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Income Tax Appellate Tribunal, “SMC – C” BENCH, BANGALORE
Before: Shri Chandra Poojari
O R D E R These appeals filed by the assessees are directed against the orders of the CIT(A), both dated 29.03.2019. The relevant assessment year is 2006-2007.
Common grounds are raised in both the appeals, except variance in figures, read as follows:-
“1. The order of the learned CIT(A) is bad and unsustainable in the eyes of law.
2 & 2173/Bang/2019 Late Smt Prema Kumari & Sri Krishna Reddy Praveen Kumar.
2. The learned CIT(A) ought to have appreciated that the appellant’s case is squarely covered by three High Court judgments (Karnataka High Court in CIT v. Smt.K.G.Rukminiamma (2011) 331 ITR 211, High Court of Madras, in the case of CIT v. Smt. V.R.Karpagam (2014) Taxmann.com 55 and High Court of Andhra Pradesh in The Commissioner of Income-tax-II, Hyderabad v. Syed Ali Adil (2013) 33 Taxmann.com 212] as well as two orders of jurisdictional ITAT, Bangalore in Smt.Nethravathi v. The Income Tax Officer – ITA No.2630/Bang/2017 and Mrs.S.Suma v. The Income Tax Officer – ITA No.568/Bang/2018.
The learned CIT(A) erred in relying on the cases of CIT v. M.J.Siwani, Suseela M.Jhaveri’s case 107 ITD 327 (Mumbai) and Parswanath Padmarajaiah Jain v. ACIT 2019 102 Taxmann.com 92 ITAT Bangalore, since the facts of these cases and issue involved in these cases are distinct from the facts and issues involved in the present case.
4. The learned CIT(A)’s reliance on Supreme Court in the case of CC (Imports) v. Dilip Kumar & Co 2018 95 Taxmann 327 (SC) is misplaced since in none of the above judgment of High Courts or ITAT relied upon by the appellant the relief was granted based on the theory that the benefit of doubt should go to the assessee.
5. The appellant craves the leave to add, amend, alter and / or withdraw any ground/s before or during the hearing.
For these and such other grounds that may be urged at the time of hearing of the appeal, the appellant prays that the appeal may be allowed.
The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing.”
3. There was a delay of 125 days in filing the appeals before the Tribunal. The assessee has filed condonation petition along with an affidavit dated 30.09.2019 stating that due to ill- health, he could not file the appeals in time. To this effect, he has also filed a medical certificate from Dr.Basavaraj S.Charantimath, Sree Lakshmi Venkateshwara Clinic, dated 25.09.2019, confirming that the assessee was suffering from slipped disc since March 2019 and the doctor advised him to take complete bed rest from March 2019 to the second week of September 2019. Hence, there was a delay of 125 days in filing the appeals before the Tribunal by Sri.Praveen Kumar, being the legal heir of Late Smt.Prema Kumari.
3.1 I have carefully considered the material placed on record. In my opinion, the assessee was prevented by sufficient cause to file the appeals before the Tribunal belatedly, as the reasoning given by the assessee is bonafide. I, therefore, condone the delay and admit the appeals for adjudication.
The assessee has raised various grounds, but the crux of the grounds is with regard to the denial of exemption u/s 54F of the I.T.Act.
The facts of the case are that the Assessing Officer denied exemption u/s 54F of the I.T.Act on the ground that no documentary evidence was produced before him. However, the assessee claimed that he has filed a letter dated 13.01.2014
4 & 2173/Bang/2019 Late Smt Prema Kumari & Sri Krishna Reddy Praveen Kumar. before the A.O., in which flat sharing agreement dated 18.08.2006 was furnished before him. According to the flat sharing agreement dated 18.08.2006 followed by partition deed dated 20.06.2006, the assessee has received 4 flats (G-38, 138, 238, 338) each measuring 825 sq.ft. According to the A.O. section 54 clearly states that exemption will be provided when capital gains arising out of the transfer of any long term capital asset, not being a residential house is invested in the purchase or construction of `a residential house’. Further, according to section 54F, the assessee should not purchase any other residential house other than the new asset within a period of one year before or two years after the date on which the transfer took place. According to the A.O. the assessee has acquired 4 flats, which is in violation of the conditions laid done in section 54F of the Act. Thus, the Assessing Officer denied the benefit of exemption u/s 54F of the Act.
6. Aggrieved by the order of assessment, the assessee carried the matter in appeal before the CIT(A). During the course of appellate proceedings, the CIT(A) noted that the Special Bench of the ITAT Mumbai Benches in the case of Sushila Jhaveri [107 ITD 327 (Mumbai)] has not been brought before the Hon’ble High Court of Karnataka and therefore could not be considered by the Hon’ble Court at the time of K.G.Rukniniamma’s decision reported in 331 ITR 211 (Kar.). Therefore, the Special Bench decision is directly applicable to the issue under consideration. The learned CIT(A) also relied on the judgment of the Hon’ble Karnataka High Court in the case of CIT v. M.J.Siwani [(2014) 46 taxmann.com 170 (Kar.)]
5 & 2173/Bang/2019 Late Smt Prema Kumari & Sri Krishna Reddy Praveen Kumar. to hold that in terms of provisions of section 54F of the Act, where assessee on date of sale of long term capital asset owns a residential house even jointly with another person, his claim for deduction of capital gain arising from sale of asset has to be rejected. Before the CIT(A) the assessee filed a written submission dated 18.03.2019 to contend that the principles laid down in the case of Commissioner of Customs (Improt), Mumbai v. M/s.Dilip Kumar and Company [Civil Appeal No.3327 of 2007] cannot be relied upon in his case since these principles are applicable only if there is an ambiguity. The assessee also relied on the decisions of three High Court judgments (Karnataka High Court in CIT v. Smt.K.G. Rukminiamma reported in 331 ITR 211, High Court of Madras in the case of CIT v. Tax Case (Appeal) No.301 of 2014 Smt.V.R.Karpagam and High Court of Andhra Pradesh in The Commissioner of Income Tax-II, Hyderabad v. Syed Ali Adil) as well as 2 orders of the jurisdictional ITAT in Smt.Nethravathi v. The ITO in ITA No.2630/Bang/2017 and Mrs.S.Suma v. the ITO in ITA No.568/Bang/2018 and claimed that there is no ambiguity in the provisions. According to the CIT(A), if the decisions in the cases of Sushila M.Jhaveri, M.J.Sewani and Rukminiamma are read together, it is evident that there exists an ambiguity due to which Hon’ble Courts are giving different decisions on the same issue and interpreting it in different ways. Therefore, considering there is some ambiguity, the benefit of such ambiguity cannot be claimed by the assessee as it must be interpreted in favour of the Revenue. Accordingly, the CIT(A) denied the exemption u/s 54F of the Act.
I have heard the rival submissions and perused the material on record. In this case, the assessee claimed exemption u/s 54F of the Act, which was denied on the reason that the assessee has not produced documentary evidence to claim deduction u/s 54F of the Act. The CIT(A) disallowed the same on the reason that the ambiguity in the present section as there were different judgments giving different decisions on the same issue. However, there was no dispute that the assessee has made investments in purchasing the capital asset within the stipulated time limit. As per section 54F, exemption will be granted when capital gain arising out of transfer of any long term capital asset not being a residential house is invested in the purchase or construction of “a residential house”. According to the CIT(A), the assessee has acquired 4 flats, which is in violation of the conditions laid done in section 54F of the Act. According to the learned DR, the phrase “a residential house” would mean one residential house and it does not appear to the correct understanding. However, according to the learned AR, the expression “a residential house” be understood in a sense that building should be of residential in nature and “a” should not be understood to indicate a singular number. The combined reading of section 54(1) and 54F of the Act discloses that, a non residential building can be sold, the capital gain of which can be invested in a residential building to seek exemption of capital gain tax. However, the proviso to section 54 of the I.T.Act lays down that 7 & 2173/Bang/2019 Late Smt Prema Kumari & Sri Krishna Reddy Praveen Kumar. if the assessee has already one residential building, he is not entitled to exemption of capital gains tax, when he invests the capital gain in purchase of additional residential building. Section 54 / 54F uses the expression “a residential house”. The expression used is not “a residential unit”. This is a new concept introduced by the CIT(A) in his order. Section 54F of the Act requires the assessee to acquire a “residential house” and so long as the assessee acquires a building, which may be constructed for the sake of convenience, in such manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the section should be taken to have been satisfied. There is nothing in these sections which require 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. If there is nothing in the section which requires that the residential house should be built in a particular manner, it seems to me that the income tax authorities cannot insist upon that requirement. I, therefore, unable to see how and why the physical structuring of the new residential house, whether it is lateral or vertical, should come in the way of considering the building as a residential house. I do not think that the fact that the residential house consists of several independent units can be permitted to act as an impediment to the allowance of the deduction u/s 54F. Further, the Hon’ble Madras High Court in the case of CIT v. Smt.V.R.Karpagam, Tax Case (Appeal) No.301 of 2014 dated 18.08.2014 and the Hon’ble Karnataka High
8 & 2173/Bang/2019 Late Smt Prema Kumari & Sri Krishna Reddy Praveen Kumar. Court in the case of CIT v. D.Ananda Basappa [(2009) 309 ITR 329 (Kar.)] has categorically held that amendment to section 54F with regard to (a) by Finance (No.2) Act, 2014 with effect from 01.04.2015 withdrawing deduction for more than one flat (residential house) and it was held that post-amendment benefit of section 54F will be applicable to one residential house in India, whereas, prior to the amendment, it is clear that a residential house would include multiple flats/residential units. In view of the considered view taken by the Hon’ble jurisdictional High Court as well as the Hon’ble Madras High Court, I am of the opinion that the assessee is entitled for exemption u/s 54F of the Act in respect of more than one flat, as claimed by the assessee.
In the result, the appeals filed by the assessee are allowed.