PADMA VASANTHARAJAN,TIRUVALLUR vs. ITO, NCW-8(1), CHENNAI

PER SS VISWANETHRA RAVI, J.M :

This appeal by the Assessee is against the order dated 05.12.2025

passed by the Learned Commissioner of Income Tax [herein after

“CIT(A)”], National Faceless Appeal Centre(NFAC), Delhi, for the

assessment year 2014-15.

no.1 is general is nature, required no adjudication. Ground nos 2 to 5 are

not argued by the ld.AR and dismissed as not pressed.

confirming the addition made by the AO on account of long term capital gains instead of denying deduction u/s. 54 of the Income-tax Act, 1961 [herein after ‘the Act’].

sq.ft., respectively. The AO allowed benefit u/s. 54 of the Act to Flat no. A2, but denied said benefit to Flat no. B2 and treated the amount claimed as deduction as long term capital gain by observing that the assessee is

entitled to claim deduction only to a single residential house in terms of amendment made in the Finance Act, 2014 which substituted ‘one residential house in India for a residential house’ vide his discussion in

Para no. 6.8 and 6.9 of the assessment order. The ld.CIT(A) confirmed the same vide his discussion in Para no. 5.4 to 5.7 of the impugned order.

Hon’ble High Court of Madras held that the amendments cannot be held Page - 2 - of 6 to be mere clarificatory so as to be applied retrospectively for AY 2005-06

therein. He submits that the Hon’ble High Court held the substantial question of law in favour of the assessee and as against the Revenue.

(1) of section 54 of the Act has been amended to provide the rollover relief under the said section is available if the investment is made in one residential house situated in India. She vehemently argued that the said

explanatory notes along with Finance Bill of which the said amendment was incorporated to section 54 of the Act is overrides the decision of Hon’ble High Court of Madras as relied by the assessee.

ld.CIT(A) that both the flats Flat no.A2 and B2 are adjacent and used as a single functional residence connected by a common passage and declared as self-occupied. But, however, the AO taking into account amendment to section 54 of the Act vide Finance Act, 2014 which

admittedly would come into effect from 01.04.2015 relevant to AY 2015- Page - 3 - of 6 16 denied the benefit of Flat no.B2, we note that it was also argued that

prior to the amendment of Finance Act, 2014, the expression ‘a residential house’ reflecting in section 54 of the Act permitted plural interpretation and claimed deduction for the both the flats. The assessee

also placed reliance on the order of ITAT Mumbai Benches in the case of Nilufer Sayed, which was brought to the notice of ld.CIT(A) which is evident from page no.3 & 4 of the impugned order and it was held not applicable in view of amendment to section 54 of the Act. Therefore, the

moot point before us is as to whether the amendment to section 54 of the Act vide Finance Act, 2014 which came into effect from 01.04.2015 relevant to AY 2015-16 is applicable for the year under consideration i.e.,

AY 2014-15 or not? restricting the deduction to one residential house or as a residential house prior to amendment. We note that the Hon’ble High Court was pleased to reproduce the Explanatory notes to the said

amendment to section 54 of the Act in Para no. 18 of the said decision and on perusal of the same, we note the said explanatory notes clearly observed that the amendment takes effect from 01.04.2015 and will

accordingly apply in relation to assessment year 2015-16 and subsequent assessment years vide para no. 20.5 of the Finance Bill, 2014. On careful reading of the decision of Hon’ble High Court of Madras in the case of Tilok Chand and Sons (Supra), wherein it was clearly held that

Page - 4 - of 6 the amendment cannot be held to be mere clarificatory so as to be

applied for assessment prior to AY 2015-16.

consideration being AY 2014-15, which is prior to AY 2015-16, therefore,

the view of AO in denying benefit u/s. 54 of the Act making amendment to

section 54 of the Act applicable for AY 2014-15 which was confirmed by

the ld.CIT(A) is not justified. Respectfully following the decision of

Hon’ble High Court in the case of Tilok Chand and Sons (Supra), we hold

that the amendment to section 54 of the Act which came into effect from

01.04.2015 is not applicable to AY 2014-15 and we hold that the

assessee is entitled to benefit u/s. 54 of the Act, taking into account a

residential house. Thus, order of the ld.CIT(A) is set aside and the

grounds raised by the assessee are allowed.

Sd/- Sd/- (एस. आर. रघुनाथा) (यस यस �व�वने� र�व) (S. R. RAGHUNATHA) (SS VISWANETHRA RAVI) लेखा सद�यकेसम� /Accountant Member �या�यक सद�य / Judicial Member Chennai, Dated: 16th June, 2026. JPV

Page - 5 - of 6 Copy to: 1. Appellant 2. Respondent 3. CIT - Chennai/Coimbatore/Madurai/Salem. 4. DR 5. GF

PRASANNA Digitally signed by PRASANNA VANI JETTY VANI JETTY Date: 2026.06.17 12:00:13 +05'30'

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