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Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI SUDHANSHU SRIVASTAVA & SHRI PRASHANT MAHARISHISmt. Chandra Khanna,
This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-29, New Delhi, dated 30.09.2016 for assessment year 2013-14. The assessee has raised only two grounds of appeal as under which are related to the claim of deduction under Section 54 of the Income Tax Act, 1961 (the Act):
“1. That in the facts and circumstances of the case the ld. CIT (Appeals) has erred in law in disallowing the claim of deduction u/s 54 of the Income Tax Act, 1961 in respect of investment made in second house property by the appellant, on the ground that deduction under section 54 is allowable with respect to investment made only in one residential property.
2. That in the facts and circumstances of the case the ld. CIT (Appeals) has erred in law in not appreciating the fact that the amendment brought u/s 54 Page | 1
of the Income Tax Act, 1961 by Finance (No.2) Act, 2014, w.e.f. 01.04.2015 is prospective in nature and hence the disallowance of deduction in investment made by the appellant in second house property is bad in law.”
Brief fact shows that assessee filed return of income on 31.07.2013 of Rs.13,10,460/-. Assessee has derived income from house property, capital gain and income from other sources. She has declared capital gain on sale of flat at Mumbai of Rs.4,57,93,605/- and has also claimed a deduction of Rs.4,74,30,609/- under Section 54 of the Act. Thus, the consequent capital gain was Rs.NIL. The assessee was asked to justify claim under section 54 of the Act. Assessing Officer noted that assessee has sold 4 flats at „Ashok Tower, Mumbai‟, in joint ownership with her husband Mr. Ajay Khanna on 09.04.2012. The assessee has purchased two house properties at Gurgaon and claimed deduction under Section 54 of the Act. Both the properties are geographically distantly located from each other and were purchased by separate sale deeds from different sellers on different dates. Thus, Assessing Officer was of the view that deduction can be claimed under section 54 with respect to investment in one of the properties, but not in two differently located house properties. Assessee submitted that residential house means even multiple houses and relied upon several judicial precedents on this aspect. The learned Assessing Officer rejected the contention of the assessee and held that in certain cases even more than one residential house can be allowed as a deduction provided those are located in the same building or adjacent to each other. Accordingly he granted deduction of one flat of Rs.3,44,50,000/- as eligible under Section 54 of the Act and computed net capital gain of Rs.1,13,43,605/-. Assessment order under Section 143(3) of the Act was thus passed on 19.01.2016 determining total income of the assessee at Rs.1,26,54,065/-. Consequently NIL Income Tax capital gain offered by the assessee in her return of income was assessed at Rs.1,13,43,065/- determining total income of the assessee at Rs.1,26,54,065/-. Consequently NIL Income Tax capital gain offered by the assessee in her return of income was assessed at Rs.1,13,43,605/-.
2.1 Aggrieved, assessee preferred an appeal before the learned CIT (Appeals) who also vide para No. 8.5 onwards upheld the order of the Assessing Officer. Therefore, assessee is aggrieved and in appeal. Page | 2
The learned Authorized Representative vehemently submitted that assessee must get the deduction with respect to both the properties. The learned Departmental Representative vehemently relied upon the decision of Hon‟ble Madras High Court in Tilokchand & Sons Vs. ITO (2019) 105 taxmann.com 151 (Madras).
3.1 The learned Departmental Representative vehemently relied upon the decision of lower authorities.
We have carefully considered the rival contentions and found that Hon‟ble Madras High Court in Tilokchand & Sons Vs. ITO (supra) has held that the dislocation of newly purchased residential houses will not alter the position for interpretation of the word “a residential house” to the effect that it may include more than one residential houses. In para No. 21 the Hon‟ble High Court also considered the impact of the amendment by Finance (No. 2) Act of 2014 with effect from 1.04.2015 which could operate only prospectively from Assessment Year 2015-16. The present case before us is prior to that. Further the Hon‟ble High Court has also considered the decision cited by the learned Assessing Officer in para No. 13 of that order. In view of this we hold that assessee is also entitled to deduction under Section 54 of the Act in both the house properties even though they are geographically distantly located in the same city. Further the learned CIT (Appeals) has also failed to appreciate that amendment with effect from Finance Act, 2014 is not a clarificatory amendment and does not operate retrospectively, but prospectively. In view of this both the grounds of appeal of the assessee are allowed.
In the result, the appeal of the assessee is allowed.