DR. ASHA MATHUR,GUJRAT vs. ASSISTANT COMMISSIONR OF INCOME TAX, CIRCLE-1, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh Hkkxpan] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM vk;dj vihy la-@ITA No. 769/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2014-15 cuke Dr. Asha Mathur, A.C.I.T., Vs. 16, C/o- Neeraj Kumar Lavania, Circle-1, Sunblossom, Near Ambey School, Jaipur. Opp. Suncity, Manjalpur, Vadodara, Gujrat-390011. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACIPM 6024 A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Sharma (CA) jktLo dh vksj ls@ Revenue by : Shri P.P. Meena (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 06/02/2018 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 27/02/2018 vkns'k@ ORDER

PER: BHAGCHAND, A.M. This is an appeal filed by the assessee emanates from the order of

the ld. CIT(A)-I, Jaipur dated 23/08/2017 for the A.Y. 2014-15. 2. The assessee derives income from salary, capital gains and other

sources. The assessee has filed its e-return of income on 10/7/2015 declaring total income of Rs. 5,71,57,170/-. The Assessing Officer made

assessment U/s 143(3) of the Income Tax Act, 1961 (in short the Act) on 23/12/2016 at total income of Rs. 6,84,93,110/- and made addition

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of Rs. 1,13,35,940/- by observing that the assessee has constructed

more than one residential house by combining them internally. Two

separate houses combined internally on the directions of the assessee

cannot be treated as a single residential proper for the purpose of

Section 54. Hence the Assessing Officer disallowed Rs. 1,13,35,940/-.

The ld. CIT(A) has confirmed the action of the Assessing Officer.

grounds of appeal:

“1. The Learned CIT Appeals-I, Jaipur has grossly erred in treating the Agreement for Sale and Construction Agreement both dt. 10-05-2014 entered simultaneously as per the scheme of the developer and builder as two separate agreements/documents for the purpose of investment in residential flat for claim u/s 54 for which period of 3 years is prescribed for the construction of house u/s 54 and also erred in not allowing the claim on different footing than disallowance made by the assessing authority. The claim of exemption by investing a sum of Rs. 1,13,35,940/- towards acquisition of the residential flat made before the due date of filing of return of income may please be allowed u/s 54 of the Income Tax Act, 1961 under the facts and circumstances of the case.

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confirming the disallowance of Rs. 1,13,35,940/- by the ld. CIT(A). The

ld. CIT(A) has dealt the issue by holding as under:

“3.1.2 Determination:

(i) The brief facts are that during the year under consideration the appellant has sold an immovable property and has purchased two

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residential flats bearing number S-702 and S-703, Scarlet Towers, Vodadara and has claimed deduction of Rs. 1,13,35,940/- under section 54 of the Act which was denied by the AO by observing that the appellant has purchased two residential houses and not one as the ‘Agreement to Sell’, registered sale deed referred to two properties and not to one residential house property. The issue has been discussed in detail in the assessment order.

(ii) It was the contention of the appellant that it has purchased one single flat consisting of flat number S-702 and 703 which were under construction on the date of ‘Agreement to Sell’ dated 16.03.2014 and ‘purchase agreement’ dated 10/05/2014. It was a contention of the appellant that both flats were interlinked by the developer before its possession was taken over by the appellant and it was entitled for deduction under section 54 of the Act. In support of its contention, the appellant has relied upon a number of judicial pronouncements.

(iii) I have duly considered the assessment order, submissions of the appellant and the material placed on record. I have also considered the various judicial pronouncements relied upon by the appellant and found them to be distinguishable on facts. It may be mentioned that the case of CIT Vs Gita Duggal (Supra) on which the appellant has relied heavily is relating to the construction of a house property. In that case the appellant was already owning the entire building consisting of four floors and through development agreement with a builder, two developed floors constructed by the builder were given to the appellant. Similarly the facts of the case of Surender Sharma Vs ITO (Supra) are also distinguishable as in that case, two separate agreements for sale and construction were not there, whereas in the instant case under consideration, two agreements were executed, one

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relating to sale of two flats and another relating to construction or completing the incomplete structure thereon.

(iv) It would be relevant to mention here that vide ‘Agreement to Sell' dated 10.05.2014, the appellant has agreed to purchase two flats for a consideration Rs. 56 lakh from Shri Saurin Rajeshbhai Patel and Shri Udayan Babubhai Patel . It would be relevant to reproduce hereunder from top portion of the page No. 3 of the said agreement as under:

“and whereas the sellers have agreed to sell flat number S- 702 - 703 of Scarlet tower of FEATHERS scheme with incomplete construction to the purchaser"

It is pertinent to mention that all the documents placed on record reveal that two independent incomplete structures were purchased by the appellant. Further, the appellant was entitled for allotment of two car parking, two voting rights in the residents welfare association.

(v) It is noted from the said ‘Agreement to Sell’ that these flats were incomplete and were not inhabitable and for making these flats complete and inhabitable, the appellant has also executed a ‘construction agreement’ with the developer M/s Feathers Reality for making these flats habitable and the consideration for the same was stated at Rs. 50,63,000/-. It would be relevant to reproduce hereunder from middle portion of page No. 3 of the construction agreement as under:

“for further construction work of joining flat number S-702-703 to make a single flat and as per the terms and conditions of the said agreement for sole, the purchaser is required to enter into a construction agreement with the developer for carrying out the remaining construction work of the said flat number S-702-703. The purchaser has engaged the developer for carrying out the remaining construction work of the said flat. The purchaser and the developer have mutually decided and fixed the specification and cost of construction, cost of extra construction work,

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if any, and the terms and conditions for the payment of construction cost. Now, therefore, this construction agreement is made and executed by and between the purchaser and the developer"

(vi) It may mentioned that two registered sale deed was executed on 25.06.2014 in relation to these two flats wherein the sale consideration was stated at Rs. 56 lakh, on which stem duty of Rs. 3,30,400/- was paid. It is pertinent to mention that the amount of Rs. 50,63,000/- relating to construction agreement was not included in the sale consideration for the purpose of paying stamp duty. It may be mentioned that in the registered sale deed dated 25.06.2014, it has been stated in clause No. 4 on page No. 8 that:

“The Sellers have sold the said flat with incomplete construction. Therefore it is clarified that the purchaser has made/shall have to make a separate construction agreement with the party of the 3rd part Developers for carrying out the remaining construction and finishing work and for completion of construction and shall have to pay the cost of such construction work directly to the developers".

(vii) It is evident from the above facts that on 25.06.2014 i.e. the date of execution of the registered sale deed, the appellant has acquired only an incomplete structure which was not inhabitable on the said date. It may be mentioned that deduction under section 54 of the Act is available for purchasing a residential house or for constructing a residential house and it is not available for purchasing a structure which cannot be treated as a residential house and making it a residential house by investing substantial amount of money thereon.

(viii) It may be mentioned that in the case of Ashok Syal Vs CIT [2012] 24 taxmann.com 274 (Punj. and Har,), their lordship analyzed the provisions of section 54 of the Act and observed as under:

"7. A perusal of the aforesaid provision shows that the exemption under Section 54 of the Act is available on transfer of a long term capital

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asset in respect of residential house and land or building appurtenant thereto to an assessee who is either individual or Hindu undivided family. It is also essential that the income of the same is chargeable under the head 'Income from house property'. Further requirement under this provision is that the assessee within a period of one year before or two years after that date purchases or within a period of three years after that date constructs a residential house.

(ix) It may be mentioned that in the case of DP Mehta vs. CIT [2001] 251 ITR 529 (Del.), it was observed by the Hon’ble High Court that it was admitted by the appellant that the property purchased by the appellant for claiming deduction u/s 54 of the Act was not 'worth occupying and inhabitable, therefore, it was held that the appellant was not entitled for deduction u/s 54 of the Act.

(x) It may be mentioned that by Finance (No. 2) Act, 2014, the words ‘constructed a residential house' in section 54(1) of the Act has been substituted for ‘constructed one residential house in India’. It would be relevant to reproduce herein under the relevant clause as stated in the Memorandum to the Finance Bill as under:

“The existing provisions contained in sub-section (1) of section 54, inter alia, provide that where capital gain arises from the transfer of a long - term capital asset, being buildings or lands appurtenant thereto, and 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

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period of three years after the date of transfer constructs, a residential house then the amount of capital gains to the extent invested in the new residential house is not chargeable to tax under section 45 of the Act.

The benefit was intended for investment in one residential house within India. Accordingly, it is proposed to amend the aforesaid sub-section (I) 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."

(xi) Thus, it is evident that the intention of the legislature for allowing deduction u/s 54 of the Act was only for purchase of a residential house. Further, the above amendment is only clarificatory in nature.

(xii) It is pertinent to mention here that the registered sale deed is reflecting the sum of Rs. 56 lakh as the sale consideration on which the appellant has paid the stamp duty. At the most, the deduction under section 54 of the Act can be allowed only on this amount of Rs. 56 lakh it the incomplete structure is treated as a residential house as the appellant cannot be allowed to take double benefit by splitting the sale consideration into two parts to avoid the payment of stamp duty on the sum of Rs. 50,63,000/- relating to construction agreement and also to take benefit of deduction under section 54 of the Act thereof.

(xiii) Therefore in view of the totality of facts and circumstance of the case, it is held that since through registered sale deed dated 25/06/2014, the appellant has acquired only an incomplete structure which cannot be treated as a residential house for claiming deduction under section 54 of the Act. Further there is no provision in section 54 of the Act for allowing cost of improvement for making an incomplete structure into a residential house vide making substantial investment thereon. Hence, it is held that the appellant was not entitled for any deduction under section 54 of the Act.”

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the grounds raised in the appeal, has submitted as under:

“Ground No. 1 “The Learned CIT Appeals-I, Jaipur has grossly erred in treating the Agreement for Sale and Construction Agreement both dtl0-05-2014 entered simultaneously as per the scheme of the developer and builder as two separate agreements/documents for the purpose of investment in residential flat for claim u/s 54 for which period of 3 years is prescribed for the construction of house u/s 54 and also erred in not allowing the claim on different footing than disallowance made by the assessing authority. The claim of exemption by investing a sum of Rs.1,13,35,940/- towards acquisition of the residential flat made before the due date of filing of return of income may please be allowed u/s 54 of the Income Tax Act, 1961 under the facts and circumstances of the case.

As per the scheme of arrangement between the land owners of the land over which the building was being constructed and the developer who was constructing the building they had entered into a development agreement on 25.03.2011 as per the facts available on page no.3 in second and third para of the Construction Agreement dt. 10.05.2014 available on record wherein it has been stated that “The Land owners Saurin Rajeshbhai Patel and Udayan Babubhai Patel have executed a notorized Development Agreement on 25-03- 2011 in favour of the developers and on the basis of this development agreement the developers have organized a residential scheme in the name of “FEATHERS” in the said land………… ” the assessee’s intention was to buy a residential flat for her residence and it was due to the arrangement between the Land owner and developer that the assessee was asked to enter into two simultaneous agreements one for agreement for sale and one for construction both dt.10.05.2014. The assessee had approached the

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developers for purchase of a big flat for her residence and as per the scheme of arrangement between the developer and land owner entered into these two simultaneous agreements on the same day which have resulted into acquisition of a single residential unit with a single kitchen as per possession received upon completion of the building from them on 15.02.2015. The assessee claimed as deduction whatever was invested by her till 31.07.2014 i.e. the due date of filing of return. Here I would like to quote the provisions contained in section 54 relevant for the year under consideration i.e. asstt. Year 2014-15:

[Subject to the provisions of sub-section (2), where in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head Income from house property (hereafter in this section referred to as the original asset), and the assessee has within a period of [one year before or two years after the date on which the transfer took place purchased], or has within a period of three years after that date constructed, a residential house, then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, —

(i) if the amount of the capital gain [is greater than the cost of [the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference 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 previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of

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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 under 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 three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.

[(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under subsection (1) of section 139] m an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official 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 amount, if any, already utilised by the assessee for the purchase or construction of the new 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 sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then, —

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(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 expires; and

(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.

The section clearly specifies that whatever the assessee has invested towards purchase or construction of new asset till the due date of filing of his return is eligible for deduction u/s 54 and further if the assessee wishes to make any investment towards purchase or construction then the same has to be deposited in the capital gain scheme account. In the instant case the assessee claimed whatever amount she invested towards purchase or construction of the flat before 31.07.2014 as per details of investment specified below: Sr.No. Date of Payment Nature of Payment Amount 1. 16/03/2014 Advance for Booking of Flat 200000/- 2. 26/03/2014 Towards Sale deed 5600000/- 3. 26/03/2014 Towards Construction money 3700000/- 4. 24/06/2014 Payment of Remaining Amount (Part) 327540/- 5. 24/06/2014 Payment of Remaining Amount (Part) 1100000/- 6. 24/06/2014 Stamp Duty 330400/- 7. 25/06/2014 Bill of Professional Charges 15000/- 8. 17/07/2014 Payment of Remaining Amount (Part) 63000/- TOTAL Rs.1,13,35,940/- The above amount of Rs.1,13,35,940/- Invested in accordance with the provisions of section 54 before the due date of filing of return i.e. 31/07/2014 is eligible for exemption u/s 54 of the Income Tax Act, 1961, Though a 3 year period for construction of house has been given in the section if the amount is not utilized towards purchase or construction by depositing the amount in capital gains scheme account and then utilizing for the purpose but the assessee has claimed only what has been invested by her up to the due date of filing of return applicable in her case for the

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assessment year 2014-15 i.e. up to 31.07.2014 which for this and that reason has been disallowed which may please be allowed.

The AO had disallowed the claim of the assessee on the basis of acquisition of two adjacent flats though despite being interconnected and having only a single kitchen were disallowed by the AO treating them as two separate units and claim for entire investment made was disallowed. The learned CIT Appeals has changed the footing of disallowance and has stated that the assessee purchased two independent incomplete structures and also mentioned in para (vi) of the order on page no. 12 “it may be stated t h a t t w o r e g i s t e r e d s a l e d e e d w a s e x e c u t e d o n 2 5 / 0 6 / 2 0 1 4 in relation to these two flats wherein the sale consideration was stated at Rs.56 Lacs.... ” Here I would like to clarify that only one registered deed was executed on 25.06.2014 specifying both flat no.702 and 703 whereas the learned CIT appeals has stated that two registered sale deed was executed on 25.06.2014 which is a mistake of fact apparent from record, which shows that material placed on record has not been properly considered. No opportunity for change of basis of disallowance was provided to the assessee by learned CIT Appeals and the disallowance made by AO has been sustained on different footing when case laws against original basis of disallowance were submitted including the case of this Hon’ble bench in the case of Surendra Sharma vs. ITO ITA No.606/JP/2013. I would also like to draw attention to the registered sale deed dt.25.06.2014 which was a tri party agreement where the first party sellers were the land owner as party of the first part, the assessee Smt. Asha Mathur was the purchaser, the party of the second part and M/s Feathers Realty was the Developer party of the third part. Further the Learned CIT Appeals also has erred in stating in para (ii) of the order on page no. 10 that “………on date of ‘Agreement to sell dt. 16.03.2014’ and ‘purchase a g r e e m e n t ’ d a t e d 1 0 / 0 5 / 2 0 1 4 . ” Which is factually wrong as there was no agreement to sell on 16.03.2014

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but only initial payment was made for booking of the flat and both the agreement for sale and construction are even dated on 10/05/2014 as per the scheme of arrangement between the landowners and the developer. The Learned CIT Appeals has also ignored the fact that both the Agreement for sale and construction agreement were entered simultaneously on the same day dt.10.05.2014 as it was mandatory for each buyer to enter into two separate agreements as per the arrangement between the land owners and the developer company for which they have provided a single bill including the cost of construction and proportionate share in land including service tax aggregating to Rs.1,09,24,487/- dt.29.06.2014 which fully stood paid by the assessee before the due date of filing of return and it was not the intention of the assessee to buy a skeleton house and then later decide to get it completed from someone. Here again the Learned CIT Appeals has interpreted the law in his own way without considering the entirety of the facts, without fully reading all the terms and conditions of the agreement entered into between the parties, without considering the fact that the entire amount was invested by the assessee before the due date of filing of the return for the year under consideration i.e. before 31.07.2014 and misinterpreting the law laid down in section 54 of the Income Tax Act, 1961.

The facts available on record have been ignored and not properly looked into and the basis of original disallowance has also been changed by the learned CIT appeals without proper opportunity to the assessee. The genuine claim made by the assessee u/s 54 for investment made towards acquisition of a flat for her residence by investing amount before the due date of filing of return specified in sec. 139(1) for the assessment year 2014-15 amounting to Rs. 1,13,35,940/- may please be allowed which has been disallowed for this and that reason ignoring the provisions contained in sec. 54 and the facts and circumstances of the case.

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Ground No.2

The Learned CIT Appeals has grossly erred in confirming the disallowance of claim of exemption/deduction u/s 54 amounting to Rs.1,13,35,940/- claimed by the assessee under the facts and circumstances of the case by treating the combined residential flat with single kitchen as investment in two separate units disallowed the entire investment in the residential flat. The claim of exemption u/s 54 may please be allowed and addition made to the income in this regard amounting to Rs.1,13,35,940/- may please be deleted.

The Learned CIT Appeals vide second para in para no.(iv) of the order on page no. 11 of the order that “It is pertinent to mention that all the documents placed on record reveal that two independent incomplete structures were purchased by the appellant” it has further been stated in para (vi) of the order on page no. 12 that “... Two registered sale deed was executed on 25.06.2014 in relation to these two facts.... ” Whereas there was only one registered sale deed for the flat no.702 & 703 dt.25.06.2014. -At the end of the order it has been stated that in totality of the facts and circumstances the claim has been disallowed. In the case of the assessee the disallowance has been made for the amount invested by her towards acquisition of single combined residential unit comprising of adjacent flat no.702-703 handed over to her at the time of possession on 15th Feb, 2015 with a single kitchen which is unjustified, illegal and against the express provisions of law specified in sec.54.

Your lordships in the case of Surendra Sharma vs. ITO vs ITO in appeal No. 606/JP/2013 2016 Tax Pub (DT) 2787 (Jp-Trib) has held that “There is nothing in the section, which requires the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use. The fact that the residential house consists of several independent units could not be permitted to act as an impediment to the allowance of the deduction under section 54. It is

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neither expressly nor by necessary implication prohibited.” And the deduction was allowed for two flats purchased on different stories of a building.

The AO had initially disallowed the claim of exemption u/s 54 stating that Two separate houses combined internally on the directions of the assessee cannot be treated as a single residential property for the purpose of section 54. Hence, the deduction of Rs.1,13,35,940/- claim by the assessee as deduction u/s 54 is not allowable.

In this regard I would like to submit that apart from your lordship’s decision cited above in the case of Surendra Sharma there are a number of decisions of similar nature such as in the case of ITO v. Ajit L Verma (2016) 151 TR (A) 282 (Mum- Trib) the assessee had purchased three flats and were combined by the assessee to make a single unit and in that case It has been held by the Hon’ble Mumbai Tribunal that all the three flats were not only interconnected but had only one entry, one kitchen and even were used as one unit by the assessee. Therefore, assessee was entitled to deduction under sec.54F on all flats.

Further the Hon’ble Mumbai High Court in the case of CIT v. Raman Kumar Suri 212 Taxman 0411 (2013) has held vide para 5(c) that “We find no fault with the order of the Tribunal which has upheld the finding of the of fact of the CIT (A) to the effect though the respondent-assessee had purchased flat Nos. 416A and 516A it was only purchase of one residential house. Further, the Tribunal held that two flats were joined together before the respondent assessee became the owner of the two flats. The certificate from the society also established the fact that two Nos. 416A and 516A were joined together and were considered as one residential house. Consequently, where respondent —assessee has acquired one residential house consisting of two

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flats, it cannot be said the respondent assessee had purchased two residential houses..... ”

In another recent pronouncement under circumstances similar to the assessee’s case, the hon’ble Mumbai bench of ITAT in the case of Asstt. CIT v. Sanjay B Pahadia (2017) 49 CCH 0007 (Mum Trib.) has held that adjacent residential units-treatment as single flat-where assessee claimed exemption under section 54 & 54F by investing in two adjacent residential units, however, floor plan thereof clearly indicated that the two units were planned to be constructed as single flat only, and assessee also intended to use them as one residential unit, AO was not justified in restricting the deduction to single unit only.

The entire building “Feathers Realty” in which these units are situated got completion, certificate from the local authorities vide certificate dt.09.02.2015 and possession of habitable single unit fully complete in all respect with electricity, running water and drainage for wash rooms and kitchen and installed lifts in the building was given to the assessee on 15.02.2015 (Copy of Possession Letter duly stamped is enclosed). I would also like to bring out the fact again that the combined unit has only one kitchen and internally connected and cannot be used as two separate residential units.

Building completion certificate was received by the developer from the Vadodara municipal corporation dt.09.02.2015 and possession letter for possession given to assessee dt. 15.02.2015 were submitted on record. At the time when the assessee received the possession of a habitable unit from the developer it was a single habitable residential unit as described in the Possession letter as a single flat or unit in all the clauses and terms of the possession letter as singular unit. Thus exemption claimed for amount of Rs. 1,13,35,940/- invested before 31.07.2014 (due date of filing of return) in

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purchase/construction of a residential flat u/s 54 is fully correct and allowable as per the provisions of section 54 where she has acquired a residential unit and claimed the amount invested till the due date of filing of return as deduction.

In the light of the facts of the case and above judicial pronouncements the claim of the assessee u/s 54 for investment towards purchase or construction of residential flat amounting to Rs. 1,13,35,940/- allowable as per the provisions of law may please be allowed and the addition made may please be deleted.

Ground No.3

The Learned CIT Appeals-I, Jaipur has grossly erred in confirming the application of provisions of amended provisions of sec.54 of the Income Tax Act, 1961 amended w.e.f. assessment year 2015-16 in the case of the assessee pertaining to assessment year 204-15 wherein the word “a residential house” was substituted with “One residential house” by amendment effective from assessment year 2015-16 onwards. The addition made to the Income by the AO and confirmed by learned CIT Appeals amounting to Rs.1,13,35,940/- may please be deleted.

The Learned CIT Appeals vide para no.(x) on page no.14 of the order has reproduced the relevant extract of section 54(1) as per the Finance (No. 2) Act, 2014 wherein the word ‘Constructed a residential house’ has been substituted with ‘Constructed one residential house in India’ and also stated in para (xi) that the above amendment is clarificatory in nature. It is pertinent here to note that for the Assessment year 2014-15 relevant to financial year 2013-14 the provisions contained in the Finance Act, 2013 were applicable and what was amended in the Finance (No.2) Act, 2014 was clearly

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stated to be substituted with effect from 01.04.2015 and hence was not applicable to the case of the assessee relevant to the financial year 2013-14.

The above stated provisions quoted by the learned CIT Appeals are amended provisions applicable from assessment year 2015-16 onwards which have been applied in assessment year 2014-15 despite the facts that the assessee came in possession of only one combined flat at the time she received the possession as per possession letter dt.15.02.2015 from the developer. Hon’ble Madras High Court in the case of CIT v. V.R.Karpagam (2015) 373 ITR 0127 (Madras) has also held that the words prior to amendment of section 54F by Finance (No.2) Act, 2014 w.e.f. 01.04.2015 with regard to word ‘a’, a residential house would include multiple flats/residential units, thus where under the development agreement assessee was entitled to receive certain built-up area, which got translated into five flats, exemption u/s 54F in respect of all five flats in a multi-storey construction would be available.

Even the Hon’ble Madras high court in the above case has held that the amended provisions are applicable from 01.04.2015 onwards and on the amended provisions exemption claimed by the assessee in previous years i.e. before the amendment the old provisions would apply where the words in the sections 54/54F were ‘a residential house’ instead of ‘one residential house’. The Hon’ble Supreme Court in the case of CIT-VII v. Gita Duggal [2015] 228 Taxman 62 has dismissed the SLP of the department and has upheld the Delhi High Court Judgement wherein it was held that merely because a residential house consists of several independent residential unit deduction u/s 54/54F could not be disallowed.

In the case of the assessee she has acquired a single residential flat having a single kitchen and has fulfilled all the conditions stipulated in sec.54 therefore the exemption claimed u/s 54 may please be allowed as the same has been

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disallowed by making own hypothetical assumptions and presumptions for this and that reasons and taking the basis of subsequent change in law though not applicable in the case of the assessee in the year under consideration.

Ground No.4

The Learned CIT Appeals has grossly erred in alleging the assessee to have split the sale consideration into two parts to avoid payment of stamp duty on the sum of Rs.50,63,000/- relating to construction agreement and also to take benefit of deduction u/s 54 of the Income Tax Act, 1961 ignoring the development agreement between the sellers and developer, the terms and conditions set out in agreements entered simultaneously on the same date as per the arrangement between the sellers and developer and also ignoring the single consolidated bill issued by the Feathers realty dt.29.06.2014 wherein service tax was charged and paid on the entire consideration of Rs.1,06,63,000/-. The exemption claimed by the assessee u/s 54 amounting to Rs.1,13,35,940/- may please be allowed under the facts and circumstances of the case.

The Learned CIT Appeals has alleged the assessee to have split the sale consideration into two parts to avoid payment of stamp duty on the sum of Rs.50,63,000/- relating to construction agreement and also to take benefit of deduction u/s 54 ignoring the terms and conditions stipulated in the agreement to sale and construction agreement both dt. 10.05.2014 which were an outcome of a development agreement between the landowner and the developer dt.25.03.2011 as mentioned in the Construction agreement and the assessee in order to abide by the arrangement between the landowner and the developer had to enter into two separate agreements on the same date 10,05.2014 one being the agreement for sale and the other one being the construction agreement.

ITA 769/JP/2017_ 21 Dr. Asha Mathur Vs. ACIT

It is pertinent to note that the assessee had to enter into two agreements only because of scheme of arrangement between the landowner and the developer and the assessee had no intention to save any tax or duty by splitting the sale consideration for which allegations have been made by the learned CIT Appeals on an honest tax payer that she evaded stamp duty on construction agreement.

The learned CIT appeals failed to note that apart from stamp duty on purchase agreement, the assessee has paid service tax on the entire purchase and construction cost i.e. on the entire consideration as per invoice dt.29.06.2014 raised by Feathers Realty wherein service tax of Rs.3,29,487/- has been paid on total consideration of Rs. 1,06,63,000/- for which bill of aggregate value of Rs. 1,09,92,487/- dt.29.06.2014 was already available on record as submitted vide letter dt. 14.07.2016. Alleging the assessee that she avoided stamp duty on construction part was uncalled for, unwarranted and demoralizing for an honest taxpayer who in the same year paid a sum of Rs.1,32,03,500/- as income tax. Further it is also apparent from the order that disallowance u/s 54 is also on such presumptive avoidance of stamp duty by the assessee as it has been stated by the Learned CIT Appeals in the second para (xii) on last page of the order that “... .the appellant cannot be allowed to take double benefit by splitting the sale consideration into two parts to avoid the payment of stamp duty on the sum of Rs.50,63,000/- relating to construction agreement and also to take benefit of deduction under section 54 of the Act thereof.” Such remark was uncalled for and against the provisions contained in section 54 wherein there is no precondition of payment of stamp duty for claim of deduction.

The assessee sold her property on 03.02.2014 and made investment of Rs.1,13,35,940/- towards acquisition of flat before 31.07.2014 (before due date of filing of return) which she has claimed as deduction/exemption u/s

ITA 769/JP/2017_ 22 Dr. Asha Mathur Vs. ACIT

54 at the time of filing of the return. The possession of complete single flat with single kitchen was also received by her on 15.02.2015 after the receipt of completion certificate by the developer from local authorities dt.09.02.2015. All the documents evidencing the acquisition of single combined flat are available on record in the form of agreement to sale, construction agreement, registered sale deed, invoice of the developer dt.29.06.2014 wherein the total consideration for cost of proportionate land and construction alongwith service tax is stipulated which was paid by the assessee, map of the single combined flat, building completion certificate from local authorities dt.09.02.2015, possession letter dt. 15.02.2015 showing a singular unit which goes to show that the assessee has fulfilled all the conditions stipulated u/s 54 of the Income Tax Act, 1961 but still for this and that reason the disallowance of claim of Rs.1,13,35,940/- has been made which in light of the facts and circumstances of the case, the provisions contained in sec.54 and its interpretation by the various judicial pronouncements cited above may please be allowed and the addition made to the income may please be deleted.

authorities below.

and considering the pleadings of both the sides and factual claim of the

sides, we are of the view that the assessee has booked two adjacent

residential flats No. S-702 and S-703 at Scarlet Tower, Atlandra,

Vadodra, Gujarat. At the time of agreement, both the units were under

construction and the assessee has also entered into an agreement for

ITA 769/JP/2017_ 23 Dr. Asha Mathur Vs. ACIT

carrying out the remaining construction and finishing work. It is claimed

that both these flats have been made one habitable unit and there is

only one kitchen set. It is also claimed that both these flats are inter

connected. Since this is the factual aspect, the claim regarding these

facts needs to be ascertained from the physical inspection of the

property. Further we also note that in the Schedule-H, placed at page

No. 80 of the paper book regarding the layout of both these flats it is

noted that this was a proposed layout for Mr. Neeraj Lavania and it is

dated 11/12/2014 while the sale agreements and construction

agreements were in the month of May, 2014. The sale deed of these

flats is of June, 2014. Thus, without correct factual position, this issue

cannot be decided. Hence, the matter is restored back to the file of the

Assessing Officer to be decided de novo in view of the factual as well as

legal position on the issue.

purposes only.

Order pronounced in the open court on 27/02/2018.

Sd/- Sd/- ¼fot; iky jko½ ¼Hkkxpan½ (VIJAY PAL RAO) (BHAGCHAND) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 27th February, 2018

ITA 769/JP/2017_ 24 Dr. Asha Mathur Vs. ACIT *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Dr. Asha Mathur, Vadodara, Gujrat. 1. izR;FkhZ@ The Respondent- The A.C.I.T., Circle-1, Jaipur. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 769/JP/2017) 6.

vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत