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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
आदेश /O R D E R
PER MAHAVIR SINGH, VP: This appeal by the assessee is arising out of order of the order of Commissioner of Income Tax (Appeals), Coimbatore in Appeal No.CIT(A), Coimbatore/10197/2017-18, vide order dated 28.01.2020. The assessment was framed by the ACIT, Circle-1, Ootacamund for the assessment year 2014-15 vide order dated
29.12.2017 u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter the ‘Act’).
Before us the assessee raised grounds relating to fair market value of the property sold as on 01.04.1981 and investing the Long Term Capital Gain in purchase of two residential units, which are joint and having same address. At the time of hearing, the ld.counsel for the assessee stated that he is not pressing the issue regarding ascertaining fair market value as on 01.04.1981, as he is arguing the issue of claim of exemption u/s.54F of the Act, in regard to investment of LTCG in two residential units, both having same address and joint property. For this, the ld.counsel for the assessee drew our attention to Ground Nos.3 & 4, which reads as under:- “3. The learned CIT(A) erred in not considering the jurisdictional High Court decisions, which have clearly held that the amendment in sec.54 and 54F are prospective and erred in holding that they are clarificatory and hence, retrospective.
4. The learned CIT(A) erred in not considering the very fact that the appellant had invested in two residential units, both are in the same address and erred in not considering the detailed written submissions and decisions relied on.”
We have heard rival contentions and gone through facts and circumstances of the case. The assessee is a co-owner in one
property bearing address at RS.No.1772/4G, 1772/5G, New RS No.E-15/50, E-15/51 of Ooty town, Nilgiris Dist. The assessee is co-owner in this property to the extent of 15% of Rs.1,50,00,000/- The AO computed the indexed cost of the share of the house as on the date of sale at Rs.34,56,459/- and also computed LTCG at Rs.60,33,960/- as under:- Chargeable LTCG Rs.1,50,00,000 34,56,459 1,15,43,541 Less: 54F deduction as allowable 40,60,852 74,82,789 52,76,785 x 1,15,43,541 1,50,00,000 LTCG already admitted Rs.14,48,829 Additions on account of LTCG Rs.60,33,960 The assessee before the AO claimed deduction u/s.54F on purchase of two flats. The assessee claimed that out of sum of Rs.150 lakhs, he has invested a sum of Rs.140 lakhs in purchase of two residential flats as under:- “That the nature and address of the first flat-as per Doc.No:5427 is “three bed room Apartment in No:F-02(102), First Floor, Municipal Corporation No:5C-319/3, PID No.89-397-5C-319/3-“ARAFA OPEL” in Block-III, Hennur Road, Banaswadi Road Layout, [H.R.B.R.Layout]”
That the nature and address of the second flat- as per Doc.No:5429 is “three bed room Apartment in No:FTF-01(401), Fourth Floor, Municipal Corporation No:5C-319/8, No.89-397-5C-319/8-“ARAFA OPEL” in Block-III, Hennur Road, Banaswadi Road Layout, [H.R.B.R.Layout]”
The assessee claimed before the AO that these two flats are built on same piece of land and address is same and flat is connected with each other and the family using this flat as a unit. But the AO was not convinced and hence, he denied the claim of deduction and allowed the claim of deduction u/s.54F of the Act only for one property for an amount of Rs.52,76,785/-. Aggrieved, assessee preferred appeal before the CIT(A).
The CIT(A) also confirmed the action of the AO despite the fact that following case laws were produced before CIT(A):- (i) Hon’ble Madras High Court in the case of CIT vs. Gumanmal Jain, 394 ITR 666. (ii) Hon’ble Karnataka High Court in the case of CIT vs. D.Ananda Dasappa, (2009) 309 ITR 329 (iii) Hon’ble Madras High Court in the case of CIT vs. Tilok Chand & Sons, (2019) 105 taxmann.com 151 Aggrieved, assessee came in appeal before the Tribunal.
We have heard the rival contentions and gone through facts and circumstances of the case. Before us, the ld.counsel for the assessee relied on the same case laws which were not considered by CIT(A). The ld.counsel for the assessee filed copy of decision of the Hon’ble Madras High Court in the case of CIT vs. Gumanmal, 394 ITR 666. On the other hand, the ld.senior DR heavily relied on amendment made by Finance (No.2) Act, 2014 w.e.f. 1.4.2015 in the provisions of section 54F(1) whereby in place of “constructed, a residential house” introduced “constructed, one residential house in India”. He argued that this amendment is retrospective and the benefit of claim of deduction u/s.54F of the Act can be allowed in respect of only one house and which is rightly been allowed by CIT(A) as well as the AO denying deduction in respect of second house.
We have gone through the judgment of the Hon’ble Madras High Court in the case of Gumanmal, supra, and noted that Hon’ble Madras High Court has interpreted that the amendment by the Finance Act, 2014 w.e.f. 01.04.2015 is prospective and not retrospective. The Hon’ble High Court observed in para 9 & 10 as under:- 9. It is relevant to note herein that an amendment was made to the above- said provision with regard to the word “a” by the Finance (No. 2) Act, 2014, which will come into effect from 01.04.2015. The said amendment reads as follows:
“32a. Words “constructed, one residential house in India” shall be substituted for “constructed, a residential house” by the Finance (No. 2) Act, 2014, with effect from 01.04.2015.”
The above-said amendment to Section 54F of the Income Tax Act, which will come into effect only from 01.04.2015, makes it very clear that the benefit of Section 54F of the Income Tax Act will be applicable to constructed, one residential house in India and that clarifies the situation in the present case, i.e, post amendment, viz., from 01.04.2015, the benefit of Section 54F will be applicable to one residential house in India. Prior to the said amendment, it is clear that a residential house would include multiple flats/residential units as in the present case where the assessee has got five residential flats. We may also mention here that all the Authorities below have clearly understood that the agreement signed by the assessee with M/s. Mount Housing Infrastructure Ltd., is that the assessee will receive 43.75% of the built-up area after development, which is construed as one block, which may be one or more flats. In that view of the matter what was before the Assessing Officer is only equivalent of 56.25% of land transferred, equivalent to 43.75% of built up area received by the assessee. This built up area got translated into five flats. Hence, we are of the opinion that the transaction in this case was not with regard to the number of flats but with regard to the percentage of the built up area, vis-a-vis, the Undivided Share of Land.”
Before Hon’ble Madras High Court, the issue was regarding certain contiguous extent of land and construction of flats thereon i.e., 15 flats. In the present case before us, the assessment year is 2014- 15. According to the decision of Hon’ble Madras High Court in Gumanmal, supra, we are of the view that the deduction u/s.54F of the Act is available even for two flats as in the present case before us, the assessee constructed two contiguous flats in the same land and address is same having common kitchen and joint by the purpose. Once these are facts, we allow the claim of deduction u/s.54 of the Act on both flats and direct the AO accordingly.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 25th January, 2022 at Chennai.