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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO, HON’BLE & SHRI MANJUNATHA. G, HON’BLE
आदेश /O R D E R
PER G. MANJUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-12, Chennai, dated 30.09.2019 and pertains to assessment year 2013-14.
:-2-: ITA. No:196/Chny/2022 2. At the outset, we find that there is delay of 832 days in filing of appeal before the Tribunal, for which a petition along with explaining reasons for condonation has been filed. The ld. Counsel for the assessee, referring to petition filed by the assessee submitted that, the appellant is a senior citizen of age 71 years is suffering from various ailments like Coronary Artery Disease, Diabetes, Hypertension for last 10 years and has undergone Coronary Artery Bypass Graft Surgery and was under medical treatment. The assessee has received order from the CIT(A) on 15.10.2019, and the appeal should have been filed on or before 15.12.2019, within 60 days from the service of order. However, the appellant could able to file appeal on 25th March, 2022 with a delay of 832 days and said delay covered by Covid and non-Covid period. The reasons for delay of filing appeal is neither intentional nor to derive any undue benefit, but due to circumstances beyond the control of the assessee. Therefore, the delay in filing appeal may be condoned.
The ld. DR, on the other hand strongly opposing petition filed by the assessee submitted that, even if you exclude the delay covered by Covid period, still there is a delay of 117 :-3-: ITA. No:196/Chny/2022 days in filing appeal, which could not be explained by the assessee with necessary reasons. Although, assessee claims to have underwent some surgeries and was under medical treatment, but said claim was not substantiated. Therefore, delay should not be condoned.
We have heard both the parties and considered relevant contents of petition filed by the assessee for condonation of delay. As explained by the assessee, although there is a delay of 832 days in filing of appeal, 715 days is covered under Covid period and was exempted from condonation of delay by the decision of the Hon’ble Supreme Court. The remaining period of 117 days delay is genuine, because of ill-health of the assessee which prevented the assessee to file appeal before the tribunal within 60 days from the date of service of order. We have gone through reasons given by the assessee, in light of certain evidences including medical records and we find that the assessee was suffering from various ailments as narrated in her affidavit which caused delay in filing of appeal. It is a well stated principle of law by the decisions of various courts including the Hon’ble Supreme Court in the case of N. Balakrishnan vs M. Krishna Murthy reported in [1998] 7 SCC :-4-: ITA. No:196/Chny/2022 123, where the Hon’ble Supreme Court clearly held that, in the absence of anything showing mala-fide or deliberate delay or dilatory tactics of courts should be normally condone the delay. In this case, from the facts available on record, it is very clear that the delay is purely on account of ill-health of the assessee and further, the assessee is not deriving any undue benefit by not filing the appeal. Therefore, we are of the considered view, that there is a reasonable cause for condonation of delay and thus, we condone the delay in filing appeal and admit appeal filed by the assessee for adjudication.
The assessee has raised the following grounds of appeal: “The order of the Commissioner of Income tax (Appeals)
12. Chennai dated 30/9/2019 is objected to on the following grounds of appeal Exemption under section 54/54F 1.The learned Commissioner (Appeals) erred in granting exemption under section 54 only in respect of one flat in the single building accommodating 13 self contained and independent living residential portions at Maduravoil which was purchased and developed only to claim exemption under section 54 2.The learned Commissioner(Appeals) ought to have granted the exemption under section 54 in respect of the whole building which is only a single building containing in its construction 13 independent living portions. 3.The learned Commissioner (Appeals) ought to have appreciated the fact that there had been only one building and not more than one building but accommodating 13 :-5-: ITA. No:196/Chny/2022 independent living portions which is called in its common parlance of a Flat. 4.The learned Commissioner (Appeals) ought to have appreciated the fact that the case laws quoted in the order by the department were not relevant and not applicable to the facts of the case of the assessee. 5.The learned Commissioner(Appeals) ought to have appreciated the fact that the assessee demolished the old building only to raise a new housing complex in the and recovered after the demolision of the old building and the case laws quoted in the order are distinguishable from the facts of the assessee 's case. 6.The learned Commissioner(Appeals} ought to have appreciated the fact that the building compulsorily acquired for the Metro Project by the Railway department was only a residential building and since one residential building is replaced by a new residential building containing in its body 13 independent residential flats the denial of exemption under section 54 is not correct. 7.The learned Commissioner(Appeals) ought to have appreciated the fact that the land remained the same and the entire land remained in the hands of the assessee only and further exemption under section 54 is available for land also. 8.The learned Commissioner(Appeals) ought to have appreciated the fact that exemption is claimed under section 54 and not under section 54F. 9.The learned Commissioner(Appeals) ought to have appreciated the fact that where income had been offered under section 24 and when such a residential property is convered into a new property the exemption under section 54 is available even if more than one house had been constructed. 10.The learned Commissioner(Appeals) ought to have appreciated the fact that restriction of exemption under section 54 or 54F had entered into the statute books only from the assessment year 2015-2016 and since the assessment year involved in this case is 2013-2014 the restriction to a single house does not apply in the assessee's case. 11.The learned Commissioner(Appeals) ought to have appreciated the fact that there are case laws of the Chennai High itself that more than one house can be claimed as :-6-: ITA. No:196/Chny/2022 exemption under section 54 when an old house is sold and converted into a new house or houses. 12.The learned Commissioner(Appeals} erred in restricting the exemption under section 54 in respect of one house and further erred in denying the exemption under section 54 in respect of the house property purchased at Aminjikarai, Chennai. 13.The learned Commissioner(Appeals) ought to have appreciated the fact that though the investment in bank FD is not stated as a medium for claiming exemption under section 54EC the spirit that the sale proceeds should be kept out of circulation in the market for preventing inflation had been served even by the investment in ordinary bank Fixed Deposit and for this reason the exemption under section 54EC should be given in respect of the ordinary bank fixed deposit also. 14.The assessee craves leave to file additional grounds and or additional evidences also as the hearing progresses in case a need arises for the same. 15.The assessee under the circumstances submits that the full exemption claimed by the assessee for the sale proceeds of Rs.2,08,81,742 under section 54/54 F may be granted by the honourable Tribunal.”
6. The brief facts of the case are that, during the financial year relevant to assessment year 2012-13, Chennai Metro Rail Ltd had acquired land and building owned by the assessee u/s. 194LA of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) on 30.04.2012 for a consideration of Rs. 2,08,81,742/-. The assessee has computed long term capital gains derived from compulsory acquisition of land and building by deducting indexed cost of acquisition and indexed cost of improvement and arrived at long term capital gains of Rs. :-7-: ITA. No:196/Chny/2022 1,77,03,112/-. The assessee had also claimed exemption u/s. 54 of the Act, for purchase of another residential house property on 30.08.2012 for Rs. 1,27,03,112/-. The assessee had also claimed exemption u/s. 54EC of the Act for Rs. 50 lakhs, for amount invested in fixed deposit with nationalized bank. Thus, the assessee has computed taxable long term capital gains at Rs. Nil.
During the course of assessment proceedings, the AO called upon the assessee to file necessary evidences including justification for claim of exemption u/s. 54 of the Act. The AO, on the basis of evidences filed by the assessee and also by conducting independent enquiries including report of inspector of Income-tax, opined that the assessee is not entitled for exemption u/s. 54 of the Act, because the new house purchased by the assessee is having multiple units with separate kitchen etc. The AO, further noted that the assessee had also purchased one more property at Aminjikarai, Chennai on 12.12.2013 for a sum of Rs. 35 lakhs. Although, said property is eligible for exemption u/s. 54 of the Act, but because the assessee owned more than one residential house at the time of purchase of new asset, the assessee is not :-8-: ITA. No:196/Chny/2022 entitled for exemption u/s. 54F of the Act also. Therefore, rejected exemption claimed u/s. 54 of the Act and also 54EC of the Act and computed taxable long term capital gains at Rs. 1,92,36,734/-.
Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the ld CIT(A), the assessee has justified computation of long term capital gains after availing benefit of exemption u/s. 54 of the Act, along with certain judicial precedence and argued that ‘a’ house referred u/s. 54 of the Act has been made applicable from the assessment year 2015-16 onwards and thus, for the impugned assessment year, even if residential house is having multiple units, the assessee can claim exemption u/s. 54 of the Act. The Ld. CIT(A), after considering relevant submissions of the assessee and also considering various facts, opined that the assessee has not satisfied conditions prescribed u/s. 54 or 54F of the Act for claiming the benefit, because the new house purchased by the assessee is having multiple units with more than one kitchen and thus, not eligible for exemption u/s. 54F of the Act. The CIT(A), has also upheld the findings of the AO in rejection of exemption u/s. 54F of the Act, for house :-9-: ITA. No:196/Chny/2022 property purchased at Aminjikarai, Chennai, on the ground that the assessee owned more than one residential house other than the new house on the date of transfer of original asset. The CIT(A), had also confirmed the findings of the AO in rejection of exemption claimed u/s. 54EC of the Act, on the ground that amount kept under normal fixed deposits with nationalized bank does not come under the benefit of exemption u/s. 54EC of the Act. Aggrieved by the CIT(A) order, the assessee preferred an appeal before us.
The Ld. Counsel for the assessee, submitted that the Ld. CIT(A) failed to appreciate fact that the assessee has claimed exemption u/s. 54 of the Act, but not u/s. 54F of the Act, because what was transferred by the assessee is a residential house property. He further submitted that, up to assessment year 2014-15, there is no restriction for claiming exemption u/s. 54F of the Act, for multiple units of a residential house, because the amendment brought to the provisions of section 54 is applicable from assessment year 2015-16 onwards. In this regard, he relied upon the decision of Hon’ble Jurisdictional High Court of Madras in the case of G. Chinnadurai vs ITO [2016] 74 Taxmann.com 227 (Mad). The :-10-: ITA. No:196/Chny/2022 assessee had also relied upon the decision of Hon’ble High Court of Karnataka in the case of Arun K. Thiagarajan vs CIT [2020] 427 ITR 190 (Kar).
The Ld. DR, on the other hand supporting the order of the CIT(A) submitted that, the assessee is not entitled for exemption u/s. 54 of the Act, because the original asset sold by the assessee is not a residential house property. Further, the assessee is also not entitled for exemption u/s. 54F of the Act, because new house purchased by the assessee is having multiple units, which is evident from the report of inspector. The DR, further submitted that the assessee is also not eligible for exemption u/s. 54F of the Act, in respect of house property purchased at Aminjikarai, because at the time of transfer of original asset, the assessee was having more than one residential house property. Therefore, he submitted that there is no error in the reasons given by the AO to deny the benefit of exemption u/s 54 of the Act and their order should be upheld.
We have heard both the parties, perused materials available on record and gone through orders of the authorities :-11-: ITA. No:196/Chny/2022 below. The facts with regard to the impugned dispute are that the property comprising land and building at Chennai has been acquired by Chennai metro Rail Ltd u/s. 194LA of the Act on 30.04.2012, for a consideration of Rs. 2,08,81,742/-. The said property has been acquired by the assessee in the year 1987 and further made a construction in the year 1997. The assessee had also purchased new residential house property on 30.08.2012 for a consideration of Rs. 64,80,100/- and put up further construction at a cost of Rs. 62,23,012/-. From the above facts, it is very clear that property transferred by the assessee by way of compulsory acquisition by Chennai Metro Rail Ltd is a long term capital asset, which is eligible for the benefit of exemption u/s. 54 of the Act. Although, there is a dispute with regard to the nature of property, whether it is commercial or residential, the assessee has filed relevant evidences to prove that said property was a residential house property and income from which is assessable under the head income from house property. Therefore, we are of the considered view that the assessee is entitled for exemption u/s. 54 of the Act towards capital gains derived from transfer of capital asset.
:-12-: ITA. No:196/Chny/2022 12. Having said so, let us come back to the amount of exemption claimed by the assessee and further whether the assessee has satisfied the conditions prescribed u/s. 54 of the Act. As per the provisions of section 54 of the Act, to avail exemption u/s. 54, the assessee will have to purchase and construct one residential house. Further, in case of purchase of new residential house, it should be purchased within one year before, or within two years after the date of transfer of residential house property. For construction of new residential house property, it should be completed within three years from the date of transfer of residential house property. In this case, the assessee has purchased a new residential house property and thus, it should be purchased within one year before or within two years after the date of transfer of original asset. In this case, the assessee has purchased new residential house property on 30.08.2012, which is within two years, after the date of transfer of residential house property and thus, the assessee is entitled for exemption u/s. 54 of the Act. As regards, the observations of the AO with regard to ‘a residential house property’, in light of amendment of provisions of section 54(1) by Finance Act, 2014 w.e.f. 01.04.2015, we find that before substitution of ‘a residential :-13-: ITA. No:196/Chny/2022 house’ by Finance Act. 2014 w.e.f. 01.04.2015, various courts have interrupted the term ‘a residential house’ as referred u/s. 54(1) of the Act, to mean one residential house which can have several independent residential units, as held by the Supreme Court in the case of CIT vs Gita Duggal [2015] 228 Taxman 62 (SC). A similar view has been taken by the Hon’ble High Court of Karnataka in the case of Arun K. Thiagarajan vs CIT (supra), where it has been clearly held that for the purpose of allowing benefit of exemption u/s. 54(1), expression ‘a residential house’ includes within its ambit plural numbers as well and thus, it cannot be construed as one residential house only. The Hon’ble High Court of Madras in the case of G. Chinnadurai vs ITO (supra), has considered an identical issue and held that the expression ‘a residential house should not be taken to convey meaning that it refers to a ‘single residential’ house and further, it may include plural numbers as well. The sum and substances of ratio laid down by various courts was that before amendment of section 54(1) of the Act, by the Finance Act, 2014 w.e.f. 01.04.2015, in a residential house property, if multiple units are there, still the assessee can claim the benefit of exemption u/s. 54 of the Act. In this case, there is no dispute with regard to the fact that the :-14-: ITA. No:196/Chny/2022 house property purchased by the assessee on 30.08.2012 is having a multiple units, which is one ‘a residential house’ property. Therefore, we are of the considered view that, the assessee is entitled for exemption u/s. 54 of the Act. In so for as the observations of the AO with regard to the purchase of another residential house property on 12.12.2013 in light of provisions of section 54F of the Act, we find that the observations of the Assessing Officer is devoid of merits, because the assessee never claimed exemption u/s. 54F of the Act, but has claimed exemption u/s. 54 of the Act. Therefore, we reject the observations of the AO. To sum up, from the facts available on record, we are of the considered view that exemption claimed u/s. 54 of the Act, in respect of purchase of new residential house property on 30.08.2012 is in accordance with law and the assessee has rightly claimed exemption after satisfying conditions prescribed therein. Therefore, we direct the AO to allow exemption claimed u/s. 54 of the Act, in respect of purchase of new residential house property and construction thereon for an amount of Rs. 1,27,03,112/-.
In so far as exemption claimed u/s. 54EC of the Act, we find that the assessee has made a normal fixed deposit of Rs. :-15-: ITA. No:196/Chny/2022 25 lakhs each in two nationalized banks. Although, the assessee has made fixed deposits on or before due date for filing return of income u/s. 139(1) of the Act, but fact remains that in order to get the benefit u/s. 54EC of the Act, the assessee should invest the amount of capital gain in eligible bonds. In this case, the assessee has made investment in normal fixed deposits. In our considered view, said investment does not quality for exemption u/s. 54EC of the Act. Thus, we upheld the findings given by the ld. CIT(A) in rejection of exemption claimed u/s. 54EC of the Act, amounting to Rs. 50 lakhs.