RAJKUMARI,CHENNAI vs. DCIT CENTRAL CIRCLE 2(2), CHENNAI

Aforesaid appeal by assessee for Assessment Year (AY) 2006-07 arises out of the order of learned Commissioner of Income Tax (Appeals)-18, Chennai [CIT(A)] dated 14-06-2022 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s. 147 of the Act on 30-12-2009. The sole grievance of the assessee in the appeal is that deduction under Sec. 54 as claimed by the assessee with respect to three properties has been restricted by Ld. AO to the extent of investment made in one house property only.

During hearing, it transpires that the issue is covered in assessee’s favor by the decision of Hon’ble High Court of Madras in Trilokchand & Sons V/s ITO (413 ITR 189) which has not been considered by Ld. CIT(A) in the impugned order. In the said background, our adjudication would be as under.

The assessee sold a residential property and earned Long-Term Capital Gains of Rs.42.64 Lacs. The assessee claimed exemption u/s 54 against investment in three properties. However, Ld. AO restricted the deduction to the extent of one house property only. The Ld. CIT(A) confirmed the stand of Ld. AO. Aggrieved, the assessee is in further appeal before us. 4. We find that Hon’ble High Court of Madras in Trilokchand & Sons V/s ITO (413 ITR 189), interpreting the word ‘a residential house’ as occurring in Sec.54(1), held as under: - 21. In our understanding, if the word 'a' as employed under Section 54 prior to its amendment and substitution by the words 'one' with effect from 01.04.2015 could not include plural units of residential houses, there was no need to amend the said provisions by Finance Act No.2 of 2014 with effect from 01.04.2015 which the Legislature specifically made it clear to operate only prospectively from A.Y.2015- 2016. Once we can hold that the word 'a' employed can include plural residential houses also in Section 54 prior to its amendment such interpretations will not change merely because the purchase of new assets in the form of residential houses is at different addresses which would depend upon the facts and circumstances of each case. So long as the same Assessee (HUF) purchased one or more residential houses out of the sale consideration for which the capital gain tax liability is in question in its own name, the same Assessee should be held entitled to the benefit of deduction under Section 54 of the Act, subject to the purchase or construction being within the stipulated time limit in respect of the plural number of residential houses also. The said provision also envisages an investment in the prescribed securities which to some extent the present Assessee also made and even that was held entitled to deduction from Capital Gains tax liability by the authorities below. If that be so, the Assessee-HUF in the present case, in our opinion, complied with the conditions of Section 54 of the Act in its true letter and spirit and, therefore was entitled to the deduction under Section 54 of the Act for the entire investment in the properties and securities. Therefore, in our opinion, Judgment rendered by the Karnataka High Court in D. Ananda Basappa (supra) & Khoobchand M.Makhija (supra) cited at bar by the learned counsel for the Assessee apply on all fours to the facts of the present case.

The decision of Punjab and Haryana High Court relied upon by the learned counsel for the Revenue, in which the Division Bench of the said Court finding a distinction with D. Ananda Basapaa's case (supra) on facts, without expressing contrary opinion in detail, held that no Substantial Questions of Law arose, renders little help to the arguments advanced by the learned counsel for the Revenue.

Therefore, we are of the considered opinion that the present Appeal filed by the Assessee deserves to be allowed and the same is accordingly allowed and the questions of law framed above are aswered in favour of the Assessee and as against the Revenue. No order as to costs.