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Income Tax Appellate Tribunal, ‘’C’’ BENCH, AHMEDABAD
आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’C’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT) BEFORE, SHRI WASEEM AHMED, ACCOUNTANT MEMBER And Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ITA No. 407/AHD/2018 �नधा�रण वष�/Asstt. Year: 2014-2015 Shri Dhanraj Baxiram Chopra, I.T.O, 204, New Cloth Market, Vs. Ward-5(3)(4) 404, Anket Building, Circle-5, O/S. Raipur Gate, Ahmedabad. Ahmedbad. PAN: AAOPC6197J
(Applicant) (Respondent) Assessee by : Shri Vijay Ranjan, A.R Revenue by : Shri L.F. Jain, Sr. D.R सुनवाई क� तार�ख/Date of Hearing : 14/07/2020 घोषणा क� तार�ख /Date of Pronouncement: 30/07/2020 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the assessee against the order of the Learned Commissioner of Income Tax (Appeals), Ahmedabad-5 [Ld. CIT(A) in short], dated 04/12/2017 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dated 20/12/2016 relevant to Assessment Year (A.Y) 2014-15.
The assessee has raised the following grounds of appeal: 1. In law and in the facts and circumstances of the appellant's case, the impugned Appellate order passed by the Ld. CIT (A), is void and bad in law. 2. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has erred in not adjudicating the Ground No. 1.1 to 1.3 which are as follows: Page 1 of 6
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1.1 Learned Assessing officer has erred in law by passing the order more particularly when no notice was served upon the assessee but was wrongly served upon one Mahesh Thakur who is not connected with the assessee and a servant of another co-possessioner of the shop. Hence the whole assessment order is nullity.
1.2 The Assessing officer also erred in not providing the copy of inspection report with Annexure and hence the assessment is void ab initio because of non providing of report which is the base of passing the order and disallowing the claim rightly made u/s 54F.
1.3 The obtaining of statement of the tenant behind the back of the appellant is also entirely illegal when no copy was provided to the assessee as written in the show cause notice. 3. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) erred in upholding the disallowance made by the A.O. in respect of the appellant's claim for exemption/deduction of one house u/s 54F of the Income Tax Act, 1961. 4. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) and the A.O. failed to correctly interpret the amendment made by the Finance Act, 2014, wherein the words ''a residential house' appearing in section 54 of the Act were changed to " one residential house " , thereby making a prospective amendment in the Act, that implied that, prior to the amendment the word "a' in a residential house was a grammatical reference and not a numeric reference, meaning one residential house. 5. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) failed to appreciate this amendment and wrongly upheld the A.O.'s action of denying the benefits of the provisions of section 54F of the Income Tax Act, 1961 to the appellant.
The appellant craves leave to add to, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.
First, we take up the issue raised by the assessee in ground numbers 3 to 4 attached with the memo of appeal. The interconnected issue raised by the assessee is that the learned CIT (A) erred in not allowing the exemption under section 54F of the Act for the two residential units purchased during the year.
3.1 The facts in brief are that the assessee in the present case is an individual and engaged in the business of advancing money on interest. The assessee in the year under consideration has declared long-term capital gain amounting to Rs. 48,45,148/- on the sale of immovable property situated at Block: C, Shop No: G-9, G.F. New Madhepura market Ahmadabad.
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3.2 The assessee further has acquired 2 adjacent residential flats bearing number A-1002 & A-1003 located at Palm Meadows, besides Palm Plaza, 100 Feet Road, Vejalpur, Ahmedabad for the consideration of Rs. 44,98,000/- for each flats aggregating to Rs. 89,96,000/-.
3.3 Accordingly, the assessee against such long-term capital gain claimed exemption under section 54F of the Act on account of investment in 2 adjacent residential flats as discussed above.
However, the AO during the assessment proceedings found that both the flats though adjacent but are different with each other as there was no common gate between both the flats. The observation of the AO was based on the report of the income tax inspector and statements recorded under section 131 of the Act of the tenants who were residing in those flats. Accordingly the AO held that condition as specified under section 54F of the Act for making investment in a residential property has not been fulfilled. Thus the AO denied the deduction claimed by the assessee under section 54F of the Act and added the same to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A).
The assessee before the learned CIT (A) submitted that the requirement specified under section 54F of the Act for making the investment in ‘a residential house’ cannot be construed as one residential house. Had this been the intention of the legislature to restrict the exemption with respect to only one residential house, then the same should have been reflected in the language/provision of the Act by the word ‘one’ instead of ‘a residential house’. As such the legislature has brought an amendment by the Finance Act 2014 wherein the word ‘a residential house’ was replaced with ‘one residential house’. But such amendment is effective with effect from 1st April 2015 corresponding to assessment year 2015-16 whereas the case on
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hand relates to the assessment year 2014-15. Accordingly the assessee claimed that he is eligible for deduction/exemption for the investment made in two flats.
However, the learned CIT (A) rejected the contention of the assessee by observing that the legislature has used the word ‘a residential house’ meaning thereby a dwelling unit. Similarly, the legislature has used the word residential house and not the houses. Therefore, the deduction should be limited to one residential house. Accordingly the learned CIT (A) allowed the deduction for the investment in one residential flat and rejected the exemption/deduction with respect to other flat.
Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
The learned AR before us reiterated the submission as made before the authorities below whereas the learned DR reiterated the findings contained in the order of lower authorities.
We have heard the rival contentions of both the parties and perused the materials available on record. The limited issue before us arises for our adjudication whether the assessee can claimed deduction/exemption under section 54F of the Act as applicable for the year under consideration for the investment made in more than 1 residential units. The provisions of section 54F of the Act as applicable for the year under consideration reads as under: 54F. (1) 31[Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long- term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or 32[two years] after the date on which the transfer took place purchased, or has within a period of three years after that date 32a[constructed, a residential house] (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,—
8.1 A plain reading of the above provision reveals that, subject to the conditions as specified under section 54F of the Act, the assessee can claim exemption for the
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investment made in a residential house. The question arises whether ‘a residential house’ reads as one residential house. To resolve the controversy, we note that different courts have taken different views. Some of them have interpreted the investment in ‘a residential house’ as limited to one house only whereas some of the courts have taken a view the word ‘a residential house’ uses under section 54F of the Act does not refer to one residential unit. In this regard we find that Hon’ble Karnataka High Court in the case of CIT vs. Smt. K.G. Rukminiamma reported in [2011] 331 ITR 211 has decided the issue in favour of the assessee wherein 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 refers to a single residential house. If that was the intention, they would have used the word 'one'. As in the earlier part, the words used are buildings or lands which are plural in number and that is referred to as 'a residential house', the original asset, an asset newly acquired after the sale of the original asset also can be buildings or lands appurtenant thereto, which also should be "a residential house". Therefore, the letter 'a' in the context it is used should not be construed as meaning 'singular'. But, being an indefinite article, the said expression should be read in consonance with the other words 'buildings' and 'lands' and, therefore, the singular 'a residential house' also permits use of plural by virtue of section 13(2) of the General Clauses Act. [Para 10]
8.2 We further find that there was an amendment under the provisions of section 54F of the Act wherein the word ‘a residential house’ was replaced with ‘one residential house’. Such amendment was brought by the Finance Act 2014 which is effective from 1 April 2015 corresponding to assessment year 2015-16. This fact can be verified from the explanatory memorandum to amendment in Finance Act 2014 which reads as under: The existing provisions contained in sub-section (1) of section 54F, inter alia, provide that where capital gains arises from transfer of a long-term capital asset, not being a residential house, and the assessee within a period of one year before or two years after the date of transfer, purchases, or within a period of three years after the date of transfer constructs, a residential house then the portion of capital gains in the ratio of cost of new asset to the net consideration received on transfer is not chargeable to tax. The benefit was intended for investment in one residential house within India. Accordingly, it is proposed to amend the aforesaid sub-section (1) of section 54 so as to provide that the rollover relief under the said section is available if the investment is made in one residential house situated in India. It is further proposed to amend the aforesaid sub-section (1) of section 54F so as to provide that the exemption is available if the investment is made in one residential house situated in India.
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These amendments will take effect from 1st April, 2015 and will accordingly apply in relation to assessment year 2015-16 and subsequent assessment years.
8.3 Thus the controversy whether a residential house should be read as one residential house prior to such amendment has been put to rest by changing the language in the provisions of the Act but the same is effective from the assessment year 2015-16. Thus in such a situation we can safely conclude that the assessee prior to such amendment was eligible for exemption under section 54F of the Act even he makes the investment in more than one residential properties. There is no ambiguity that the case before us pertains to the assessment year 2014-15 prior to the amendment brought under the provisions of section 54F of the Act. Accordingly, we direct the AO to allow the assessee the benefit of exemption under section 54F of the Act for the investment made in both the properties. Hence the ground of appeal of the assessee is allowed.
8.4 Before parting, it is pertinent to note that the learned AR for the assessee has not advanced any argument with respect to the ground No. 1 attached with the memo of appeal. Accordingly we reject the same.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 30/07/2020 at Ahmedabad.
-Sd- -Sd- (Ms MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 30/07/2020 Manish
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