUMBAI)(SB) 299 : (2007) 10 7 ITD 321 (MUMBAI)(SB) IN WHICH IT WAS HELD THAT EXEMPTION UN DER S. 54 SHOULD BE ALLOWED ONLY IN RESPECT OF INVESTMENT IN ONE RESIDENTIAL HOUSE. IN THE SAID CASE, IT WAS POINTED OUT, THE TR IBUNAL HAD OBSERVED THAT WHEREVER THE LEGISLATURE INTENDED THA T INVESTMENT ITA NO. 7688/MUM/2014 PRADIPKUMAR PURUSHOTTAM KANAKIA 4 COULD BE MADE IN MORE THAN ONE ASSET, THE WORD USED WAS ANY AS WAS THE CASE IN SS. 54B, 54D, 54E, 54EA AND 54EB. F OR EXAMPLE, S. 54E ALLOWED EXEMPTION OF CAPITAL GAIN IF INVESTE D IN ANY OF THE SPECIFIED ASSETS AND, THEREFORE, THE WORD USED WAS ANY AND NOT A. BUT IN CASE OF SS. 54 AND 54F THE WORD USED WA S 'A' AND NOT 'ANY' WHICH SHOWS THAT THE LEGISLATURE INTENDED TO ALLOW EXPENDITURE ONLY IN RESPECT OF ONE RESIDENTIAL HOUS E. THE TRIBUNAL, THEREFORE, CONCLUDED THAT THE INVESTMENT HAS TO BE IN ONLY ONE RESIDENTIAL HOUSE FOR GETTING EXEMPTION IN RESPECT OF SALE OF AN ASSET. THE AO ALSO OBSERVED THAT WHEN A STATUTORY P ROVISION WAS PLAIN AND UNAMBIGUOUS, LITERAL INTERPRETATION HAS T O BE ADOPTED. RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE SUPR EME COURT IN CASE OF POLESTAR ELECTRONIC (P) LTD. & ANR. VS. ADD L. CST 1978 CTR (SC) 20 : (1978) 41 STC 409 (SC) AND THE JUDGMENT O F HONBLE SUPREME COURT IN CASE OF PRAKASH NATH KHANNA & ANR. VS. CIT (2004) 187 CTR (SC) 97 : (2004) 266 ITR 1 (SC), AO, THEREFORE, HELD THAT THE ASSESSEE WAS ENTITLED TO CLAIM EXEMPT ION UNDER S. 54 ONLY IN RESPECT OF SALE OF ONE FLAT AND THE CORRESP ONDING INVESTMENT IN ONE FLAT. EXEMPTION WAS THUS ALLOWED ONLY IN RES PECT OF INDEXED GAIN OF RS. 88,55,558 IN RESPECT OF FLAT NO. 41 WIT H RESPECT TO THE INVESTMENT OF RS. 95,71,364 IN GIRNAR FLAT. THE INV ESTMENT BEING MORE THAN CAPITAL GAIN IN RESPECT OF SALE OF FLAT N O. 41, THE CAPITAL GAIN WAS EXEMPTED WHEREAS THE INDEXED GAIN OF RS. 8 5,55,058 IN RESPECT OF FLAT NO. 51 WAS HELD TAXABLE. IN APPEAL CIT(A) UPHELD THE VIEW TAKEN BY THE AO AGGRIEVED BY WHICH THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US THE LEARNED AUTHORISED REPRESENTATIVE FO R THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE LOW ER AUTHORITIES THAT EXEMPTION UNDER S. 54 WAS ALLOWABLE IN RESPECT OF ANY NUMBER OF FLATS SOLD AS THERE WAS NO RESTRICTION PLACED IN THE SECTION FOR ALLOWING EXEMPTION ONLY IN RESPECT OF SALE OF ONE F LAT. HOWEVER, HE AGREED THAT CORRESPONDING TO EACH SALE OF FLAT THER E HAS TO BE INVESTMENT IN ONE RESIDENTIAL PROPERTY. IT WAS POIN TED OUT THAT THE DECISION OF THE SPECIAL BENCH IN CASE OF MS. SUSHIL A M. JHAVERI (SUPRA) WAS DISTINGUISHABLE AS IN THAT CASE THE ASS ESSEE HAD CLAIMED EXEMPTION IN RELATION TO INVESTMENT IN TWO PROPERTIES AGAINST THE SALES OF ONE FLAT. IN CASE OF THE ASSES SEE, THE INVESTMENTS IN TWO FLATS WERE CORRESPONDING TO TWO DIFFERENT SALES OF FLATS. IT WAS ACCORDINGLY ARGUED THAT THE ASSESS EE SHOULD BE ALLOWED EXEMPTION FULLY AS AGGREGATE VALUE OF INVES TMENT IN THE TWO FLATS WAS MORE THAN THE AGGREGATE CAPITAL GAIN FROM SALE OF FLATS. ALTERNATIVELY IT WAS ALSO SUBMITTED THAT IN CASE EXEMPTION WAS CONSIDERED IN RESPECT OF EACH SET OF PURCHASE A ND SALE TAKING SEPARATELY, THEN INVESTMENT IN GIRNAR FLAT SHOULD B E CONSIDERED AGAINST THE GAIN IN RESPECT OF FLAT NO. 41 WHICH WA S FULLY EXEMPT AS THE INVESTMENT WAS MORE. AS REGARDS THE SALE OF FLA T NO. 51 THE INDEXED GAIN WAS RS. 85,55,058 AGAINST WHICH INVEST MENT MADE WAS ONLY RS. 81,57,624 AND, THEREFORE, ONLY A SUM O F RS. 3,97,434 COULD BE TAXED. ITA NO. 7688/MUM/2014 PRADIPKUMAR PURUSHOTTAM KANAKIA 5 3.1 THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND PLACED RELIANCE ON THE FINDINGS GIVEN IN THE RESPECTIVE OR DERS. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIV AL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING COM PUTATION OF EXEMPTION UNDER S. 54 WHICH IS AVAILABLE IN CASE TH E LONG-TERM CAPITAL GAIN ARISING FROM SALE OF A RESIDENTIAL HOU SE IS INVESTED EITHER BY WAY OF PURCHASE AND CONSTRUCTION OF A RES IDENTIAL HOUSE WITHIN THE PRESCRIBED PERIOD. IN THIS CASE THE ASSE SSEE HAD SOLD TWO FLATS DURING THE YEAR BEING THE FLAT NOS. 41 AN D 51 IN SHIKHA BUILDING, PALI HILL, BANDRA (W) RESULTING INTO INDE XED GAIN OF RS. 88,55,558 AND RS. 85,55,058 RESPECTIVELY. THE CAPIT AL GAIN HAD BEEN INVESTED BY THE ASSESSEE IN A FLAT AT SAI DHAM FOR RS. 81,57,624 AND A FLAT AT; GIRNAR FOR RS. 95,71,364. THE CASE OF THE ASSESSEE IS THAT EXEMPTION UNDER S. 54 IS AVAILABLE IN RESPECT OF SALE OF ANY NUMBER OF FLATS WITH CORRESPONDING INVE STMENT IN A RESIDENTIAL HOUSE WHEREAS THE VIEW TAKEN BY THE AUT HORITIES BELOW IS THAT EXEMPTION CAN BE ALLOWED ONLY IN RESPECT OF SALE OF ONE RESIDENTIAL PROPERTY WITH CORRESPONDING INVESTMENT IN ONLY ONE RESIDENTIAL HOUSE. THERE IS NO DISPUTE EITHER IN TH E COMPUTATION OF CAPITAL GAIN OR IN RESPECT OF FULFILMENT OF ANY OTH ER CONDITION PRESCRIBED IN S. 54 SUCH AS THE INVESTMENT BEING WI THIN THE SPECIFIED PERIOD ETC. 4.1 A PERUSAL OF PROVISIONS OF S. 54(1) WHICH HAS BEEN REPRODUCED AT P. 2 EARLIER SHOWS THAT CAPITAL GAIN ARISING FRO M TRANSFER OF A LONG-TERM CAPITAL ASSET BEING A RESIDENTIAL HOUSE T HE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOU SE PROPERTY' IS EXEMPT IF THE CAPITAL GAIN IS INVESTED IN A RESI DENTIAL HOUSE IN THE MANNER PRESCRIBED IN THE SAID SECTION. THERE IS NO RESTRICTION PLACED ANYWHERE IN THE S. 54 THAT EXEMPTION IS AVAI LABLE ONLY IN RELATION TO SALE OF ONE RESIDENTIAL HOUSE. THEREFOR E, IN CASE THE ASSESSEE HAS SOLD TWO RESIDENTIAL HOUSES, BEING LON G-TERM ASSETS, THE CAPITAL GAIN ARISING FROM THE SECOND RESIDENTIA L HOUSE IS ALSO CAPITAL GAIN ARISING FROM THE TRANSFER OF A LONG-TE RM ASSET BEING A RESIDENTIAL HOUSE. THE PROVISIONS OF S. 54 THEREFOR E WILL ALSO BE APPLICABLE TO THE SALE OF SECOND RESIDENTIAL HOUSE AND SIMILARLY TO A THIRD RESIDENTIAL HOUSE AND SO ON. WHENEVER THE EXE MPTION AVAILABLE IS RESTRICTED TO ONE ASSET, A SUITABLE PR OVISION IS INCORPORATED IN THE RELEVANT SECTION ITSELF. FOR IN STANCE S. 23(2) EXEMPTS INCOME FROM A PROPERTY CONSISTING OF A HOUS E OR A PART OF HOUSE WHICH IS IN OCCUPATION OF THE ASSESSEE OR WHI CH COULD NOT BE OCCUPIED BY THE ASSESSEE BECAUSE OF HIS EMPLOYMENT/BUSINESS/PROFESSION BEING CARRIED ON AT SOME OTHER PLACE. BASED ON SUCH PROVISIONS CONTAINED IN S. 23( 2), INCOME FROM ANY NUMBER OF PROPERTIES BEING RESIDENTIAL HOUSE WH ICH ARE SELF- OCCUPIED WILL HAVE TO BE TREATED AS EXEMPT. BUT A R ESTRICTION HAS BEEN PLACED IN S. 23(4) WHICH PROVIDES THAT WHERE T HE PROPERTY REFERRED TO IN SUB-S. (2) CONSISTS OF MORE THAN ONE RESIDENTIAL HOUSE, EXEMPTION WOULD BE AVAILABLE ONLY IN RESPECT OF ONE HOUSE AND OTHER SELF-OCCUPIED RESIDENTIAL HOUSES WILL BE TREATED AS LET ITA NO. 7688/MUM/2014 PRADIPKUMAR PURUSHOTTAM KANAKIA 6 OUT. THERE IS NO SUCH PROVISION IN S. 54 TO RESTRIC T THE EXEMPTION OF CAPITAL GAIN ONLY TO SALE OF ONE RESIDENTIAL HOUSE. THE AUTHORITIES BELOW HAVE TAKEN THE VIEW THAT WHENEVER MORE THAN O NE OPTION IS GIVEN TO THE ASSESSEE THE WORD USED IS 'ANY'. THE R EFERENCE HAS BEEN MADE TO THE PROVISIONS OF S. 54E ETC. WE FIND FROM PERUSAL OF THE SAID SECTIONS THAT THE WORD 'ANY' HAS BEEN USED BECAUSE THE ASSESSEE HAS OPTION TO INVEST IN ANY OF THE ASSETS MENTIONED THEREIN. FOR INSTANCE, S. 54E PROVIDES EXEMPTION IN RESPECT OF CAPITAL GAIN ARISING FROM TRANSFER OF A LONG-TERM C APITAL ASSET IF WHOLE OR ANY PART OF THE NET CONSIDERATION IS INVES TED IN ANY SPECIFIED ASSETS WITHIN SIX MONTHS FROM THE DATE OF TRANSFER. SINCE THE SPECIFIED ASSETS WERE MORE THAN ONE, THE WORD ' ANY' HAS BEEN USED BECAUSE THE EXEMPTION WILL BE AVAILABLE IF THE INVESTMENT IS MADE IN ANY OF THE SPECIFIED ASSETS. THE SITUATION IN S. 54 IS DIFFERENT. CONSIDERING THE LANGUAGE USED IN S. 54(1 ), IN OUR VIEW EXEMPTION WILL BE AVAILABLE IN RESPECT OF TRANSFER OF ANY NUMBER OF LONG-TERM CAPITAL ASSETS BEING RESIDENTIAL HOUSES I F OTHER CONDITIONS ARE FULFILLED. 4.2 THE REVENUE HAS PLACED RELIANCE ON THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN CASE OF MS. SUSHILA M. JHA VERI (SUPRA) BUT THE SAID CASE IS DISTINGUISHABLE AS IN THAT CASE NO WHERE IT WAS HELD THAT EXEMPTION WILL BE AVAILABLE ONLY IN RESPECT OF SALE OF ONE RESIDENTIAL HOUSE. IN FACT ISSUE IN THAT CASE WAS D IFFERENT. THE ISSUE WAS WHETHER EXEMPTION WAS AVAILABLE IN CASE THE GAI N FROM SALE OF A HOUSE IS INVESTED IN MORE THAN ONE RESIDENTIAL HO USE. IT WAS HELD BY THE SPECIAL BENCH THAT EXEMPTION WILL BE AVAILAB LE ONLY WHEN THE INVESTMENT WAS MADE IN ONLY ONE RESIDENTIAL HOU SE. WE ARE IN FULL AGREEMENT WITH THE DECISION OF THE SPECIAL BEN CH THAT EXEMPTION IN RESPECT OF SALE OF A RESIDENTIAL HOUSE WILL BE AVAILABLE ONLY WHEN THERE IS CORRESPONDING INVESTMENT IN ONE RESIDENTIAL HOUSE. BUT THE EXEMPTION WILL BE AVAILABLE IN RESPE CT OF SALE OF ANY NUMBER OF RESIDENTIAL HOUSE IF THERE ARE CORRESPOND ING INVESTMENTS IN RESIDENTIAL HOUSE AND ALL OTHER CONDITIONS ARE F ULFILLED. THUS IN CASE THERE IS SALE OF MORE THAN ONE RESIDENTIAL HOU SE, THE EXEMPTION WILL BE AVAILABLE IN RELATION TO EACH SET OF SALE AND CORRESPONDING INVESTMENT IN THE RESIDENTIAL HOUSE. HOWEVER, WE ARE UNABLE TO AGREE WITH THE PLEA OF THE ASSESSEE T HAT EXEMPTION HAS TO BE CALCULATED CONSIDERING THE AGGREGATE OF C APITAL GAIN AND AGGREGATE OF INVESTMENT IN THE RESIDENTIAL HOUSES. IN CASE THERE ARE SALES OF MORE THAN ONE RESIDENTIAL HOUSE, IN OU R VIEW EXEMPTION HAS TO BE COMPUTED CONSIDERING EACH SET O F SALE OF RESIDENTIAL HOUSE AND THE CORRESPONDING INVESTMENT IN ONE RESIDENTIAL HOUSE AND THE COMBINATION WHICH IS BENE FICIAL TO THE ASSESSEE HAS TO BE ALLOWED. IN THIS CASE THE LEARNE D AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT INDEXED GAIN OF R S. 88,55,558 IN RESPECT OF SALE OF FLAT NO. 41 SHOULD BE CONSIDE RED AGAINST THE INVESTMENT IN FLAT AT GIRNAR FOR RS. 95,71,364 WHIC H IS ALLOWED AND THE INVESTMENT BEING MORE ENTIRE INDEXED GAIN OF RS . 88,55,558 IN RESPECT OF SALE OF FLAT NO. 41 WILL BE EXEMPT. THE INDEXED GAIN OF RS. 85,55,508 IN RESPECT OF SALE OF FLAT NO. 51 WIL L HAVE TO BE CONSIDERED AGAINST THE INVESTMENT OF RS. 81,57,624 IN THE FLAT AT ITA NO. 7688/MUM/2014 PRADIPKUMAR PURUSHOTTAM KANAKIA 7 SAI DHAM. SINCE THE INVESTMENT IS LESS THAN THE CAP ITAL GAIN, DIFFERENCE OF RS. 3,97,434 WILL HAVE TO BE TAXED. W E HOLD ACCORDINGLY. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY AL LOWED IN TERMS OF THE ORDER ABOVE. 2.2. WE FIND THAT THE COORDINATE BENCH IN THE AFOR ESAID CASE, WHEREIN, THERE WAS SALE OF MORE THAN ONE RESI DENTIAL HOUSE HELD THAT EXEMPTION WILL BE AVAILABLE IN RELA TION TO EACH SET OF SALE AND CORRESPONDING INVESTMENT IN RE SIDENTIAL HOUSE, THUS, WE FIND THAT THE IMPUGNED ISSUE IS COV ERED BY THE AFORESAID DECISION OF THE COORDINATE BENCH. 2.3. HOWEVER, BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE PROVISION OF SECTION 54 O F THE ACT FOR READY REFERENCE AND ANALYSIS:- 54. (1) SUBJECT TO THE PROVISIONS 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 BUILDINGS OR LANDS APPURTENANT THERETO, AND B EING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' (HEREAFTER IN THIS SECTION REF ERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERI OD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRA NSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AF TER THAT DATE 39 [CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA], THEN , INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME-TAX AS INC OME 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 THA N THE COST OF THE RESIDENTIAL HOUSE SO PURCHASED OR CONSTRUCTED (HERE AFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE DIFFEREN CE 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 PREVI OUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSE T 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 ITA NO. 7688/MUM/2014 PRADIPKUMAR PURUSHOTTAM KANAKIA 8 ( 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 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, T HE COST SHALL BE REDUCED BY THE AMOUNT OF THE CAPITAL GAIN. (2) THE AMOUNT OF THE CAPITAL GAIN WHICH IS NOT APP ROPRIATED 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 CONSTRUCTION OF THE NEW ASSET BEFORE 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 NOT LAT ER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FUR NISHING 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, AN D UTILISED IN ACCORDANCE WITH, ANY SCHEME WHICH THE CENTRAL GOVER NMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSI T; AND, FOR THE PURPOSES OF SUB-SECTION (1), THE AMOUNT, IF ANY, AL READY UTILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF TH E NEW ASSET TOGETHER WITH THE AMOUNT SO DEPOSITED SHALL BE DEEM ED 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 CONST RUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1 ), THEN, ( I ) THE AMOUNT NOT SO UTILISED SHALL BE CHARGED UNDE R 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 EXPI RES; AND ( II ) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW SUCH AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. A PLAIN READING OF THE PROVISION OF SECTION 54(1) OF THE INCOME-TAX ACT DISCLOSES THAT WHEN AN INDIVIDUAL-AS SESSEE OR HINDU UNDIVIDED FAMILY-ASSESSEE SELLS A LONG TERM C APITAL ASSETS AND WITHIN A SPECIFIED PERIOD CONSTRUCT RESI DENTIAL UNIT (NEW ASSET), THE CAPITAL GAIN ARISES FROM THE ORIGI NAL ASSET, SHALL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIO NS OF THIS SECTION. SUCH ASSESSEE CAN INVEST CAPITAL GAINS FOR PURCHASE OF RESIDENTIAL BUILDING/HOUSE TO SEEK EXEM PTION OF ITA NO. 7688/MUM/2014 PRADIPKUMAR PURUSHOTTAM KANAKIA 9 THE CAPITAL GAINS TAX. SECTION 13 OF THE GENERAL CL AUSES ACT DECLARES THAT WHENEVER THE SINGULAR IS USED FOR A W ORD, IT IS PERMISSIBLE TO INCLUDE THE PLURAL. THE CONTENTION O F THE REVENUE IS THAT THE PHRASE 'A' RESIDENTIAL HOUSE WO ULD MEAN ONE RESIDENTIAL HOUSE AND IT DOES NOT APPEAR TO THE CORRECT UNDERSTANDING. THE EXPRESSION 'A' RESIDENTIAL HOUSE SHOULD BE UNDERSTOOD IN A SENSE THAT BUILDING SHOULD BE OF RESIDENTIAL IN NATURE AND 'A' SHOULD NOT BE UNDERST OOD TO INDICATE A SINGULAR NUMBER. THE COMBINED READING OF SECTIONS 54(1) AND 54F OF THE INCOME- TAX ACT DISCLOSES THAT , A NON RESIDENTIAL BUILDING CAN BE SOLD, THE CAPITAL GAIN OF WHICH CAN BE INVESTED IN A RESIDENTIAL BUILDING TO SEEK EXEMP TION OF CAPITAL GAIN TAX. HOWEVER, THE PROVISO TO SECTION 5 4 OF THE INCOME-TAX ACT, LAYS DOWN THAT IF THE ASSESSEE HAS ALREADY ONE RESIDENTIAL BUILDING, HE IS NOT ENTITLED TO EXE MPTION OF CAPITAL GAINS TAX, WHEN HE INVESTS THE CAPITAL GAIN IN PURCHASE OF ADDITIONAL RESIDENTIAL BUILDING. THE CO NTEXT 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 T O A SINGLE RESIDENTIAL HOUSE, IF, THAT WAS THE INTENTION, THEY WOULD HAVE USED THE WORD 'ONE.' AS IN THE EARLIER PART, THE WO RDS USED ARE BUILDINGS OR LANDS WHICH ARE PLURAL IN NUMBER A ND THAT: IS REFERRED TO AS 'A RESIDENTIAL HOUSE', THE ORIGIN AL ASSET. AN ASSET NEWLY ACQUIRED AFTER THE SALE OF THE ORIGINAL ASSET ALSO CAN BE BUILDINGS OR LANDS APPURTENANT THERETO, WHIC H ALSO SHOULD BE 'A RESIDENTIAL HOUSE.' THEREFORE THE LETT ER A IN THE CONTEXT IT IS USED SHOULD NOT BE CONSTRUED AS MEANI NG ITA NO. 7688/MUM/2014 PRADIPKUMAR PURUSHOTTAM KANAKIA 10 'SINGULAR.' BUT, BEING AN INDEFINITE ARTICLE, THE S AID EXPRESSION SHOULD BE READ IN CONSONANCE WITH THE OT HER WORDS BUILDINGS AND LANDS AND, THEREFORE, THE S INGULAR A RESIDENTIAL HOUSE ALSO PERMITS USE OF PLURAL BY VI RTUE OF SECTION 13(2) OF THE GENERAL CLAUSES ACT. CIT V. D. ANANDA BASSAPPA (2009) 223 (KAR) 186: (2009) 20 DTR (KAR) 266 CAN BE FOLLOWED. 2.4. THERE COULD ALSO BE ANOTHER ANGLE. SECTION 54 /54F USES THE EXPRESSION 'A RESIDENTIAL HOUSE'. THE EXPR ESSION USED IS NOT 'A RESIDENTIAL UNIT'. THIS IS A NEW CON CEPT INTRODUCED BY THE ASSESSING OFFICER INTO THE SECTIO N. SECTION 54/54F REQUIRES THE ASSESSEE TO ACQUIRE A 'RESIDENT IAL HOUSE' AND SO LONG AS THE ASSESSEE ACQUIRES A BUILDING, WH ICH MAY BE CONSTRUCTED, FOR THE SAKE OF CONVENIENCE, IN SUC H A MANNER AS TO CONSIST OF SEVERAL UNITS WHICH CAN, IF THE NEED ARISES, BE CONVENIENTLY AND INDEPENDENTLY USED AS A N INDEPENDENT RESIDENCE, THE REQUIREMENT OF THE SECTI ON SHOULD BE TAKEN TO HAVE BEEN SATISFIED. THERE IS NOTHING I N THESE SECTIONS WHICH REQUIRE THE RESIDENTIAL HOUSE TO BE CONSTRUCTED IN A PARTICULAR MANNER. THE ONLY REQUIR EMENT IS THAT IT SHOULD BE FOR THE RESIDENTIAL USE AND NOT F OR COMMERCIAL USE. IF THERE IS NOTHING IN THE SECTION WHICH REQUIRES THAT THE RESIDENTIAL HOUSE SHOULD BE BUILT IN A PARTICULAR MANNER, IT SEEMS TO US THAT THE INCOME T AX AUTHORITIES CANNOT INSIST UPON THAT REQUIREMENT. A PERSON MAY CONSTRUCT A HOUSE ACCORDING TO HIS PLANS AND REQUIREMENTS. MOST OF THE HOUSES ARE CONSTRUCTED AC CORDING TO THE NEEDS AND REQUIREMENTS AND EVEN COMPULSIONS. FOR ITA NO. 7688/MUM/2014 PRADIPKUMAR PURUSHOTTAM KANAKIA 11 INSTANCE, A PERSON MAY CONSTRUCT A RESIDENTIAL HOUS E IN SUCH A MANNER THAT HE MAY USE THE GROUND FLOOR FOR HIS O WN RESIDENCE AND LET OUT THE FIRST FLOOR HAVING AN IND EPENDENT ENTRY SO THAT HIS INCOME IS AUGMENTED. IT IS QUITE COMMON TO FIND SUCH ARRANGEMENTS, PARTICULARLY POST-RETIREMEN T. ONE MAY BUILD A HOUSE CONSISTING OF FOUR BEDROOMS (ALL IN THE SAME OR DIFFERENT FLOORS) IN SUCH A MANNER THAT AN INDEPENDENT RESIDENTIAL UNIT CONSISTING OF TWO OR T HREE BEDROOMS MAY BE CARVED OUT WITH AN INDEPENDENT ENTR ANCE SO THAT IT CAN BE LET OUT. HE MAY EVEN ARRANGE FOR HIS CHILDREN AND FAMILY TO STAY THERE, SO THAT THEY ARE NEARBY, AN ARRANGEMENT WHICH CAN BE MUTUALLY SUPPORTIVE. HE MA Y CONSTRUCT HIS RESIDENCE IN SUCH A MANNER THAT IN CA SE OF A FUTURE NEED HE MAY BE ABLE TO DISPOSE OF A PART THE REOF AS AN INDEPENDENT HOUSE. THERE MAY BE SEVERAL SUCH CONSIDERATIONS FOR A PERSON WHILE CONSTRUCTING A RE SIDENTIAL HOUSE. WE ARE THEREFORE, UNABLE TO SEE HOW OR WHY T HE PHYSICAL STRUCTURING OF THE NEW RESIDENTIAL HOUSE, WHETHER IT IS LATERAL OR VERTICAL, SHOULD COME IN THE WAY OF C ONSIDERING THE BUILDING AS A RESIDENTIAL HOUSE. WE DO NOT THIN K THAT THE FACT THAT THE RESIDENTIAL HOUSE CONSISTS OF SEVERAL INDEPENDENT UNITS CAN BE PERMITTED TO ACT AS AN IMPEDIMENT TO T HE ALLOWANCE OF THE DEDUCTION UNDER SECTION 54/54F. IT IS NEITHER EXPRESSLY NOR BY NECESSARY IMPLICATION PROH IBITED. THE RATIO LAID DOWN BY HON'BLE DELHI HIGH COURT IN CIT VS GITA DUGGAL (2013) 357 ITR 153 (DEL.), CIT VS D. AN ANDA BASAPPA (2009) 309 ITR 329 (KARN.)(PARA-3 & 6) AND CIT VS SMT. K.G. RUKMINIAMMA (2011) 331 ITR 211(KARN.)(PAR A 6 & ITA NO. 7688/MUM/2014 PRADIPKUMAR PURUSHOTTAM KANAKIA 12 10) SUPPORTS THE CASE OF THE ASSESSEE. HON'BLE DELH I HIGH COURT IN THE CASE OF CIT VS GITA DUGGAL (SUPRA) AFF IRMED THE STAND OF THE TRIBUNAL TAKEN IN ITA NO.3613/DEL./201 0, ORDER DATED 07/06/2011. THE VICE VERSA IS ALSO APPLICABLE BECAUSE EXEMPTION U/S 54 WILL BE AVAILABLE IN RESPECT OF AN Y NUMBER OF LONG TERM CAPITAL ASSETS, BEING RESIDENTIAL HOUS ES, IF OTHER CONDITIONS ARE FULFILLED. IF THE SALE PROCEEDS OF T HE LONG TERM CAPITAL ASSET IS NOT UTILISED, WITHIN SPECIFIED TIM E, THEN IT WILL BE DEALT WITH IN ACCORDANCE WITH LAW. IN THE PRESE NT APPEAL, IT IS NOT THE CASE OF THE REVENUE THAT THE PROCEEDS RECEIVED UPON TRANSFER OF LONG TERM CAPITAL ASSET WAS NOT UT ILISED BY THE ASSESSEE. THUS, CONSIDERING THE TOTALITY OF FAC TS, THE APPEAL OF THE ASSESSEE IS ALLOWED. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF THE LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 28/11/2016. SD/- SD/- ( RAJESH KUMAR ) (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER $ MUMBAI; ( DATED : 02/12/2016 F{X~{T? P.S / /. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT (RESPECTIVE ASSESSEE) 2. ./,- / THE RESPONDENT. 3. 0 0 1' ( *+ ) / THE CIT, MUMBAI. 4. 0 0 1' / CIT(A)- , MUMBAI, 5. 3#4 .' , 0 *+& * 5 , $ / DR, ITA NO. 7688/MUM/2014 PRADIPKUMAR PURUSHOTTAM KANAKIA 13 ITAT, MUMBAI 6. 6 7$ / GUARD FILE. ! / BY ORDER, /3+' .' //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI