SMT.MANJU MAHENDRA GOYAL, MUMBAI V. INCOME TAX OFFICER 19(2)(3), MUMBAI

ITA 994/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5018 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 21-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K BEPARIDR
• Keywords: Capital asset; Question of law
• Section: 54F; 2(14); 234B; 54

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.994/MUM/2018 ASSESSMENT YEAR: 2012-13 SMT. MANJU MAHENDRA GOYAL A/802, SURYA APARTMENTS, 53, BHULABHAI DESAI ROAD, MUMBAI-400026 / VS. INCOME TAX OFFICER-19(2)(3), ROOM NO.2018, MATRU MANDIR, TARDEO ROAD, MUMBAI-400007 / ASSESSEE / REVENUE P.A. NO . AAFPG2990N $ % & / ASSESSEE BY NONE $ % & / REVENUE BY SHRI S.K. BEPARI-DR / DATE OF HEARING 08/10/2018 & / DATE OF ORDER: 08/10/2018 & / O R D E R THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 24/01/2018 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI. ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 2 2. DURING HEARING, NONE WAS PRESENT FOR THE ASSESSEE. IT IS NOTED THAT THIS APPEAL WAS FILED BY THE ASSESSEE ON 21/02/2018 AND FIXED FOR HEARING FOR 08/05/2018 WHEN THE ASSESSEE SOUGHT ADJOURNMENT. ON 09/05/2018, AGAIN THE APPEAL WAS ADJOURNED TO 04/06/2018. ON THAT DATE, THE ASSESSEE SOUGHT ADJOURNMENT. AGAIN ON 07/06/2018, THE ASSESSEE SOUG HT ADJOURNMENT. ON 16/07/2018, AT THE REQUEST OF THE ASSESSEE, THE APPEAL WAS ADJOURNED AND THE IDENTICA L IS THE SITUATION ON 19/07/2017. ON 09/10/2017, AGAIN T HE ASSESSEE REQUESTED FOR ADJOURNMENT. ON 13/08/2018, AGAIN THE ASSESSEE REQUESTED FOR ADJOURNMENT AND TH US THE LAST OPPORTUNITY WAS GRANTED TO THE ASSESSEE FOR 14/08/2018. ON THAT DATE ALSO, THE ASSESSEE REQUEST ED FOR ADJOURNMENT FOR 04/09/2018. ON 04/09/2018 ALSO, THE HEARING WAS ADJOURNED TO 06/09/2018 THAT TOO AT THE REQUEST OF THE ASSESSEE. IDENTICAL IS THE SITUATION FOR 06/09/2018 AND 07/09/2018 AS THE ASSESSEE SOUGHT ADJOURNMENT. TODAY, I.E. 08/10/2018, THE ASSESSEE NEITHER APPEARED NOR MOVED ADJOURNMENT PETITION, THEREFORE, I HAVE NO OPTION BUT TO PROCEED EX-PARTE , QUA ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 3 THE ASSESSEE AND TEND TO DISPOSE OF THE APPEAL ON T HE BASIS OF MATERIAL AVAILABLE ON RECORD. 2.1. THE FIRST GROUND RAISED BY THE ASSESSEE PERTA INS TO REJECTING THE CLAIM FOR EXEMPTION UNDER SECTION 54 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) WITH RESPECT TO CAPITAL GAINS OF RS.10,02,415/- AROSE FR OM TRANSFER OF LONG TERM CAPITAL ASSET, BEING A RESIDE NTIAL HOUSE. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THE STAND OF THE ASSESSEE IS THAT THE ASS ESSEE PURCHASED THE RESIDENTIAL HOUSE WITHIN THE PERIOD PRESCRIBED UNDER SECTION 54 OF THE ACT HAVING SATIS FIED ALL THE CONDITIONS CONTAINED THEREIN. ON THE OTHER HAND , THE LD. DR, BEFORE ME, DEFENDED THE DENIAL OF EXEMPTION BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) BY INVITING OUR ATTENTION TO THE PROVISION OF SECTION 54 OF THE ACT . 2.2. I HAVE CONSIDERED THE SUBMISSIONS OF LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFOR E ADVERTING FURTHER, IT IS MY BOUNDED DUTY TO EXAMINE THE PROVISION OF SECTION 54 OF THE ACT, WHICH IS REPROD UCED HEREUNDER:- ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 4 54. [(1)] [ 1[SUBJECT TO THE PROVISIONS OF SUB-SE CTION (2), WHERE, IN THE CASE OF AN ASSESSEE 2 BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET 3 [***], BEING BUILDINGS OR 4 LANDS APPURTENA NT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS C HARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' (HEREAFTER IN THI S SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WIT HIN A PERIOD OF 5 [ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH TH E TRANSFER TOOK PLACE PURCHASED 6 ], OR HAS WITHIN A PERIOD OF THREE YEAR S AFTER 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 WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SA Y, (I ) IF THE AMOUNT OF THE CAPITAL GAIN 7 [IS GREATER THAN THE COST OF 8 [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 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 (II ) IF THE AMOUNT OF THE CAPITAL GAIN I S EQUAL TO OR LESS THAN THE COST OF THE NEW ASSET, THE CAPITAL GAIN SHALL NOT BE CHARGED UN DER 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 T HREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE C OST SHALL BE REDUCED BY THE AMOUNT OF THE CAPITAL GAIN. 9 [***] 10 [(2) THE AMOUNT OF THE CAPITAL GAIN WHICH IS N OT APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE O RIGINAL ASSET TOOK PLACE, OR WHICH IS NOT UTILISED BY HIM FOR THE PURC HASE 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 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 UTI LISED IN ACCORDANCE WITH, ANY SCHEME 11 WHICH THE CENTRAL GOVERNMENT MA Y, 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 THE NE W 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 SU B-SECTION 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, ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 5 (I ) THE AMOUNT NOT SO UTILISED SHALL BE CHARGED UNDER 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 W ITHDRAW SUCH AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. EXPLANATION. 12 [OMITTED BY THE FINANCE ACT, 1992, W.E.F. 1-4- 1993.] 2.3. NOW, WE SHALL REPRODUCE HEREUNDER SECTION 54F OF THE ACT AS WAS APPLICABLE FOR THE IMPUGNED ASSES SMENT YEAR IS REPRODUCED HEREUNDER:- 54F. (1) [SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), WHER E, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDE D FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPI TAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERR ED 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 PL ACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONS TRUCTED, A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOL LOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, ( A ) IF THE COST OF THE NEW ASSET IS NOT LESS THAN TH E NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; ( B ) IF THE COST OF THE NEW ASSET IS LESS THAN THE NE T CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPIT AL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS TH E COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGE D UNDER SECTION 45: [ PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL A PPLY WHERE ( A ) THE ASSESSEE, ( I ) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR ( II ) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANSFER OF TH E ORIGINAL ASSET; OR ( III ) CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET; AND ( B ) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER TH AN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET, IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPER TY'.] EXPLANATION. FOR THE PURPOSES OF THIS SECTION, 5 [***] ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 6 6 [***] 'NET CONSIDERATION', IN RELATION TO THE TRAN SFER OF A CAPITAL ASSET, MEANS THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET AS REDUCED BY ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRAN SFER. (2) WHERE THE ASSESSEE PURCHASES, WITHIN THE PERIOD OF 7 [TWO YEARS] AFTER THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET, OR CONSTRUCTS, WITHIN THE PERIOD OF THREE YEARS AFTER SUCH DATE, ANY RESIDENT IAL HOUSE, THE INCOME FROM WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FRO M HOUSE PROPERTY', OTHER THAN THE NEW ASSET, THE AMOUNT OF CAPITAL GAI N ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SE CTION 45 ON THE BASIS OF THE COST OF SUCH NEW ASSET AS PROVIDED IN CLAUSE ( A ), OR, AS THE CASE MAY BE, CLAUSE ( B ), OF SUB-SECTION (1), SHALL BE DEEMED TO BE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' RELATING TO LONG-TERM CAPITAL ASSETS OF THE PREVIOUS YEAR IN WHICH SUCH RESIDENTI AL HOUSE IS PURCHASED OR CONSTRUCTED. (3) WHERE THE NEW ASSET IS TRANSFERRED WITHIN A PER IOD OF THREE YEARS FROM THE DATE OF ITS PURCHASE OR, AS THE CASE MAY BE, IT S CONSTRUCTION, THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE COST O F SUCH NEW ASSET AS PROVIDED IN CLAUSE ( A ) OR, AS THE CASE MAY BE, CLAUSE ( B ), OF SUB-SECTION (1) SHALL BE DEEMED TO BE INCOME CHARGEABLE UNDER T HE HEAD 'CAPITAL GAINS' RELATING TO LONG-TERM CAPITAL ASSETS OF THE PREVIOUS YEAR IN WHICH SUCH NEW ASSET IS TRANSFERRED.] [(4) THE AMOUNT OF THE NET CONSIDERATION WHICH IS N OT APPROPRIATED 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 RE TURN [SUCH DEPOSIT BEING MADE IN ANY CASE NOT LATER THAN THE DUE 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 I NSTITUTION AS MAY BE SPECIFIED IN, AND UTILISED IN ACCORDANCE WITH, ANY SCHEME 9 WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFI CIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT ; AND, FOR THE PURPOSES OF SUB-SECTION (1), THE AMO UNT, IF ANY, ALREADY UTILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTR UCTION OF THE 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), THE N, ( I ) THE AMOUNT BY WHICH ( A ) THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRAN SFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE COST OF THE NEW ASSET AS PROVIDED IN CLAUSE ( A ) OR, AS THE CASE MAY BE, CLAUSE ( B ) OF SUB- SECTION (1), EXCEEDS ( B ) THE AMOUNT THAT WOULD NOT HAVE BEEN SO CHARGED H AD THE AMOUNT ACTUALLY UTILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 7 NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTIO N (1) BEEN THE COST OF THE NEW ASSET, SHALL BE CHARGED UNDER SECTION 45 A S INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DA TE OF THE TRANSFER OF THE ORIGINAL ASSET EXPIRES ; AND ( II ) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW THE U NUTILISED AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. EXPLANATION. [ OMITTED BY THE FINANCE ACT, 1992, W.E.F. 1-4-1993. ]] LATER VIDE FINANCE ACT, 2014 W.E.F. 01/04/2015, SECTION 54/54F WAS AMENDED AND A WORD A RESIDENTIA L HOUSE WAS SUBSTITUTED WITH ONE RESIDENTIAL HOUSE . 2.4. A PLAIN READING OF THE PROVISION OF SECTION 5 4(1) OF THE INCOME-TAX ACT DISCLOSES THAT WHEN AN INDIVI DUAL- ASSESSEE OR HINDU UNDIVIDED FAMILY-ASSESSEE SELLS A LONG TERM CAPITAL ASSETS AND WITHIN A SPECIFIED PERIOD C ONSTRUCT / ACQUIRE RESIDENTIAL UNIT (NEW ASSET), THE CAPITAL GAIN ARISES FROM THE ORIGINAL ASSET, SHALL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION. SU CH ASSESSEE CAN INVEST CAPITAL GAINS FOR PURCHASE OF RESIDENTIAL BUILDING/HOUSE TO SEEK EXEMPTION OF THE CAPITAL GAINS TAX. 2.5. THE HON'BLE JURISDICTIONAL HIGH COURT IN K.C. KAUSHIK VS. INCOME TAX OFFICER 185 ITR 499 (BOM) HE LD AS UNDER: ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 8 1. THE PETITIONER IS IN THE SERVICE OF THE BANK OF BARODA. HE PURCHASED A FLAT IN SUVARNADEEP CO-OPERATIVE HOUSING SOCIETY LI MITED (FOR SHORT 'SURNADEEP'), SANTACRUZ, BOMBAY, ON MARCH 21, 1973, FOR A SUM OF RS. 49,140 FOR THE PURPOSE OF HIS RESIDENCE. HE WAS RES IDING IN THAT FLAT ON OCTOBER 24, 1979, HE SOLD THE FLAT FOR RS. 1,25,000 AND ON SAME THE DATE PURCHASED ANOTHER FLAT IN JAI PRIYADARSHINI CO-OPER ATIVE HOUSING SOCIETY LIMITED AT KHAR. BOMBAY (FOR SHORT 'PRIYADARSHINI') , FOR A SUM OF RS. 1,11,000. HE RESIDED IN THE KHAR FLAT FROM OCTOBER 24, 1979, TO JULY 25, 1980. ON JULY 26, 1980, HE SOLD THE KHAR FLAT ALSO FOR A SUM OF RS. 1,20,000 AND PURCHASED ANOTHER FLAT ON THE DATE IN KALPANA C O-OPERATIVE HOUSING SOCIETY LIMITED (FOR SHORT 'KALPANA'). SANTACRUZ, B OMBAY, FOR RS. 1,20,000. THEREAFTER, HE STARTED RESIDING IN THIS FLAT. HOWEV ER, HE VACATED THE FLAT ON MAY 16, 1981, ON BEING TRANSFERRED TO BARODA. FROM MAY 27, 1981, TO JULY 1, 1983, THE FLAT IN KALPANA WAS LET OUT TO THE BAN K OF BARODA, HIS EMPLOYERS. 2. FOR THE ASSESSMENT YEAR 1980-81, THE PETITIONER CLAIMED THAT THE SURPLUS OF RS. 75,860 ARISING ON THE SALE OF HIS FLAT IN SU VARNADEEP ON OCTOBER 24, 1979, WAS NOT TAXABLE AS HE HAD INVESTED MORE THAN THE SAID AMOUNT IN THE PURCHASE OF A FLAT IN KALPANA ON JULY 26, 1980, FOR RESIDENCE. THE INCOME- TAX OFFICER PARTLY ACCEPTED THE CLAIM AND HELD THAT THE SURPLUS WAS INVESTED IN THE PURCHASE OF A FLAT IN PRIYADARSHINI, KHAR ON OCTOBER 24, 1979, AND NOT IN THE PURCHASE OF A FLAT IN KALPANA, SANTACRUZ , ON JULY 26, 1980, AS CLAIMED. THE PETITIONER FILED A REVISION PETITION U NDER SECTION 264 OF THE INCOME-TAX ACT, 1961, WHICH WAS REJECTED BY THE COM MISSIONER OF INCOME- TAX, VIDE ORDER DATED FEBRUARY 5, 1985. IT IS PERTI NENT TO MENTION THAT TWO ISSUES, VIZ., (I) WHETHER THE PETITIONER HAD A CHOI CE TO CHOOSE THE PROPERTY AGAINST WHICH THE CAPITAL GAINS WHICH HAD ARISEN ON THE TRANSFER OF A CAPITAL ASSET ARE TO BE ADJUSTED; AND (II) WHETHER THE PROP ERTY PURCHASED BUT NOT ACTUALLY USED FOR RESIDENCE FOR THREE YEARS FULFILS THE REQUIREMENT OF SECTION 54(1) OF THE INCOME-TAX ACT, 1961, WERE RAISED BEFORE TH E COMMISSIONER. WHILE ACCEPTING THE CONTENTION THAT THE PETITIONER HAD A CHOICE AND COULD CLAIM RELIEF UNDER SECTION 54 AGAINST THE PURCHASE OF THE FLAT ON JULY 26, 1980, EVEN THOUGH HE HAD PURCHASED A FLAT ON OCTOBE R 24, 1979, IN THE MEANTIME, THE COMMISSIONER HELD THAT THAT FLAT HAVI NG NOT BEEN OCCUPIED BY THE PETITIONER FOR HIS RESIDENCE FOR THREE YEARS, H E WAS NOT ENTITLED TO RELIEF UNDER SECTION 54 AGAINST THE PURCHASE OF THAT FLAT. 3. FOR THE ASSESSMENT YEAR 1981-82, FOLLOWING HIS O RDER FOR EARLIER ASSESSMENT YEAR, THE INCOME-TAX OFFICER HELD THAT T HE KHAR PURCHASED BY THE PETITIONER ON OCTOBER 24, 1979, WAS SOLD ON JULY 26 , 1980, I.E., WITHIN A YEAR. THEREFORE, THE SURPLUS WAS CHARGEABLE AS SHOR T-TERM CAPITAL GAINS. FOR THIS VERY REASON, HE ALSO HELD THAT TO THE EXTENT T HE PETITIONER HAD AVAILED OF RELIEF UNDER SECTION 54 AGAINST THE PURCHASE OF THIS FLAT ON OCTOBER 24, 1 979, THE COST OF THE FLAT WAS REQUIRED TO BE REDUCED. AC CORDINGLY, HE COMPUTED THE SHORT-TERM CAPITAL GAINS FOR THE YEAR AT RS. 82,860 . THE PETITIONER'S APPEAL THEREAGAINST FAILED. ACCORDING TO THE COMMISSIONER OF INCOME-TAX (APPEALS), THE PETITIONER HAD NO OPTION OR CHOICE. RELIEF UNDE R SECTION 54 WAS OR COULD BE AVAILABLE ONLY AGAINST THE PURCHASE OF THE FIRST PROPERTY FOR RESIDENCE AFTER THE SALE OF THE RESIDENTIAL HOUSE CAPITAL GAI NS ARISING ON THE TRANSFER OF WHICH WERE SOUGHT TO BE ADJUSTED. ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 9 4. THE PETITION WAS ADMITTED ON AUGUST 30, 1985, WH EN INTERIM RELIEF IN TERMS OF PRAYER (G) WAS ALSO GRANTED. IT IS PROPOSE D TO DISPOSE OF THE PRELIMINARY OBJECTION FIRST. IT WAS CONTENDED BY DR . BALASUBRAMANIAN, FOR THE REVENUE, THAT THE INCOME-TAX ACT PROVIDES A COMPLETE MACHINERY FOR THE ASSESSMENT OF TAX, IMPOSITION OF PENALTY FOR GRANTI NG RELIEF IN RESPECT OF ANY IMPROPER ORDER PASSED BY THE INCOME-TAX AUTHORITIES . A PERSON AGGRIEVED BY AN ORDER OF THE INCOME-TAX OFFICER HAD THUS ADEQUAT E REMEDIES AVAILABLE TO HIM BY WAY OF APPEAL TO THE COMMISSIONER (APPEALS) AND THE TRIBUNAL. JURISDICTION OF THIS COURT UNDER ARTICLE 226 OF THE CONSTITUTION IS AN EXTRAORDINARY JURISDICTION. THE PETITIONER CAN INVO KE THIS JURISDICTION ONLY WHEN THERE IS NO ALTERNATIVE AND EFFECTIVE REMEDY. IT IS NOT ESTABLISHED THAT THE PETITIONER HAD IN THIS CASE NO ALTERNATIVE AND/ OR EFFECTIVE REMEDY. FAIRLY ADMITTING THAT THE ORDER PASSED BY THE COMMISSIONER UNDER SECTION 264 OF THE INCOME-TAX ACT IN REVISION WAS NOT APPEALABLE, DR. BALSUBRAMANIAN STATED THAT IT WAS DUE TO A CONSCIOUS PROVISION MAD E BY THE LEGISLATURE IN THIS BEHALF. THE PETITIONER HAD CHOSEN NOT TO GO IN APPEAL AND TO AVAIL OF A REMEDY WHICH WAS AVAILABLE. IN ANY EVENT, THAT FACT BY ITSELF WOULD NOT ENTITLE THE PETITIONER TO INVOKE THE WRIT JURISDICTION OF T HIS COURT AS A MATTER OF COURSE. THE CONTENTIONS WERE REPELLED BY SHRI SONDE , LEARNED COUNSEL FOR THE PETITIONER. IT WAS POINTED OUT THAT THOUGH EXTRAORD INARY, THE JURISDICTION UNDER ARTICLE 226 WAS DISCRETIONARY. WHEN THE PETITION HAS ALREADY B EEN ENTERTAINED, IT MAY NOT BE PROPER OR LEGAL FOR THE SAME COURT TO CONSIDER THE QUESTION OF ENTERTAINING IT ONCE AGAIN AT THE TIME OF FINAL HEARING. 5. IN MY JUDGMENT, THE PETITION HAVING ALREADY BEEN ENTERTAINED AND THE JURISDICTION BEING, THOUGH EXTRAORDINARY, DISCRETIO NARY, I WILL PREFER TO DISPOSE OF THE PETITION ON MERITS. THIS WAS ALSO TH E VIEW TAKEN BY THIS COURT (GOA BENCH) IN WRIT PETITION NO. 174/B/1981 DECIDED ON AUGUST 2, 1984. 6. IN ORDER TO APPRECIATE THE RIVAL CONTENTIONS ON MERITS OF THE PETITION, IT IS DESIRABLE TO REFER TO THE PROVISIONS OF SECTION 54 OF THE INCOME-TAX ACT AS THEY WERE IN FORCE DURING THE RELEVANT PERIOD. SECTION 54 IS REPRODUCED HEREUNDER : '54. PROFIT ON SALE OF PROPERTY USED FOR RESIDENCE. - WHERE A CAPITAL GAIN ARISES FROM THE TRANSFER OF A CAPITAL ASSET TO WHIC H THE PROVISIONS OF SECTION 53 ARE NOT APPLICABLE, BEING BUILDINGS OR LANDS APPUR TENANT THERETO THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOM E FROM HOUSE PROPERTY', WHICH IN THE TWO YEARS IMMEDIATELY PRECEDING THE DA TE ON WHICH THE TRANSFER TOOK PLACE, WAS BEING USED BY THE ASSESSEE OR A PAR ENT OF HIS MAINLY FOR THE PURPOSES OF HIS OWN OR THE PARENT'S OWN RESIDENCE, AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR AFTER THAT DA TE PURCHASED, OR HAS WITHIN A PERIOD OF TWO YEARS AFTER THAT DATE CONSTRUCTED, A HOUSE PROPERTY FOR THE PURPOSES OF HIS OWN RESIDENCE, THEN, INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEA R IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WI TH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, - (I) IF THE AMOUNT OF THE CAPITAL GAIN GREATER THAN THE COST OF THE NEW ASSET, THE DIFFERENCE BETWEEN THE AMOUNT OF THE CAPITAL GAIN A ND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS INCOME OF THE PREVIOUS YEAR; AND ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 10 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 UN DER SECTION 45 ; 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 REDUCED BY THE AMOUNT OF THE CAPITAL GAIN.' 7. EVIDENTLY, RELIEF IS NOT AVAILABLE UNDER THE SEC TION IN RESPECT OF CAPITAL GAINS ARISING ON THE TRANSFER OF ANY AND EVERY CAPI TAL ASSET. RELIEF IS AVAILABLE ONLY IF THE CAPITAL ASSET IS SUCH THAT IT S INCOME IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AND WHICH IN THE TWO YEARS IMMEDIATELY PRECEDING THE TRANSFER WAS BEING USED B Y THE ASSESSEE OR A PARENT OF HIS FOR THE PURPOSE OF HIS OWN OR THE PAR ENT'S OWN RESIDENCE. THERE IS NO DISPUTE THAT THIS CONDITION IS SATISFIED IN T HE PRESENT CASE AS THE FLAT IN SUVARNADEEP WAS USED BY THE PETITIONER FROM 1973 TO 1979 FOR HIS OWN RESIDENCE AND INCOME FROM IT, IF ANY, WOULD HAVE BE EN CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. THE SECOND CONDI TION FOR AVAILING OF THE RELIEF IS THAT THE ASSESSEE MUST WITHIN A PERIOD OF ONE YEAR BEFORE OR AFTER THE DATE OF TRANSFER OF SUCH A CAPITAL ASSET, PURCHASED OR WITHIN A PERIOD OF TWO YEARS AFTER THAT DATE, CONSTRUCT A HOUSE PROPERTY F OR HIS OWN RESIDENCE. IN THIS CASE, BOTH THE HOUSE PROPERTIES, I.E., THE FLA T IN PRIYADARSHINI AND THE FLAT IN KALPANA, WERE PURCHASED BY THE PETITIONER WITHIN ONE YEAR OF THE DATE OF THE SALE OF THE FLAT IN SUVARNADEEP AND BOTH THE FL ATS WERE PURCHASED FOR THE PURPOSE OF RESIDENCE. IN THE ABSENCE OF ANY PROVISI ON TO THE CONTRARY, IN MY JUDGMENT. THE PETITIONER IS ENTITLED TO AVAIL OF TH E RELIEF IN RESPECT OF THE CAPITAL GAIN ARISING ON THE SALE OF HIS FLAT IN 197 9 AGAINST THE FLAT PURCHASED IN THAT YEAR AS ALSO AGAINST THE FLAT PURCHASED ON JULY 26, 1980. IT HAS, OF COURSE, TO BE ADJUSTED AGAINST ONE OF THE FLATS ONL Y. THE PETITIONER HAS CHOSEN TO SEEK THAT RELIEF AGAINST THE PURCHASE OF THE FLA T ON JULY 26, 1980, AND, AS HELD BY THE COMMISSIONER IN HIS ORDER UNDER SECTION 264 OF THE INCOME-TAX ACT FOR 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 CONDITIONS MEN TIONED IN THE SECTION ARE SATISFIED. THERE BEING NO DISPUTE THAT THE FLAT PUR CHASED BY THE PETITIONER IN KALPANA 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 SUVARNADEEP FLAT AND FOR THE PURPOSE OF HIS OWN RESIDENCE, THE PETITIONE R IS ENTITLED TO SEEK ADJUSTMENT OF CAPITAL GAINS AGAINST THE PURCHASE OF THIS FLAT. 8. HOWEVER, CLAUSE (I) PROVIDES THAT IF THE NEW ASS ET FOR THE PURCHASE OF WHICH THE ASSESSEE SOUGHT RELIEF OF CAPITAL GAINS U NDER SECTION 54 IS SOLD WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR C ONSTRUCTION, THE COST OF THE NEW ASSET WILL BE REQUIRED TO BE REDUCED TO THE EXT ENT OF RELIEF AVAILED OF ON ACCOUNT OF CAPITAL GAINS EARNED BUT ADJUSTED. IT IS FOR THIS REASON THAT IT HAS BECOME IMPORTANT TO CONSIDER WHETHER THE NEW ASSET, I.E., THE FLAT IN KALPANA PURCHASED BY THE PETITIONER ON JULY 26, 1980, WHICH WAS ADMITTEDLY LET OUT BY THE PETITIONER TO HIS EMPLOYER, BANK OF BARODA, ON AND FROM MAY 27, ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 11 1982, ON HIS TRANSFER TO BARODA CAN BE SAID TO BE A FACTOR THAT WOULD BRING THE PETITIONER WITHIN THE MISCHIEF OF CLAUSE (I). I N THE CONTEXT, IT IS DESIRABLE TO REFER TO THE GUJARAT HIGH COURT DECISION IN THE CASE, CIT V. TIKYOMAL JASANMAL [1971]82 ITR 95. THE FACTS IN THAT CASE WERE THAT OUT OF THE TOTAL CONSTRUCTED PORTION OF THE HOUSE ADMEASURING 1,389 SQ. FT., THE ASSESSEE HAD LET OUT AN AREA OF 734 SQ. FT., I.E., MORE THAN HAL F, IMMEDIATELY ON COMPLETION OF THE CONSTRUCTION. IT WAS HELD THAT THE NEW HOUSE WAS NOT CONSTRUCTED BY THE ASSESSEE FOR THE PURPOSE OF HIS OWN RESIDENCE. THE COURT, HOWEVER, OBSERVED THAT IT WAS NOT THE CASE OF THE ASSESSEE T HAT THE HOUSE WAS ORIGINALLY CONSTRUCTED BY HIM FOR THE PURPOSE OF HI S OWN RESIDENCE BUT BY REASON OF SUBSEQUENT EVENTS OR SUPERVENING CIRCUMST ANCES, IT BECAME IMPOSSIBLE OR IMPRACTICABLE FOR HIM TO OCCUPY A PAR T OF THE HOUSE FOR THE PURPOSE OF HIS OWN RESIDENCE AND WAS LET OUT TO TEN ANTS FOR THAT REASON. SUCH INDEED COULD NOT BE THE CASE OF THE ASSESSEE SINCE NO PERIOD OF TIME ELAPSED BETWEEN THE COMPLETION OF CONSTRUCTION OF THE GROUN D FLOOR AND THE LETTING OUT OF A MAJOR PORTION OF IT TO TENANT. IN THE SECO ND DECISION IN THE CASE OF CIT V. NATU HANSRAJ [1976]105 ITR 43, THE GUJARAT HIGH COURT HELD THAT NO SINGLE FACTOR INCLUDING WHETHER OR NOT THE PROPE RTY NEWLY ACQUIRED BY THE ASSESSEE WAS WHOLLY OR SUBSTANTIALLY ACQUIRED BY HI M FOR THE PURPOSE OF HIS OWN RESIDENCE AFTER PURCHASE OR CONSTRUCTION, AS TH E CASE MAY BE, WOULD BE DETERMINATIVE OF THE MATTER. EVEN IF THE NEW PROPER TY WAS NOT SUBSTANTIALLY PUT TO USE FOR HIS OWN RESIDENTIAL PURPOSES BY THE ASSESSEE WITHIN A REASONABLE TIME AND IF THE FAILURE TO DO SO WAS WIT HOUT ANY FAULT ON HIS PART, THAT IS, BY REASON OF SOME UNFORESEEN SUBSEQUENT EV ENTS OR SUPERVENING CIRCUMSTANCES, IT MIGHT STILL BE POSSIBLE TO HOLD I N A GIVEN CASE, PROVIDED OTHER CIRCUMSTANCES POINT IN THAT DIRECTION, THAT T HE REAL RELIEF, INTENTION OR MOTIVE ENTERTAINED BY THE ASSESSEE AT OR ABOUT THE TIME OF PURCHASE OR CONSTRUCTION AS REGARDS THE USE OF THE NEWLY ACQUIR ED HOUSE PROPERTY WAS TO OCCUPY IT HIMSELF. 9. FROM THE ABOVE TWO DECISIONS OF THE GUJARAT HIGH COURT, IT CAN FAIRLY BE INFERRED THAT THE PETITIONER IN THE PRESENT CASE HA D PURCHASED THE NEW FLAT IN KALPANA ON JULY 26, 1990, FOR HIS OWN RESIDENCE. HE RESIDED IN THAT FLAT UNTIL HIS TRANSFER TO BARODA. HIS TRANSFER TO BARODA IS A N UNFORESEEN AND SUBSEQUENT EVENT AND, THEREFORE, THERE IS NO WARRAN T FOR CONSTRUING THE RELEVANT EXPRESSION IN THE MANNER SUGGESTED BY THE REVENUE TO HOLD THAT THE FLAT WAS NOT PURCHASED BY THE PETITIONER FOR THE PU RPOSE OF HIS RESIDENCE JUST BECAUSE IT HAD TO BE LET OUT TO THE BANK OF BARODA IN THE CIRCUMSTANCES MENTIONED ABOVE. 10. DR. BALASUBRAMANIAN HAD STATED THAT THE SCHEME OF SECTION 54 WAS THAT THE RELIEF IN RESPECT OF CAPITAL GAINS ARISING ON T HE TRANSFER OF A CAPITAL ASSET WAS AVAILABLE AGAINST THE PURCHASE OF THE FIRST HOU SE PROPERTY FOR THE ASSESSEE'S RESIDENCE FOLLOWING SALE. THE ASSESSEE H AD NO CHOICE IN THIS REGARD AS HELD BY THE COMMISSIONER OF INCOME-TAX (A PPEALS). HE ALSO ARGUED THAT THE FACT THAT THE PETITIONER HAD TO VAC ATE AND LET OUT THE FLAT ON HIS TRANSFER TO BARODA WAS NOT GERMANE TO THE ISSUE . THE FACT IS THAT THE FLAT WAS NOT OCCUPIED BY THE PETITIONER FOR A PERIOD OF THREE YEARS. 11. IN MY VIEW, THE MANNER IN WHICH THE PROVISION I N THIS REGARD HAS BEEN CONSTRUED BY THE GUJARAT HIGH COURT IN ITS AFORESAI D TWO DECISIONS IS ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 12 REASONABLE AND REQUIRES TO BE ACCEPTED. THE EXPRESS ION 'FOR THE PURPOSE OF HIS OWN RESIDENCE', IN MY JUDGMENT, MEANS AND REFER S TO A SITUATION WHERE A NEW CAPITAL ASSET. I.E., THE HOUSE PROPERTY, IS PUR CHASED BY THE ASSESSEE WITH THE INTENTION TO USE THE SAME AS HIS OWN RESIDENCE. IF, FOR SOME REASON OVER WHICH HE HAS NO CONTROL OR SOMETHING UNFORESEEN HAP PENS AS A RESULT OF WHICH HE HAS TO RESIDE AT A PLACE OTHER THAN THE PL ACE WHERE SUCH A NEW CAPITAL ASSET IS SITUATE, IT COULD NOT BE HELD THAT THE NEW CAPITAL ASSET WAS NOT PURCHASED FOR THE PURPOSES OF HIS OWN RESIDENCE. IN THE ABOVE VIEW OF THE MATTER, BOTH THE CONDITIONS ARE SATISFIED IN THIS C ASE. ACCORDINGLY, THE PETITION SUCCEEDS. RULE IS MADE ABSOLUTE IN TERMS O F PRAYER CLAUSES (B) AND (D). NO ORDER AS TO COSTS. 2.6. I FIND THAT HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PAWAN ARYA VS. CIT [2011] 11 TAXMAN.COM 312 (P&H) WHEREIN IT WAS HELD AS UNDER: 1. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961 (FOR SHORT, THE ACT) AGAINST THE ORDE R OF THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI DATED 17.12.2009 IN I.T.A. NO.2 416/DEL/2008 FOR THE ASSESSMENT YEAR 2005-06 PROPOSING TO RAISE FOLLOWING SUBSTANTI AL QUESTIONS OF LAW:- (I) WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE, THE ACTION OF THE AUTHORITIES BELOW IN REJECTING THE CLAIM OF THE ASSESSEE WHEN ALL THE CO NDITIONS UNDER SECTION 54 OF THE ACT HAVE BEEN FULFILLED IS LEGALLY SUSTAINABLE IN THE E YES OF LAW? (II) WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE , THE ACTION OF THE AUTHORITIES BELOW IN REJECTING THE CLAIM OF THE ASSESSEE WITHOUT THEI R BEING ANY MATERIAL EVIDENCE TO REBUT THE CLAIM OF THE ASSESSEE/APPELLANT IS LEGALLY SUST AINABLE IN THE EYES OF LAW? (III) WHETHER IN FACTS AND CIRCUMSTANCES OF THE CAS E, THE ACTION OF THE AUTHORITIES BELOW IN IGNORING THE RATIO OF THE DECISION IN THE CASE O F D. ANAND BASAPA V/S ITO (2004) 91 ITD 53 (BANG.) WHEREIN THE EXEMPTION U/S 54 OF THE ACT WAS GRANTED ON THE ACQUISITION OF TWO HOUSES OUT OF THE PROCEEDS OF ONE RESIDENTIA L HOUSE IS LEGALLY SUSTAINABLE IN THE EYES OF LAW? (IV) WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE , THE ACTION OF THE AUTHORITIES BELOW, IMPUGNED ORDERS ANNEXURE A-1 AND A-5 ARE LEGALLY SU STAINABLE IN THE EYES OF LAW? 2. THE ASSESSEE CLAIMED EXEMPTION ON CAPITAL GAINS ON SALE OF FLAT ON THE GROUND OF ACQUISITION OF TWO HOUSES. THE ASSESSING OFFICER SE T OFF THE CAPITAL GAIN AGAINST ONE OF THE HOUSES BUT HELD THE CLAIM NOT TO BE ADMISSIBLE AGAINST SECOND HOUSE. HOWEVER, THE CIT(A) UPHELD THE CLAIM OF THE ASSESSEE RELYING UPO N DECISION OF BANGALORE BENCH OF THE TRIBUNAL IN D. ANAND BASAPA VS. ITO (2004) 91 ITD 5 3. THE SAID VIEW HAS BEEN REVERSED BY THE TRIBUNAL AS FOLLOWS:- 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE FACTS IN THE PRESENT CASE ARE CLEAR. THE ASSESSEE IS CLAIMING EXEMPTION IN RESPECT OF TWO INDEPENDENT RESIDENTIAL HOUSES SITUATED AT DIFFERENT LOCATIONS; ONE IS IN DILSHAD COLONY, DELHI AND THE OTHER IS IN FARIDABAD. THE ASSESSEE IN THE SPECIAL BENCH CASE HAD ALSO PURCHASED TWO RESID ENTIAL HOUSES AGAINST SALE CONSIDERATION OF RESIDENTIAL FLAT AT GULISTAN SITUATED AT BHULABAI DESAI ROAD, MUMBAI. ONE RESIDENTIAL PROPERTY WAS AT VARUN APART MENTS AT VARSOVA AND THE OTHER PROPERTY WAS AT ERLYN APARTMENTS, BANDRA AND IT WAS HELD BY THE SPECIAL BENCH IN THE AFOREMENTIONED CASE I.E. ITO VS. MS. SUSHILA M. JHA VERI (SUPRA) THAT THE ASSESSEE IS ENTITLED TO GET EXEMPTION ONLY IN RESPECT OF ONE HO USE OF HER CHOICE. THEREFORE, THE DECISION OF SPECIAL BENCH IS FULLY APPLICABLE TO TH E PRESENT CASE AND THE ASSESSEE CAN AVAIL EXEMPTION U/S 54 IN RESPECT OF ONE RESIDENTIA L HOUSE ONLY. THE FACTUAL ASPECT HAS NOT BEEN DISPUTED BY LD. AR. THE ONLY DISPUTE BEFOR E US IS LEGAL PROPOSITION THAT ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 13 WHETHER THE ASSESSEE IS ENTITLED TO GET EXEMPTION I N RESPECT OF TWO INDEPENDENT RESIDENTIAL HOUSES PURCHASED OUT OF SALE CONSIDERAT ION OF ANOTHER RESIDENTIAL HOUSE. THEREFORE, THE ISSUE IS DECIDED IN FAVOUR OF THE DE PARTMENT AND IT IS HELD THAT THE ASSESSEE IS ENTITLED TO GET EXEMPTION U/S 54 IN RES PECT OF ONE PROPERTY ONLY AND NO QUESTION HAS BEEN RAISED BY LD. AR REGARDING THE CH OICE OF THE PROPERTY OR THE FACTUAL ASPECT OF THE MATTER. 7. SO IT RELATES TO THE DECISION RELIED UPON BY LD. AR OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. D. ANAND BASAPA, IT MAY BE MENT IONED THAT THE SAID CASE CANNOT BE APPLIED TO THE CASE OF THE ASSESSEE ON THE GROUND T HAT IN THAT CASE THE TWO HOUSES PURCHASED BY THE ASSESSEE WERE NOT INDEPENDENT PROP ERTIES AND A FACTUAL FINDING HAS BEEN RECORDED THAT THE TWO APARTMENTS WHICH WERE CL AIMED TO BE EXEMPTED AGAINST SALE CONSIDERATION WERE SITUATED SIDE BY SIDE AND I T WAS ALSO STATED BY THE BUILDER IN THAT CASE THAT HE HAS EFFECTED MODIFICATION OF THE FLATS TO MAKE IT AS ONE UNIT BY OPENING THE DOOR IN BETWEEN TWO APARTMENTS. ON THESE FACTS, THE HON'BLE HIGH COURT HAS OBSERVED THAT THE FACT THAT AT THE TIME WHEN INSPEC TOR INSPECTED THE PREMISES, THE FLATS WERE OCCUPIED BY TWO DIFFERENT TENANTS IS NOT THE G ROUND TO HOLD THAT APARTMENT IS NOT ONE RESIDENTIAL UNIT. THE FACT THAT THE ASSESSEE CO ULD HAVE PURCHASED BOTH THE FLATS IN ONE SINGLE SALE DEED OR COULD BE NARRATED THE PURCH ASE OF TWO PREMISES AS ONE UNIT IN THE SALE DEED IS NOT THE GROUND TO HOLD THAT THE AS SESSEE HAD NO INTENTION TO PURCHASE TWO FLATS AS ONE UNIT. FROM THESE OBSERVATIONS OF H ON'BLE HIGH COURT, IT IS CLEAR THAT WHILE RENDERING THE DECISION THEY HAVE KEPT IN MIND THAT THE PURCHASE OF TWO FLATS IN THE SAME BUILDING WHICH WERE UNITED FOR LIVING OF THE A SSESSEE BY MAKING NECESSARY MODIFICATIONS MADE THE RESIDENTIAL UNIT AS ONE AND, THUS, THAT CASE COULD NOT BE APPLIED TO THE FACTS OF THE CASE OF THE ASSESSEE......... 3. WE HAVE HEARD LEARNED COUNSEL FOR THE APPELLANT. 4. AS REGARDS CLAIM FOR EXEMPTION AGAINST ACQUISITI ON OF TWO HOUSES UNDER SECTION 54 OF THE ACT, THE SAME IS NOT ADMISSIBLE IN PLAIN LANGUA GE OF STATUTE. IN THE JUDGMENT OF KARNATAKA HIGH COURT IN CIT V. D. ANANDA BASAPPA [2 009] 309 ITR 329 (KAR), REFERRED TO IN THE IMPUGNED ORDER, EXEMPTION AGAINST PURCHAS E OF TWO FLATS WAS ALLOWED HAVING REGARD TO THE FINDING THAT BOTH THE FLATS COULD BE TREATED TO BE ONE HOUSE AS BOTH HAD BEEN COMBINED TO MAKE ONE RESIDENTIAL UNIT. THE SAI D JUDGMENT, THUS, PROCEEDS ON A DIFFERENT FACT SITUATION. 5. LEARNED COUNSEL FOR THE APPELLANT WANTED TO RAIS E CERTAIN OTHER POINTS WHICH HAVE NEITHER BEEN PLEADED IN THE MEMO OF APPEAL NOR RAIS ED BEFORE THE TRIBUNAL. THE SAME COULD NOT BE ALLOWED MERELY ON THE BASIS OF ORAL SU BMISSIONS. 6. NO SUBSTANTIAL QUESTION OF LAW ARISES. 7. THE APPEAL IS DISMISSED. 2.7. THE HON'BLE HIGH COURT WAS APPROACHED, AGAINST THE ORDER OF THE TRIBUNAL, WHEREIN THE DECI SION IN THE CASE OF D. ANAND BASAPA VS. ITO WAS ALSO CONSID ERED. THE CASE DECIDED BY HON'BLE HIGH COURT THROWS LIGHT ON THE ISSUE, WHEREIN THE ASSESSEE CLAIMED EXEMPTION I N RESPECT OF TWO INDEPENDENT RESIDENTIAL HOUSES SITUA TED AT DIFFERENT LOCATIONS. IN THE CASE OF CIT VS. D. ANAN D BASAPA ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 14 THERE WERE TWO HOUSES WERE PURCHASES BY THE ASSESSE E AND WAS NOT INDEPENDENT PROPERTIES AND THE BUILDERS MADE EFFECTED MODIFICATIONS IN THE FLAT AND MADE IT ONE UNIT BY OPENING THE DOOR IN BETWEEN TWO APARTMENTS IN THAT SITUATION A PARTICULAR DECISION WAS TAKEN. 2.8. I FURTHER NOTE THAT HON'BLE DELHI HIGH COURT IN CIT VS GITA DUGGAL (357 ITR 153)(DEL.) CONSIDERING THE DECISION IN CIT VS B. ANANDA BASAPPA (2009) 309 ITR 329 HELD AS UNDER:- THE REVENUE HAS FILED THE APPEAL UNDER SECTION 260 A OF THE INCOME TAX ACT, 1961 AGAINST THE ORDER DATED 07.06. 2001 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL IN ITA 3613/DE L./2010 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE WHICH IS THE RESPONDENT IN THE APPE AL IS AN INDIVIDUAL. IN THE COMPUTATION OF INCOME FILED ALON G WITH THE RETURN OF INCOME, SHE DECLARED LONG TERM CAPITAL GAINS OF RS. 2,68,25,750/- IN THE FOLLOWING MANNER :- 'INCOME FROM CAPITAL GAIN LONG TERM A 22 WESTEND COLONY CONSIDERATION AS PER COLLABORATION AGREEMENT 40,000,000.00 LESS INDEX COST FOR PUR. OF RS. 1575000 (FAIR VALUE AS ON 1-04-81) 8,174,250.00 31,825,750.00 LESS : EXEMPTION UNDER SECTION 54EC (REC BONDS) 5,000,000.00 26,825,750.00' WHILE COMPLETING THE ASSESSMENT THE ASSESSING OFFIC ER TOOK THE VIEW THAT ON THE TERMS OF THE AGREEMENT ENTERED INTO WITH M/S THAPAR HOMES LTD. ON 08.05.2006, THE COST OF CONSTRUCTION OF THE BUILDING INCURRED BY THE AFORESAID COMPANY WHICH WAS THE DEV ELOPER OF THE PROPERTY WOULD ALSO BE INCLUDED IN THE TOTAL SALE C ONSIDERATION. ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 15 THE ASSESSEE RESPONDED BY SUBMITTING THAT THE ENTIR E COST OF CONSTRUCTION WAS INCURRED BY THE BUILDER AND EVEN I F IT IS CONSIDERED AS PART OF THE SALE CONSIDERATION, SINCE IT HAS BEEN FULLY INVESTED IN THE RESIDENTIAL HOUSE ITSELF, THE SAME WOULD BE EXEMPT UNDER SECTION 54 OF THE ACT. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEE'S SUBMISSION. HE THEREFORE, ADDED AN A MOUNT OF RS. 3,43,72,529/- WHICH WAS THE COST OF CONSTRUCTION IN CURRED BY THE DEVELOPER TO THE SALE CONSIDERATION OF RS. FOUR CRO RES RECEIVED BY THE ASSESSEE AND COMPUTED THE TOTAL SALE CONSIDERAT ION AT RS. 7,43,72,529/-. 3. DEALING WITH THE ASSESSEE'S CONTENTION THAT IN A NY CASE THE SALE CONSIDERATION SHOULD BE TAKEN AS HAVING BEEN I NVESTED IN THE NEW RESIDENTIAL HOUSE AND THUS EXEMPT UNDER SECTION 54, WHICH WAS SUPPORTED BY A JUDGMENT OF THE KARNATAKA HIGH C OURT IN CIT V. D. ANANDA BASAPPA [2009] 309 ITR 329/180 TAXMAN 4, THE ASSESSING OFFICER HELD THAT THE TWO FLOORS WHIC H WERE GIVEN TO THE ASSESSEE BY THE DEVELOPER AND ON WHICH THE DEVE LOPER HAD INCURRED CONSTRUCTION COST WERE INDEPENDENT OF EACH OTHER AND SELF-CONTAINED AND THEREFORE THEY CANNOT BE CONSIDE RED AS ONE UNIT OF RESIDENCE. ACCORDINGLY, HE HELD THAT THE AS SESSEE WAS NOT ELIGIBLE FOR THE EXEMPTION UNDER SECTION 54. DEALIN G WITH THE CLAIM FOR RELIEF UNDER SECTION 54F, THE ASSESSING OFFICER HELD THAT THE EXEMPTION WOULD BE AVAILABLE ONLY IN RESPECT OF ONE UNIT, SINCE THE TWO RESIDENTIAL UNITS WERE INDEPENDENT OF EACH OTHE R AND THE ASSESSEE CANNOT THEREFORE CLAIM EXEMPTION ON THE FO OTING THAT BOTH CONSTITUTED A SINGLE RESIDENCE. IN THIS VIEW O F THE MATTER HE RECOMPUTED THE CAPITAL GAINS BY MAKING AN ADDITION OF RS. 98,20,722/-. 4. ON APPEAL, THE CIT(APPEALS) AGREED WITH THE ASSE SSEE'S CONTENTION AND FOLLOWING THE JUDGMENT OF THE KARNAT AKA HIGH COURT CITED ABOVE, HELD THAT THE ASSESSEE WAS ELIGIBLE FO R THE DEDUCTION UNDER SECTION 54 IN RESPECT OF THE BASEMENT, GROUND FLOOR, FIRST FLOOR AND THE SECOND FLOOR. HE ACCORDINGLY, ALLOWED THE APPEAL. 5. THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL AND RAISED THE FOLLOWING GROUND :- 'ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN L AW AND ON THE FACTS IN DELETING THE ADDITION OF RS. 98,20,722 /- U/S. 54F OF THE IT ACT, 1961 WHICH THE ASSESSING OFFICER HAD ALLOWE D IN RESPECT OF ONLY ONE UNIT BY TREATING THE UNITS AS TWO SEPARATE RESIDENTIAL PROPERTIES. ' THE TRIBUNAL CONFIRMED THE DECISION OF THE CIT (APP EALS) BY OBSERVING AS UNDER: - '6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT LD . COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY C OVERED IN ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 16 FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'B LE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR.V. SMT. K.G. RU KMINIAMMA IN ITA NO.783 OF 2008 VIDE ORDER DATED 27.8.2010 WHERE IN IT WAS HELD AS UNDER :- 'THE CONTEXT IN WHICH THE EXPRESSION 'A RESIDENTIAL HOUSE' IS USED IN SECTION 54 MAKES IT CLEAR THAT, IT WAS NOT THE INTENTION OF THE LEGISLATION TO CONVEY THE MEANING THAT: IT REFE RS TO A SINGLE RESIDENTIAL HOUSE, IF, THAT WAS THE 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 RE FERRED TO AS 'A RESIDENTIAL HOUSE', THE ORIGINAL ASSET. AN ASSET NE WLY ACQUIRED AFTER THE SALE OF THE ORIGINAL ASSET ALSO CAN BE BU ILDINGS OR LANDS APPURTENANT THERETO, WHICH ALSO SHOULD BE 'A RESIDE NTIAL HOUSE.' THEREFORE THE LETTER 'A' IN THE CONTEXT IT IS USED SHOULD NOT BE CONSTRUED AS MEANING 'SINGULAR.' BUT, BEING AN INDE FINITE ARTICLE, THE SAID EXPRESSION SHOULD BE READ IN CONSONANCE WI TH THE OTHER 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 FOLLOWED. ' 7. UPON CAREFUL CONSIDERATION, WE FIND THAT THE CON TENTIONS OF THE ASSESSEE THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE ARE CORRECT. 7.1 LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTR OVERT THE ABOVE AND NO CONTRARY DECISION WAS CITED BEFORE US. 8. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY OR ILL EGALITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) AND HENCE, UPHOLD THE SAME.' 6. IN THE PRESENT APPEAL BEFORE US, THE REVENUE HAS PROPOSED THE FOLLOWING QUESTIONS AS SUBSTANTIAL QUESTIONS OF LAW WHICH IN ITS OPINION ARISE OUT OF THE ORDER OF THE TRIBUNAL. '(A) WHETHER TH E HON'BLE ITAT HAS ERRED IN DELETING THE ADDITION OF RS. 98,20,772/- UNDER SECTION 54F OF THE INCOME TAX ACT, 1961 AS MADE BY THE ASSESSING OFFICER? (B) WHETHER THE HON'BLE ITAT HAS ERRED IN LAW AND FACTS IN HOLDING THAT THE ASSESSEE SHOULD BE GIVEN DED UCTION UNDER SECTION 54 OF THE INCOME TAX ACT, 1961?' 7. WE HAVE CONSIDERED THE FACTS AND TAKEN NOTE OF THE RIVAL SUBMISSIONS. TO COMPLETE THE NARRATION OF FACTS, IT NEEDS TO BE NOTICED THAT THE ASSESSEE WAS THE OWNER OF PROPERTY AT A/22, WESTEND COLONY, NEW DELHI COMPRISING OF THE BASEMEN T, GROUND FLOOR, FIRST FLOOR AND SECOND FLOOR. SHE WAS DERIVI NG RENTAL INCOME ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 17 FROM THE PROPERTY. ON 08.05.2006 SHE ENTERED INTO A COLLABORATION AGREEMENT WITH M/S THAPAR HOMES LTD. FOR DEVELOPING THE PROPERTY. ACCORDING TO ITS TERMS, THE ASSESSEE BEIN G DESIROUS OF GETTING THE PROPERTY REDEVELOPED/RECONSTRUCTED AND NOT BEING POSSESSED OF SUFFICIENT FINANCE AND LACKING IN EXPE RIENCE IN CONSTRUCTION, APPROACHED THE BUILDER TO DEVELOP THE PROPERTY FOR AND ON BEHALF OF THE OWNER AT THE COST OF THE BUILD ER. THE BUILDER WAS TO DEMOLISH THE EXISTING STRUCTURE ON THE PLOT OF LAND AND DEVELOP, CONSTRUCT, AND/OR PUT UP A BUILDING CONSIS TING OF BASEMENT, GROUND FLOOR, FIRST FLOOR, SECOND FLOOR A ND THIRD FLOOR WITH TERRACE AT ITS OWN COSTS AND EXPENSES. IN ADDITION TO THE COST OF CONSTRUCTION INCURRED BY THE BUILDER ON DEVELOPMENT OF THE PROPERTY, A FURTHER PAYMENT OF RS. FOUR CRORES WAS PAYABLE TO THE ASSESSEE AS CONSIDERATION AGAINST THE RIGHTS OF THE ASSESSEE. THE BUILDER WAS TO GET THE THIRD FLOOR. THE ASSESSEE AC CORDINGLY HANDED OVER VACANT PHYSICAL POSSESSION OF THE ENTIR E PROPERTY ALONG WITH 22.5% UNDIVIDED INTEREST OVER THE LAND. THE HANDING OVER OF POSSESSION OF THE ENTIRE PROPERTY WAS HOWEV ER ONLY FOR THE LIMITED PURPOSE OF DEVELOPMENT; THE UNDIVIDED INTER EST IN THE LAND STOOD TRANSFERRED TO THE DEVELOPER/BUILDER ONLY TO THE EXTENT OF 22.5% FOR HIS EXCLUSIVE ENJOYMENT. IT WAS ON THESE FACTS THAT THE ASSESSING OFFICER FIRST TOOK THE VIEW THAT THE SALE CONSIDERATION FOR THE TRANSFER OF THE CAPITAL ASSET SHOULD BE TAKEN N OT MERELY AT RS. FOUR CRORES WHICH WAS THE CASH AMOUNT RECEIVED BY T HE ASSESSEE, BUT THE COST OF CONSTRUCTION INCURRED BY THE DEVELO PER ON THE DEVELOPMENT OF THE PROPERTY AMOUNTING TO RS. 3,43,7 2,529/- SHOULD ALSO BE ADDED TO THE SALE CONSIDERATION. THE ASSESSEE THEREUPON CLAIMED THAT IF THE COST OF CONSTRUCTION INCURRED BY THE BUILDER IS TO BE ADDED TO THE SALE PRICE, THEN THE SAME SHOULD ALSO BE CORRESPONDINGLY TAKEN TO HAVE BEEN INVESTED IN T HE RESIDENTIAL HOUSE NAMELY THE TWO FLOORS WHICH THE ASSESSEE WAS TO GET IN ADDITION TO THE CASH AMOUNT UNDER THE AGREEMENT WIT H THE BUILDER, AND THE AMOUNT SO SPENT ON THE CONSTRUCTION SHOULD BE ALLOWED AS DEDUCTION UNDER SECTION 54 OF THE ACT. IT WAS AT TH IS STAGE THAT THE ASSESSING OFFICER REJECTED THE CLAIM FOR DEDUCTION UNDER SECTION 54 ON THE FOOTING THAT THE TWO FLOORS OBTAINED BY THE ASSESSEE CONTAINED TWO SEPARATE RESIDENTIAL UNITS HAVING SEP ARATE ENTRANCES AND CANNOT QUALIFY AS A SINGLE RESIDENTIA L UNIT. HE AGREED THAT THE ASSESSEE WAS ELIGIBLE FOR THE RELIE F UNDER SECTION 54F IN RESPECT OF THE COST OF CONSTRUCTION INCURRED ON ONE UNIT. HE NOTED THAT THE ASSESSEE HAS RETAINED THE GROUND FLO OR AND THE BASEMENT. HE THEREFORE, APPORTIONED THE CONSTRUCTIO N COST OF RS. 3,43,72,529/- TO HAVE BEEN INCURRED ON THE BASEMENT , GROUND FLOOR, FIRST FLOOR AND SECOND FLOOR IN THE RATIO OF 1:1:1:0.5 FOR SECOND FLOOR, FIRST FLOOR, GROUND FLOOR, BASEMENT RESPECTI VELY. SINCE HE WAS ALLOWING THE RELIEF UNDER SECTION 54F OF THE ACT ON LY IN RESPECT OF ONE UNIT, HE ADDED RS. 98,20,722/- WHICH IS THE FIG URE ARRIVED AT BY DIVIDING THE TOTAL COST OF CONSTRUCTION OF RS. 3,43 ,72,529/- BY 3.5. THIS IS HOW THE ASSESSMENT WAS MADE. WHAT IN EFFECT THE ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 18 ASSESSING OFFICER HAD DONE WAS TO REJECT THE ASSESS EE'S CLAIM FOR DEDUCTION UNDER SECTION 54/54F OF THE ACT IN RESPEC T OF THE HOUSE/UNITS IN THE FIRST AND SECOND FLOORS HOLDING THAT THEY WERE SEPARATE AND INDEPENDENT RESIDENTIAL UNITS HAVING S EPARATE ENTRANCES AND CANNOT BE CONSIDERED AS ONE UNIT TO E NABLE THE ASSESSEE TO CLAIM THE DEDUCTION. THIS WAS DISAPPROV ED BY THE CIT(APPEALS) ON THE BASIS OF THE JUDGMENT OF THE KA RNATAKA HIGH COURT ( SUPRA ) AND HIS DECISION WAS APPROVED BY THE TRIBUNAL. TH E TRIBUNAL EXPRESSED THE VIEW THAT THE WORDS 'A RESID ENTIAL HOUSE' APPEARING IN SECTION 54/54F OF THE ACT CANNOT BE CO NSTRUED TO MEAN A SINGLE RESIDENTIAL HOUSE SINCE UNDER SECTION 13(2) OF THE GENERAL CLAUSES ACT, A SINGULAR INCLUDES PLURAL. 8. IT IS THE CORRECTNESS OF THE ABOVE VIEW THAT IS QU ESTIONED BY THE REVENUE AND IT IS CONTENDED THAT THE INTERPRETA TION PLACED BY THE TRIBUNAL GIVES RISE TO A SUBSTANTIAL QUESTION O F LAW. THE ASSESSEE STRONGLY RELIES UPON THE JUDGMENT OF THE K ARNATAKA HIGH COURT ( SUPRA ) WHICH, IT IS STATED, HAS BECOME FINAL, THE SPECIA L LEAVE PETITION FILED BY THE REVENUE AGAINST THE SAI D DECISION HAVING BEEN DISMISSED BY THE SUPREME COURT AS REPORTED IN THE ANNUAL DIGEST OF TAXMAN PUBLICATION. THE JUDGMENT OF THE K ARNATAKA HIGH COURT SUPPORTS THE CONTENTION OF THE ASSESSEE. AN I DENTICAL CONTENTION RAISED BY THE REVENUE BEFORE THAT COURT WAS REJECTED IN THE FOLLOWING TERMS : 'A PLAIN READING OF THE PROVISION OF SECTION 54(1) OF THE INCOME- TAX ACT DISCLOSES THAT WHEN AN INDIVIDUAL-ASSESSEE OR HINDU UNDIVIDED FAMILY- ASSESSEE SELLS A RESIDENTIAL BUIL DING OR LANDS APPURTENANT THERETO, HE CAN INVEST CAPITAL GAINS FO R PURCHASE OF RESIDENTIAL BUILDING TO SEEK EXEMPTION OF THE CAPIT AL GAINS TAX. SECTION 13 OF THE GENERAL CLAUSES ACT DECLARES THAT WHENEVER THE SINGULAR IS USED FOR A WORD, IT IS PERMISSIBLE TO I NCLUDE THE PLURAL. THE CONTENTION OF THE REVENUE IS THAT THE PHRASE 'A ' RESIDENTIAL HOUSE WOULD MEAN ONE RESIDENTIAL HOUSE AND IT DOES NOT APPEAR TO THE CORRECT UNDERSTANDING THE EXPRESSION 'A' RESIDE NTIAL HOUSE SHOULD BE UNDERSTOOD IN A SENSE THAT BUILDING SHOUL D BE OF RESIDENTIAL IN NATURE AND 'A' SHOULD NOT BE UNDERST OOD TO INDICATE A SINGULAR NUMBER. THE COMBINED READING OF SECTIONS 5 4(1) AND 54F OF THE INCOME-TAX ACT DISCLOSES THAT, A NON RESIDEN TIAL BUILDING CAN BE SOLD, THE CAPITAL GAIN OF WHICH CAN BE INVESTED IN A RESIDENTIAL BUILDING TO SEEK EXEMPTION OF CAPITAL GAIN TAX. HOW EVER, THE PROVISO TO SECTION 54 OF THE INCOME-TAX ACT, LAYS D OWN THAT IF THE ASSESSEE HAS ALREADY ONE RESIDENTIAL BUILDING, HE I S NOT ENTITLED TO EXEMPTION OF CAPITAL GAINS TAX, WHEN HE INVESTS THE CAPITAL GAIN IN PURCHASE OF ADDITIONAL RESIDENTIAL BUILDING.' THIS JUDGMENT WAS FOLLOWED BY THE SAME HIGH COURT I N THE DECISION IN CIT V . SMT K.G. RUKMINIAMMA [2011] 196 TAXMAN 87/[2010] 8 TAXMANN.COM 121 (KAR.) . ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 19 9. THERE COULD ALSO BE ANOTHER ANGLE. SECTION 54/54F USES THE EXPRESSION 'A RESIDENTIAL HOUSE'. THE EXPRESSION US ED IS NOT 'A RESIDENTIAL UNIT'. THIS IS A NEW CONCEPT INTRODUCED BY THE ASSESSING OFFICER INTO THE SECTION. SECTION 54/54F REQUIRES THE ASSESSEE TO ACQUIRE A 'RESIDENTIAL HOUSE' AND SO LO NG AS THE ASSESSEE ACQUIRES A BUILDING, WHICH MAY BE CONSTRUC TED, FOR THE SAKE OF CONVENIENCE, IN SUCH A MANNER AS TO CONSIST OF SEVERAL UNITS WHICH CAN, IF THE NEED ARISES, BE CONVENIENTL Y AND INDEPENDENTLY USED AS AN INDEPENDENT RESIDENCE, THE REQUIREMENT OF THE SECTION SHOULD BE TAKEN TO HAVE BEEN SATISFI ED. THERE IS NOTHING IN THESE SECTIONS WHICH REQUIRE THE RESIDEN TIAL HOUSE TO BE CONSTRUCTED IN A PARTICULAR MANNER. THE ONLY REQUIR EMENT IS THAT IT SHOULD BE FOR THE RESIDENTIAL USE AND NOT FOR COMME RCIAL USE. IF THERE IS NOTHING IN THE SECTION WHICH REQUIRES THAT THE RESIDENTIAL HOUSE SHOULD BE BUILT IN A PARTICULAR MANNER, IT SE EMS TO US THAT THE INCOME TAX 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 IN STANCE, A PERSON MAY CONSTRUCT A RESIDENTIAL HOUSE IN SUCH A MANNER THAT HE MAY USE THE GROUND FLOOR FOR HIS OWN RESIDENCE AND LET OUT THE FIRST FLOOR HAVING AN INDEPENDENT ENTRY SO THAT HIS INCOM E IS AUGMENTED. IT IS QUITE COMMON TO FIND SUCH ARRANGEM ENTS, PARTICULARLY POST-RETIREMENT. 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 CONSIST ING OF TWO OR THREE BEDROOMS MAY BE CARVED OUT WITH AN INDEPENDEN T ENTRANCE 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 A RRANGEMENT WHICH CAN BE MUTUALLY SUPPORTIVE. HE MAY CONSTRUCT HIS RESIDENCE IN SUCH A MANNER THAT IN CASE OF A FUTURE NEED HE M AY BE ABLE TO DISPOSE OF A PART THEREOF AS AN INDEPENDENT HOUSE. THERE MAY BE SEVERAL SUCH CONSIDERATIONS FOR A PERSON WHILE CONS TRUCTING A RESIDENTIAL HOUSE. WE ARE THEREFORE, UNABLE TO SEE HOW OR WHY THE PHYSICAL STRUCTURING OF THE NEW RESIDENTIAL HOUSE, WHETHER IT IS LATERAL OR VERTICAL, SHOULD COME IN THE WAY OF CONS IDERING THE BUILDING AS A RESIDENTIAL HOUSE. WE DO NOT THINK TH AT THE FACT THAT THE RESIDENTIAL HOUSE CONSISTS OF SEVERAL INDEPENDE NT UNITS CAN BE PERMITTED TO ACT AS AN IMPEDIMENT TO THE ALLOWANCE OF THE DEDUCTION UNDER SECTION 54/54F. IT IS NEITHER EXPRE SSLY NOR BY NECESSARY IMPLICATION PROHIBITED. FOR THE ABOVE REASONS WE ARE OF THE VIEW THAT THE T RIBUNAL TOOK THE CORRECT VIEW. NO SUBSTANTIAL QUESTION OF LAW AR ISES FOR OUR CONSIDERATION. THE APPEAL IS ACCORDINGLY DISMISSED WITH NO ORDER AS TO COSTS. ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 20 2.9. THE HON'BLE DELHI HIGH COURT IN CIT VS RAM GOPAL (372 ITR 498)(DEL.) HELD THAT:- THIS COURT, IN THE DECISION AS GULSHAN MALIK V. CIT [2014] 223 TAXMAN 243/43 TAXMANN.COM 200 (DELHI) HAD THE OCCASION TO, CONSIDER WHAT AMOUNTED TO ACQUISITION OF A CAPITAL ASSET - THOUGH IN THE CONTEXT OF A CLAIM THAT CAPITAL GAINS HAD ACCRUED DUE TO THE SALE OF THE PROPERTY. THE CO URT WAS OF THE OPINION THAT 'CAPITAL ASSET' HAS BEEN DEFINED IN EXTREMELY WIDE TERMS. A REFERENCE TO SECTION 2(47), WHICH DEFINES 'TRANSFER', AND PARTICULARLY I TS SECOND EXPLANATION TO CLAUSES ( V ) AND ( VI ) MADE IT CLEAR THAT POSSESSION, ENJOYMENT OF PROPE RTY AS WELL ANY INTEREST IN ANY OF TRANSFERABLE CAPITAL ASSET WAS I NCLUDED WITHIN THE AMBIT OF 'CAPITAL ASSET'. THE COURT HELD IMPORTANTLY THAT EV EN BOOKING RIGHTS OR RIGHTS TO PURCHASE THE APARTMENT OR TO OBTAIN ITS LETTER WAS ALSO CAPITAL ASSET. [PARA 5] IN TH E PRESENT CASE THE QUESTION IS NOT WHETHER THE ASSE SSEE SOLD THE BOOKING RIGHTS AND WAS, THEREFORE, ENTITLED TO BENEFIT OF C APITAL GAINS. IT IS, RATHER, WHETHER HIS ENTERING INTO THE TRANSACTION AND ACQUIRING A P ROPERTY AMOUNTED TO HIS ACQUIRING A CAPITAL ASSET. IN THE LIGHT OF THE DEFINITIONS OF 'CAPITAL ASSET' UNDER SECTION 2(14) AND 'TRANSFER' UNDER SECTION 2(47) AS DISCUSSED IN GULSHAN MALIK ( SUPRA ), THIS COURT HAS NO DOUBT THAT THE ASSESSEE'S CONT ENTIONS WERE MERITED. [PARA 6] SO FAR AS THE SECOND ISSUE IS CONCERNED, I.E. , WHETHER IMPROVED COST WAS DEDUCTED, THIS COURT HAS NO MANNER OF DOUBT THAT TH E REVENUE DOES NOT DISPUTE THE ACQUISITION OF SECOND PROPERTY. GIVEN THAT THE REVENUE DOES NOT DISPUTE THAT THE SECOND TRANSACTI ON OF PURCHASE TOOK PLACE, IT HAS TO NECESSARILY FO LLOW THAT THE COST OF IMPROVEMENT WAS DEDUCTIBLE. WHILE COMING TO THE AFORESAID CONCLUSION, THE HON'B LE HIGH COURT CONSIDERED THE DECISION IN CIT V. R.L. SOOD [2000] 245 ITR 727/108 TAXMAN 227 (DELHI) (PAR A 3), SURAJ LAMP & INDUSTRIES (P.) LTD. V. STATE OF HARYANA [2012] 340 ITR 1/[2011] 202 TAXMAN 607/14 TAXMANN.COM 103 (SC)(PARA 3) AND GULSHAN MALIK V. CIT [2014] 223 TAXMAN 243/43 TAXMANN.COM 200 (DELHI). THE HON'BLE MADRAS HIGH COURT IN CIT V S ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 21 SUNDARMAL KOTHARI (302 ITR 286)(MAD.) OBSERVED/HELD AS UNDER:- THE RELEVANT ASSESSMENT YEAR IS 2001-02. THE ASSES SEES, SHRI SARDARMAL KOTHARI AND SHRI SHANTHILAL KOTHARI, FILED THEIR RESPECTIVE RETURNS OF INCOME ADMITTING A TOTA L INCOME OF RS. 3,02,593 APART FROM THE AGRICULTURAL INCOME OF RS. 25,000 EACH. THE ASSESSEES HAVE CLAIMED EXEMPTION O F CAPITAL GAIN TAX UNDER SECTION 54F OF THE INCOME-TA X ACT. THE ASSESSING OFFICER REJECTED THE SAME ON THE GROUND T HAT THE CONSTRUCTION WAS NOT COMPLETED WHEN HE MADE A PERSO NAL VISIT. AGAINST THAT ORDER, THE ASSESSEES PREFERRED APPEALS BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) WHO ALLOWED THE APPEALS BY HOLDING THAT THE ASSESSEES H AVE INVESTED THE CAPITAL GAINS IN THE LAND AND SUBSTANT IALLY COMPLETED THE CONSTRUCTION AND DIRECTED THE ASSESSI NG OFFICER TO GRANT THE BENEFIT TO THE ASSESSEES. AGAI NST THAT ORDER, THE DEPARTMENT PREFERRED APPEALS BEFORE THE INCOME- TAX APPELLATE TRIBUNAL AND THE TRIBUNAL HAS CONFIRM ED THE ORDER OF THE COMMISSIONER (APPEALS) AND DISMISSED T HE APPEALS. THE CORRECTNESS OF THE SAID ORDERS IS NOW CANVASSED IN THESE APPEALS BY FORMULATING THE FOLLOWING QUEST IONS OF LAW: '1 . WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE INCOME-TAX APPELLATE TRIBUNAL WAS RIGHT I N LAW IN HOLDING THAT THE ASSESSEES ARE ENTITLED FOR EXEMPTI ON UNDER SECTION 54F OF THE INCOME-TAX ACT IS VALID? 2.WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME-TAX APPELLATE TRIBUNAL WAS RIGHT IN LAW IN HOLDING, WHEN THE CONDITIONS LAID DOWN IN SUB-SECTI ON (1) OF SECTION 54F AND THE BOARD CIRCULAR NO. 667, DATED O CTOBER 18, 1993 ([1993] 204 ITR (ST.) 103), CLEARLY STATED THAT THE PURCHASE/CONSTRUCTION IS TO BE COMPLETED WITHIN STI PULATED TIME IS NOT MANDATORY FOR CLAIMING EXEMPTION UNDER THE ACT?' WE HAVE HEARD THE ARGUMENT OF LEARNED COUNSEL FOR T HE APPELLANT AND PERUSED THE MATERIALS AVAILABLE ON RE CORD. THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASSESSE ES HAVE INVESTED THE ENTIRE NET CONSIDERATION OF SALE OF CA PITAL ASSET IN THE LAND ITSELF AND SUBSEQUENTLY THE ASSESSEES H AVE INVESTED LARGE SUMS OF MONEY IN THE CONSTRUCTION OF THE HOUSE. THE COST OF INVESTMENT IN LAND AND THE COST OF EXPENDITURE TOWARDS THE CONSTRUCTION OF THE HOUSES IS NOT IN ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 22 DISPUTE. THE ONE AND ONLY GROUND ON WHICH THE ASSES SING OFFICER HAS NON-SUITED THE ASSESSEES FOR THE CLAIM OF EXEMPTION WAS THAT THE HOUSES HAVE NOT BEEN COMPLET ED. THERE REMAINS SOME MORE CONSTRUCTION TO BE MADE. THE REQUIREMENT OF THE PROVISION IS THAT THE ASSESS EE, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER, HAS TO CONSTRUCT A RESIDENTIAL HOUSE IN ORDER TO BECOME EL IGIBLE FOR EXEMPTION. IN THE CASES ON HAND, IT IS NOT IN DISPU TE THAT THE ASSESSEES HAVE PURCHASED THE LANDS BY INVESTING THE CAPITAL GAIN AND THEY HAVE ALSO CONSTRUCTED RESIDENTIAL HOU SES. IN ORDER TO ESTABLISH THE SAME, THE ASSESSEES SUBMITTE D BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) SEVERAL MA TERIAL EVIDENCE, VIZ ., INVITATION CARD PRINTED FOR THE HOUSE-WARMING CEREMONY TO BE HELD ON JULY 12, 2003. THE ASSESSEES HAVE ALSO PRODUCED THE COMPLETION CERTIFICATES FROM THE MUNICIPAL AUTHORITY ON JANUARY 30, 2004. ON THE BASIS OF THE ABOVE DOCUMENTS, THE COMMISSIONER OF INCOME-TAX (APPEALS) CONCLUDED THAT THE REQUIREMENT OF THE STATUTORY PRO VISION HAS BEEN COMPLIED WITH BY THE ASSESSEES AND THAT WA S RECONFIRMED BY THE TRIBUNAL IN THE ORDERS IMPUGNED. IN THE SECOND QUESTION OF LAW FORMULATED, A REFEREN CE IS MADE TO THE BOARD CIRCULAR NO. 667, DATED OCTOBER 18, 19 93 ([1993] 204 ITR (ST.) 103). ON A READING OF THE CIR CULAR, WE ARE OF THE VIEW THAT THE CIRCULAR WOULD NOT IN ANY WAY ADVANCE THE CASE OF THE REVENUE TO COME TO THE CONC LUSION THAT IN ORDER TO HAVE THE BENEFIT UNDER SECTION 54F OF THE INCOME-TAX ACT, THE CONSTRUCTION SHOULD HAVE BEEN COMPLETED. THE TRIBUNAL HAS ALSO TAKEN NOTE OF ITS OWN EARLIER ORDER IN THE CASE OF MRS. SEETHA SUBRAMANIAN V. ASST. CIT REPORTED IN [1996] 59 ITD 94 (MAD.) , WHEREIN THE TRIBUNAL HAS HELD THAT, IN ORDER TO GET THE BENEFIT UNDER SECTION 54F , THE ASSESSEE NEED NOT COMPLETE THE CONSTRUCTION OF THE HOUSE AND OCCUPY THE SAME. IT IS ENOUGH IF THE ASSESSEE E STABLISHED THAT THE ASSESSEE HAD INVESTED THE ENTIRE NET CONSI DERATION WITHIN THE STIPULATED PERIOD. THE SAID VIEW TAKEN C ONSISTENTLY BY THE TRIBUNAL HAS BEEN APPLIED IN THESE CASES ALS O. THE TRIBUNAL HAS DISTINGUISHED THE DELHI HIGH COURT JUD GMENT IN THE CASE OF D.P. MEHTA V. CIT REPORTED IN [2001] 251 ITR 529 , RELIED ON BY THE REVENUE IN THEIR FAVOUR TO NON-SUI T THE ASSESSEES FOR EXEMPTION. IN OUR VIEW, THE TRIBUNAL HAS DISTINGUISHED THE SAME RIGHTLY BECAUSE IN THE CITED CASE, THERE WAS A FACTUAL FINDING BY THE AUTHORITIES THAT THE ASSESSEE HIMSELF HAS ADMITTED THAT THE CONSTRUCTION PUT UP WAS ONLY A GARAGE AND SERVICE QUARTERS AND IT WAS N OT FIT ENOUGH FOR OCCUPATION OF THE ASSESSEE. THAT FACTUAL FINDING IS ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 23 TOTALLY ABSENT IN THESE CASES. THERE IS NO MATERIAL TO ENTERTAIN THESE APPEALS. THE APPEALS FAIL AND THE S AME ARE DISMISSED. CONSEQUENTLY, CONNECTED MISCELLANEOUS PE TITION IS ALSO DISMISSED. 2.10. IF THE OBSERVATIONS MADE IN THE AFORESAID OR DERS ARE ANALYZED WITH THE FACTS OF THE PRESENT APPEAL, I NOTE THAT THE ASSESSEE SOLD FLAT NO.404 IN SATELLITE TOW ERS CO- OP. SOCIETY AND RECEIVED LONG TERM CAPITAL GAIN OF RS.10,02,415/- AND CLAIMED DEDUCTIONS UNDER SECTION 54 OF THE ACT. THE ASSESSEE INVESTED THE GAIN IN NEW P ROPERTY AND PRODUCED THE SALE AND PURCHASE AGREEMENTS BEFOR E THE LD. ASSESSING OFFICER. THE LD. ASSESSING OFFIC ER OBSERVED THAT THE ASSESSEE IS A JOINT HOLDER OF RES IDENTIAL PROPERTY AT PUNE. THE RESIDENTIAL PROPERTY WAS SOLD ON 19/11/2011 FOR A SALE CONSIDERATION OF RS.57 LAKHS AND THUS RECEIVED HIS SHARE OF RS.28,50,000/- (50% SHAR ES) AND AFTER APPLYING THE INDEXATION ON THE PURCHASE O F COST OF THE PROPERTY CALCULATED THE LONG TERM CAPITAL GA IN AT RS.10,02,415/-. THE AGREEMENT FOR PURCHASE OF THE N EW PROPERTY WAS REGISTERED ON 06/03/2009 AND THUS THE LD. ASSESSING OFFICER DISALLOWED THE CLAIMED EXEMPTION. THE ASSESSEE PURCHASED FLAT NO.202 IN SPICE BUILDING ON 06/03/2009 AND PAID RS.6,01,697/- ON 04/07/2012 AND ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 24 RS.04,86,625/- ON 16/07/2012 AND GOT THE POSSESSION OF THE NEW ASSET ON 26/03/2013. THE RATIO LAID DOWN IN AMRITLAL B. SHAHU & ORS. VS INCOME TAX OFFICER (ITA NO.265/MUM/2015, ETC) ORDER DATED 31/08/2018, SUPPORTS THE CASE OF THE ASSESSEE. THE HON'BLE JURISDICTIONAL HIGH COURT IN MRS. HILA J. B. WADIA (1995) 216 ITR 376 HELD THAT BOOKING OF FLAT IN AN APARTME NT UNDER CONSTRUCTION MUST ALSO BE VIEWED AS CONSTRUCT ING RESIDENTIAL TENEMENTS AND THUS THE CASE OF THE ASSE SSEE SHOULD BE TREATED AS A CASE OF CONSTRUCTION AND N OT AS A CASE OF PURCHASES. AS PER SECTION 54, CONSTRUCTIO N OF NEW RESIDENTIAL PROPERTY SHOULD BE COMPLETED WITHIN THREE YEARS AFTER THE DATE OF SALE OF PROPERTY. THE CASE OF THE ASSESSEE IS FURTHER FORTIFIED BY THE DECISION IN MU STANSIR I TEHSILDAR VS INCOME TAX OFFICER (2018) 168 ITD 523(MUM.). THE RELEVANT PORTION FROM THIS DECISION IS REPRODUCED HEREUNDER:- 5. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. WE HAVE EARLIER NOTICED THAT THE ASSESSEE HAS BOOKED A FLAT, WHICH WAS UNDER CONSTRUCTION, AND MADE PAYMENTS OVER THE YEAR . THE FINAL PAYMENTS WERE MR. MUSTANSIR I. TEHSILDAR MADE SUBSE QUENT TO THE DATE OF SALE OF OLD FLAT. THE LD A.R SUBMITTED THAT THE FINAL PAYMENT WAS MADE ON 22-10- 2014 AND POSSESSION OF NEW FLAT WAS OBTAINED ON 11-12-2014. ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 25 6. THE LD A.R SUBMITTED THAT THE TAX AUTHORITIES HA VE TAKEN THE ACQUISITION OF FLAT AS A CASE OF 'PURCHASE'. HE SUB MITTED THAT THE BOOKING OF FLAT IN AN APARTMENT UNDER CONSTRUCTION IS A CASE OF 'CONSTRUCTION' AND NOT A CASE OF PURCHASE. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION RENDERED BY THE CO-ORDINAT E BENCH IN THE CASE OF ASST. CIT VS. SAGAR NITIN PARIKH (ITA NO.63 99/MUM/2011 DATED 03-06-2015). HE SUBMITTED THAT THE COORDINATE BENCH HAD PLACED RELIANCE ON THE DECISION RENDERED BY THE JUR ISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF MRS. HILLA J B WAD IA (216 ITR 376). 7. WE HEARD LD D.R ON THIS ISSUE. WE NOTICE THAT TH E HON'BLE BOMBAY HIGH COURT HAS HELD IN THE CASE OF MRS. HILL A J B WADIA (SUPRA) HAS HELD THAT BOOKING OF FLAT IN AN APARTME NT UNDER CONSTRUCTION MUST ALSO BE VIEWED AS A METHOD OF CON STRUCTING RESIDENTIAL TENEMENTS. ACCORDINGLY, THE COORDINATE BENCH HAS TAKEN THE VIEW IN THE CASE OF SAGAR NITIN PARIKH (SUPRA) THAT BOOKING OF FLAT IN AN APARTMENT UNDER CONSTRUCTION IS A CASE OF 'CO NSTRUCTION'. IN VIEW OF THE ABOVE SAID DECISION OF THE HON'BLE BOMB AY HIGH COURT AND TRIBUNAL, THE ACQUISITION OF NEW FLAT IN AN APA RTMENT UNDER CONSTRUCTION SHOULD BE CONSIDERED AS A CASE OF 'CON STRUCTION' AND NOT 'PURCHASE'. ACCORDINGLY WE SET ASIDE THE VIEW T AKEN BY THE TAX AUTHORITIES AND HOLD THAT THE ASSESSEE HAS CONSTRUC TED A FLAT AND THE PROVISIONS OF SEC. 54 SHOULD BE APPLIED ACCORDINGLY . 8. THE LD A.R SUBMITTED THAT THE COMMENCEMENT OF CO NSTRUCTION IS NOT RELEVANT FOR THE PURPOSE OF SEC. 54 OF THE ACT. HE SUBMITTED THAT THE PROVISIONS OF SEC.54 ONLY STIPULATE THAT THE CO NSTRUCTION SHOULD BE COMPLETED MR. MUSTANSIR I. TEHSILDAR WITHIN 3 YEARS FROM THE DATE OF TRANSFER. ACCORDINGLY HE SUBMITTED THAT THE CONSTRU CTION MAY HAVE COMMENCED PRIOR TO THE DATE OF OLD ASSET, BUT THE S AME SHOULD BE COMPLETED WITHIN THREE YEARS FROM THE DATE OF SALE. IN SUPPORT OF THIS PROPOSITION, THE LD A.R PLACED RELIANCE ON THE DECI SION RENDERED BY HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. J.R.SUBRAMANYA BHAT (1987)(165 ITR 571), WHICH WAS FOLLOWED IN THE CASE OF ASST. CIT VS. SUBHASH SEVARAM BHAVNANI (2012)(23 TAXMANN.COM 94)(AHD. TRIB.). THE LD A.R SUBMITTED T HAT THE ASSESSEE HAS COMPLETED THE CONSTRUCTION OF NEW FLAT WITHIN THREE YEARS FROM THE DATE OF TRANSFER OF OLD ASSET AND AC CORDINGLY HE SUBMITTED THAT THE ASSESSEE HAS COMPLIED WITH THE C ONDITIONS OF SEC.54. HE FURTHER SUBMITTED THAT THE PAYMENTS MADE TOWARDS ACQUISITION OF NEW FLAT BEFORE THE DUE DATE FOR FIL ING RETURN OF INCOME WAS MORE THAN THE AMOUNT OF CAPITAL GAINS. HE FURTH ER SUBMITTED THAT THERE IS NO REQUIREMENT THAT THE SALE PROCEEDS REAL ISED ON SALE OF OLD ASSET ALONE SHOULD BE USED FOR ACQUIRING NEW ASSET AND FOR THIS PROPOSITION, HE PLACED RELIANCE ON THE DECISION REN DERED BY HON'BLE KERALA HIGH COURT IN THE CASE OF ITO VS. K.C.GOPALA N (2000)(162 CTR 0566). ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 26 9. THE LD D.R, ON THE CONTRARY, STRONGLY PLACED REL IANCE ON THE ORDER PASSED BY LD CIT(A). 10. SECTION 54 OF THE ACT PROVIDES THE CONDITION TH AT THE CONSTRUCTION OF NEW RESIDENTIAL HOUSE SHOULD BE COMPLETED WITHIN 3 YEARS FROM THE DATE OF TRANSFER OF OLD RESIDENTIAL HOUSE. ACCO RDING TO LD A.R, SECTION 54 IS SILENT ABOUT COMMENCEMENT OF CONSTRUC TION AND HENCE COMMENCEMENT OF CONSTRUCTION CAN PRECEDE THE DATE O F SALE OF OLD ASSET. IN THE INSTANT CASE, THE ASSESSEE HAD BOOKED THE FLAT MUCH PRIOR TO THE DATE OF OLD FLAT. WE NOTICE THAT THE HON'BLE KARNATAKA HIGH COURT HAS HELD IN THE CASE OF CIT VS. J.R.SUBRAMANY A BHAT (SUPRA) THAT COMMENCEMENT OF CONSTRUCTION IS NOT RELEVANT F OR THE PURPOSE OF SEC. 54 AND IT IS ONLY THE COMPLETION OF MR. MUSTAN SIR I. TEHSILDAR CONSTRUCTION. THE ABOVE SAID RATIO WAS FOLLOWED IN THE CASE OF ASST. CIT VS. SUBHASH SEVARAM BHAVNANI (2012)(23 TAXMANN. COM 94)(AHD. TRIB.). BOTH THESE CASES SUPPORT THE CONTE NTIONS OF THE ASSESSEE. ACCORDINGLY, FOR THE PURPOSE OF SEC. 54 O F THE ACT, WE HAVE TO SEE WHETHER THE ASSESSEE HAS COMPLETED THE CONST RUCTION WITHIN THREE YEARS FROM THE DATE OF TRANSFER OF OLD ASSET. IN THE INSTANT CASE, THERE IS NO DISPUTE THAT THE ASSESSEE TOOK POSSESSI ON OF THE NEW FLAT WITHIN THREE YEARS FROM THE DATE OF SALE OF OLD RES IDENTIAL FLAT. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE H AS COMPLIED WITH THE TIME LIMIT PRESCRIBED U/S 54 OF THE ACT. SINCE THE AMOUNT INVESTED IN THE NEW FLAT PRIOR TO THE DUE DATE FOR FURNISHIN G RETURN OF INCOME WAS MORE THAN THE AMOUNT OF CAPITAL GAIN, THE REQUI REMENTS OF DEPOSITING ANY MONEY UNDER CAPITAL GAINS ACCOUNT SC HEME DOES NOT ARISE IN THE INSTANT CASE. FURTHER, THE HON'BLE HIG H COURT HAS HELD IN THE CASE OF K.C.GOPALAN THAT THERE IS NO REQUIREMEN T THAT THE SALE PROCEEDS REALISED ON SALE OF OLD RESIDENTIAL HOUSE ALONE SHOULD BE UTILISED. 11. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THA T THE ASSESSEE IS ENTITLED FOR DEDUCTION OF FULL AMOUNT OF CAPITAL GA INS U/S 54 OF THE ACT, AS HE HAS COMPLIED WITH THE CONDITIONS PRESCRI BED IN THAT SECTION. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO ALLOW THE DEDUCTION U/S 54 OF THE ACT AS CLAIMED BY THE ASSESSEE. THUS, FOLLOWING THE AFORESAID DECISION, WE FIND M ERIT IN THE CLAIM OF THE ASSESSEE, BECAUSE THE ASSESSEE MADE THE INVESTMENT WITHIN THE SPECIFIED PERIOD CONTAINE D IN SECTION 54 OF THE ACT. THUS, THIS GROUND OF THE ASS ESSEE IS ALLOWED. ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 27 3. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH RESPECT TO CONFIRMING THE ADDITION OF RS.5,11,239/- BY WAY OF DISALLOWING INTEREST PAID ON BORROWED FUNDS. IT IS NOTED THAT THE ASSESSEE PAID INTEREST OF RS.5,11,239/- AN D THE SET OFF THE SAME AGAINST THE INCOME RECEIVED FROM O THER SOURCES. THE LD. ASSESSING OFFICER ASKED FOR JUSTIF ICATION FOR THE CLAIM OF DEDUCTION UNDER SECTION 57(III) OF THE ACT. THE LD. ASSESSING OFFICER OBSERVED THAT THE ASSESSE E USE THE FUNDS OF THE BANK O.D. FOR INVESTING IN BANK F. D. AND THE INTEREST PAID ON THE OVERDRAFT ACCOUNT OF THE B ANK ARE NORMALLY HIGHER THAN THE INTEREST PAYMENT MADE BY T HE BANK ON FIXED DEPOSITS. HE ALSO OBSERVED THAT THE B ANK OVERDRAFT FACILITIES WERE USED FOR OFFSETTING THE F LUCTUATION OF THE INCOME AND RATHER THE SHORT TERM FUNDS OF O. D. WERE USED FOR LONG TERMS INVESTMENT LIKE FDS AND BO NDS. IT IS A CLEAR CUT CASE OF REDUCING THE TAX LIABILIT Y WITHOUT ANY JUSTIFICATION AND THUS THE NEXUS BETWEEN THE IN TEREST PAID AND OTHER SOURCES WAS NOT PROVED, THUS, SUCH C LAIM OF INTEREST DEDUCTION IS NOT ALLOWABLE UNDER SECTIO N 57(III) OF THE ACT, RESULTANTLY, THIS GROUND OF THE ASSESSE E IS HAVING NO MERIT, CONSEQUENTLY, DISMISSED. ITA NO.994/MUM/2018 SMT. MANJU MAHENDRA GOYAL 28 4. THE LAST GROUND IS WITH RESPECT TO LEVY OF INTEREST UNDER SECTION 234B AND 234 OF THE ACT. CONSIDERING THE TOTALITY OF FACTS, THIS GROUND IS H ELD TO BE CONSEQUENTIAL IN NATURE. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. DR AT THE CONCLUSION OF THE HEARING ON 08/10/2018. SD/- (JOGINDER SINGH) !' / JUDICIAL MEMBER MUMBAI; DATED : 08/10/2018 F{X~{T? P.S / ! &($)!*+,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. )) * ( '#$ ) / THE CIT, MUMBAI. 4. )) * / CIT(A)- , MUMBAI 5. -./' , )'#$' 1 , / DR, ITAT, MUMBAI 6. /23$ / GUARD FILE. &( / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI