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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: HON’BLE SHRI MAHAVIR SINGH, VP & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2011-12 contests the order of Ld. Commissioner of Income Tax (Appeals)-39, Mumbai [CIT(A)], Appeal No.CIT(A)-39/IT-58/IT 21(1)(3)/14-15 dated 02/05/2017 on following grounds of appeal :- 1) Under the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in upholding view of the then Assessing Officer in restricting the exemption of reinvestment of capital gain to one residential house property by taking view of phrase "a residential property" in Section 54(1) of Income Tax Act, 1961 as only one house property ignoring the explanations and submissions made before him.
Nilufer Sayed Assessment Year: 2011-12 2) Under the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in upholding view of the then Assessing Officer in disallowing the part exemption of Rs.60,85,931/- out of total exemption of Rs.1,50,14,111/- claimed by Assessee u/s 54 of the Act on his own notions, surmises and conjunctures, ignoring the explanations and submissions made before him.”
We have carefully heard the rival submissions and perused relevant material on record. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs.
The material facts are that an assessment was framed against the assessee for the year under consideration u/s. 143(3) on 05/02/2014. It transpired that the assessee sold one residential property situated at Asha Deep Building JVPD and claimed exemption u/s 54 by making investment in two separate residential properties viz. (i) Flat in A-Wing, 6th floor, Leela Sagar, Yari Road, Versova, Andheri (W), Mumbai for Rs.89.28 Lacs; (ii) Flat No.304, A-wing, 3rd Floor, Twin Star CHS situated at Srishti Complex, Saki Vihar Road, Opp. L&T Gate, Powai, Mumbai for Rs.70.44 Lacs. After considering factual matrix, Ld. AO opined that the deduction would be available to the extent of investment made in one flat only since the flats were located totally at two different locations. Reliance was placed on the decision of Mumbai Tribunal (SB) in Sushila M.Jhaveri (2007 107 ITD 327) while taking the said view. Accordingly, the deduction u/s 54 was restricted in the aforesaid manner. The stand of Ld. AO, upon confirmation by Ld. CIT(A), is under challenge before us. Our Adjudication 4.1 We find that the provisions of Sec. 54 of the Income Tax Act, 1961 as it stood during AY 2011-12, provides for a deduction Nilufer Sayed Assessment Year: 2011-12 against certain Long-Term Capital Gains earned by an individual assessee on account of investment made by way of purchase / construction of ‘a residential house property’ within specified time period. The Finance Act, 2014 substituted the expression ‘a residential house property’ with the words ‘one residential house’ with effect from 01/04/2015. The rationale of the amendment, as explained in clause 20.3 of the explanatory notes to the Finance Bill was as follows: - 20.3. Certain courts had interpreted that the exemption is also available if investment is made in more than one residential house. The benefit was intended for investment in one residential house within India. Accordingly, sub-section (1) of Section 54 of the Income-tax Act has been amended to provide that the rollover relief under the said section is available if the investment is made in one residential house situated in India. The Finance Act, 2019 has further amended the said provision with effect from 01/04/2020 to provide that in case of capital gain not exceeding Rs.2 Crores, deduction shall be available even against investment in two residential houses in India. 4.2 Interpreting the provisions of Section 54, Hon’ble Madras High Court in recent decision titled as Tilokchand & Sons V/s ITO [105 Taxmann.Com 151 14/03/2019], applying the decisions of Hon’ble Karnataka High Court in CIT V/s D. Ananda Basappa [309 ITR 329] & CIT V/s Khoobchand M. Makhija [43 Taxmann.com 143 18/12/2013] held that 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 then there was no need to amend the said provisions by Finance Act No.2 of 2014 which the Legislature specifically made it clear to operate only prospectively Nilufer Sayed Assessment Year: 2011-12 from AY 2015-16. Once it is held that the word 'a' employed can include plural residential houses also within the meaning of Section 54 prior to its amendment, then such interpretation will not change merely because the purchase of new assets in the form of residential houses is at different addresses. So long as the same Assessee 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 u/s 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. It was also held that the amendment made by The Finance Act, 2014 was intended to be specifically applied only prospectively with effect from AY 2015-16 since it took note of the judicial precedents for period prior to 01/04/2015. At the same time the decision of Hon’ble Punjab & Haryana High Court in Pawan Arya V/s CIT [11 Taxmann.com 312] was distinguished since no opinion, in detail, was expressed in the judgment. 4.3 The Hon’ble Karnataka High Court in Khoobchand M. Makhija [43 Taxmann.com 143] considering the decision of same court in CIT V/s Smt. K.G.Rukminiamma [331 ITR 211] interpreted the term ‘a’ in the context of Section 13 of the General Clauses Act, 1897 in the following manner: - 9. The word 'a' is not defined in the Act. When a word is not defined in the Act itself, it is permissible to refer to dictionaries to find out the general sense in which that word is understood in common parlance. However, in selecting one out of the various meanings of a word, regard must always be had to the context as it is a fundamental rule that the meanings of words and expressions used in an Act must take their colour from the context in which they appear. Therefore, when the context makes the meaning of a word quite Nilufer Sayed Assessment Year: 2011-12 clear, it becomes unnecessary to search for and select a particular meaning out of the diverse meanings a word is capable of, according to lexicographers. Dictionaries are not dictators of statutory construction where the benignant mood of a law, and more emphatically, the definition clause furnishes a different denotation. A statute cannot always be construed with the dictionary in one hand and the statute in the other. Regard must also be had to the scheme, context and to the legislative history. Words and expressions at times have a 'technical' or a 'legal meaning' and in that case they are understood in that sense. Judicial decisions expounding the meaning of words in construing statutes in pari materia will have more weight than the meaning furnished by dictionaries. (Principles of Statutory Interpretation by Justice G.P.Singh – pages 279 and 280). It is in this background, it is necessary to understand the meaning of the word 'a' in the context in which it is used in the said Section.
The words "a" or "an" and "the" are called Articles. They come before nouns. There are two Articles – a (or an) and the "a" or "an" is called the Indefinite Article, because it usually leaves indefinite the person or thing spoken of. "The" is called the Definite Article, because it normally points out some particular person or thing. The indefinite article is used before singular countable nouns. The definite article is used before singular countable nouns, plural countable nouns and uncountable nouns. The indefinite Article is used in two contexts, firstly, in its original numerical sense of one. Secondly, in the vague sense of a certain. It is also used in the sense of any, to single out an individual as the representative of a class. It is also used to make a common noun of a proper noun.
In the Strouds Judicial Dictionary of Words and Phrases dealing with this letter 'a', it is said 'a' is sometimes read as 'the' 'a' may sometimes be read as 'some'. But, more frequently 'a' is the equivalent of 'any'. However, it is difficult to read 'a' as 'all'.
In the Concise Oxford Dictionary of Current English, dealing with the letter 'a' is stated that, 'a' sometimes called indefinite article, used with apparent plurals of number.
Section 13 of the General Clauses Act, 1897 deals with gender and number. It reads as under: - "13. Gender and number. — In all Central Acts and Regulations, unless there is anything repugnant in the subject or context. — (i) words importing the masculine gender shall be taken to include females; and (ii) words in the singular shall include the plural, and vice versa."
This Court in the case of CIT v. Smt. K.G. Rukminiamma [2011] 331 ITR 211/196 Taxman 87/[2010] 8 taxmann.com 121 (Kar.), had an occasion to consider Section 54 of the Act and had held as under: 'For a proper appreciation of the aforesaid contention, it is necessary to have a careful look at Section 54 of the Income Tax Act, which reads as under: "54. Profit on sale of property used for residence — (1) Subject to the provisions of sub-section (2), where, in the case of an assesses 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 winch is chargeable under the head Nilufer Sayed Assessment Year: 2011-12 'Income from house property' (hereafter in this section referred to as the original asset), and the assesses 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, - ….. ."
A reading of the aforesaid provision makes it very clear that the property sold is referred to as original asset in the section. That original asset is described as buildings or lands appurtenant thereto and being a residential house. Therefore, it is not mere "a residential house". The residential house may include buildings or lands appurtenant there to. The stress is on the use to which the property is put to. Only when that asset was used as a residential house, which may consist of buildings or lands appurtenant thereto, the income derived from the sale of such a residential house is chargeable under the head "Income from house property." If 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 aforesaid provisions. In this part of the section also, the words "a residential house" is again used. The said residential house necessarily has to include buildings or lands appurtenant thereto. It cannot be construed as one residential house. In this context, it is useful to refer- to Section 13 of the General Clauses Act, 1897, which reads as under: "13. Gender and number. - In all Central Acts and Regulations, unless there is anything repugnant in the subject or context – (i) words importing the masculine gender shall be taken to include females; and (ii) words in the singular shall include the plural, and vice versa."
The context in which the expression "a residential house" is used in Section 54 makes it clear that, it was not the intention of the legislation to convey the meaning that it refers to a single residential house. If that was the intention, they would have used the word "one." As in the earlier part, the words used are buildings or lands which are plural in number and that is referred to as a residential house", the original asset. An asset newly acquired after the sale of the original asset also can be buildings or lands appurtenant thereto, which also should be "a residential house." Therefore the letter "a" in the context it is used should not be construed as meaning "singular." But, being an indefinite article, the said expression should be read in consonance with the other words "buildings and lands" and, therefore, the singular "a residential house" also permits use of plural by virtue of Section 13(2) of the General Clauses Act. This is the view which is taken by this court in the aforesaid Anand Basappa's case in I.T.A.No. 113/2004, disposed of on September 20, 2008 CIT v. D. Ananda Basappa [2009] 309 ITR 329 (Kar.)].' Nilufer Sayed Assessment Year: 2011-12 4.4 Similar view has been expressed by Hon’ble Madras High Court in its earlier decision titled as CIT V/s Gunamal Jain [160 DTR 221 03/03/2017] after applying the decisions of same court in CIT V/s V.R. Karpagam [373 ITR 127] and the decision of Hon’ble Karnataka High Court in CIT V/s Smt. K.G.Rukminiamma [331 ITR 211]. The Hon’ble Delhi High Court relying upon the decision of Hon’ble Karnataka High Court in CIT V/s D. Ananda Basappa [309 ITR 329] took similar view and dismissed revenue’s appeal by holding that no substantial question of law arose. 4.5 Keeping in view the rules of judicial precedents, the aforesaid view of Hon’ble High Courts shall take precedent over the decision of Tribunal (SB) in ITO V/s Sushila M.Jhaveri as relied upon by Ld. CIT(A). 4.6 In view of the foregoing & accepting the interpretation of word ‘a’ as occurring in Section 54 as made by Hon’ble Madras High Court in Tilokchand & Sons V/s ITO [supra], we hold that on the facts and circumstances, the assessee would be eligible to claim deduction u/s 54 on account of investment made in both the flats. We order so. The Ld. AO is directed to re-compute assessee’s income in terms of our above order.
The appeal stands allowed in terms of our above order.