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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI DUVVURU RL REDDY & SHRI G.MANJUNATHA
आयकर अपीलीय अिधकरण, ‘बी’ �याय पीठ, चे�ई IN THE INCOME TAX APPELLATE TRIBUNAL , ‘B’ BENCH, CHENNAI �ी धु�वु� आर.एल रे�ी, �याियक सद�य एवं �ी जी. मंजुनाथ , लेखा सद�य के सम� BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A.No.1930/Chny/2017 (िनधा�रणवष� / Assessment Year: 2013-14) Mr. M.S.Amaresan Vs The Assistant Commissioner of S-101, 4th Main Road, Income Tax , Anna Nagar, Non-Corporate Circle-7(1) Chennai. Chennai-600040. PAN : AAFPA 2740N (अपीलाथ�/Appellant) (��यथ�/Respondent) : अपीलाथ� क� ओरसे/ Appellant by Mr. N.Arunraj, CA for Mr.S.Sridhar, Advocate : Mr. Suresh Periasamy,JCIT ��यथ� क� ओरसे/Respondent by सुनवाई क� तारीख/Date of hearing : 14.12.2020 घोषणा क�तारीख /Date of Pronouncement : 23. 12.2020 आदेश / O R D E R PER G.MANJUNATHA, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-7, Chennai dated 20.06.2017 and pertains to the assessment year 2013-14. 2. The assessee has raised the following grounds of appeal:- “1. The order of The Commissioner of Income Tax (Appeals) 7, Chennai dated 20.06.2017 in I.T.A.No.24/CIT(A)6/2016-17 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case. 2. The CIT (Appeals) erred in sustaining the partial reworking of the claim for tax exemption u/s 54F of the Act in the computation of Long Term Capital Gains without assigning proper reasons and justification. 3. The CIT (Appeals) failed to appreciate that the misconstruction of section 54F of the Act would vitiate the decision rendered in para 4.3 of the impugned order and ought
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to have appreciated that the reinvestment in two units should not be considered independent of each other, thereby vitiating the decision rendered in para 4.3 of the impugned order. 4. The CIT (Appeals) failed to appreciate that the misreading of the decision of the Madras High Court would vitiate the decision rendered in para 4.3 of the impugned order and ought to have appreciated that the reinvestment in multiple units would be eligible for tax exemption u/s 54F of the Act. 5. The CIT (Appeals) erred in sustaining the depreciation to the extent of Rs.64,350/- in the computation of taxable total income without assigning proper reasons and justification. 6. The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law. 7. The Appellant craves leave to file additional grounds/arguments at the time of hearing.”
Brief facts of the case are that the assessee is an individual filed his return of income for the assessment year 2013-14 on 01.08.2013 declaring total income of Rs.18,63,300/-. The case has been selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that the assessee has transferred immovable property and computed long term capital gain and after claiming exemption u/s.54F of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) declared Nil income under the head income from capital gains and therefore, called upon the assessee to file necessary evidences including sale deed or any
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other evidences for transfer of property and purchase deed for reinvestment of sale consideration for purchasing residential house to claim exemption under section 54F of the Act. In response, the assessee submitted that during the financial year relevant to the assessment year 2013-14, the assessee property was acquired for the Metro Rail Project and he was paid compensation of ` 1,97,97,409/-. The assessee has computed long term capital gain after deducting cost of acquisition and claimed exemption u/s.54F of the Act for purchase of two residential properties amounting to ` 83 lakhs and `69 lakhs. The assessee further stated that claim of exemption u/s.54F of the Act was in accordance with law, because before amendment to section 54F by the Finance Act, 2014 w.e.f. 01.04.2015, benefit of section 54F will be applicable to more than one residential house and hence, even if the assessee has purchased two different houses, exemption cannot be denied u/s.54F of the Act. The Assessing Officer was not convinced with the explanation furnished by the assessee and according to him, as per provisions of section 54F of the Act, the assessee is not eligible for exemption u/s.54F, because he has purchased another residential house other than the new asset, within a period of one year after the date of transfer of the original asset and accordingly,
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rejected the exemption claimed u/s.54F of the Act and recomputed the long term capital gains from transfer of property.
Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee has reiterated his submissions made before the Assessing Officer along with judicial precedents including the decision of Hon’ble Madras High Court in the case of CIT vs. V.R. Karpagam reported in (2014) 50 taxmann.com and the decision of ITAT., Chennai in the case of ITO Vs .P.A. Sarala reported in (2015) 58 taxmann.com 290 (Chennai). The learned CIT(A), after considering the relevant submissions of the assessee and also by taking note of the judgement of Hon’ble Madras High Court in the case of CIT vs. V.R.Karpagam (supra) observed that relevance of ratio laid down by the Hon’ble Madras High Court in the above said case by the assessee is misplaced on facts and in circumstances, because the Hon’ble High Court has rendered the judgement in the context of joint development agreement where the assessee in pursuance to transfer of land gets multiple units of residential apartments in the project and at the same time. The Hon’ble Court under those circumstances held that a residential house referred to
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in section 54F means multiple units of a residential house constructed on a project. In this case, facts are altogether different, where the assessee has purchased two distinct properties on different dates and hence, investments in two distinct properties cannot be construed as one residential unit or plot, which is eligible for exemption u/s. 54F of the Act. The relevant findings of the learned CIT(A) are as under:-
“4.3 The matter is considered. In the case of R Karpagam (supra), the Honble High Court has held a 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 Act (No.2) Act, 2014, which will come into effect from 01.04.2015. the said amendment read as follows:-
‘32a. Words “constructed, one residential house in India” shall be substituted r 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 0I.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 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
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M/s. Mount Housing infrastructure Ltd. is that the assessee will receive 43.75% of the build 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 Office is only equivalent to 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 fiats but with regard t the percentage of the built up area, vis-à.- vis. the Undivided Share of Land.
In similar circumstances this Court, by order dated 04.01.2012, in T.C.(A) No.656 of 2005 held as follows:
“The above provision refers to residential house meaning thereby that even if there are four different flats and if it is considered for the property assessed as one unit and one door number is given, it should be construed as a residential unit, namely, one unit. In that sense the said provision is available to tile assessee’.
It is of relevance to note that Hon’ble Madras High Court in this case construed the property as one block, which may be one or more flats in the same project, and it was only in that context that exemption under section 54F was allowed to mulltiple units. Similarly, in the case of PA Sarala (supra),the Issue before the Id. Chennai Tribunal was the assesee receiving eight flats I residential units from the builder. The Id. Tribunal followed the ratio of V.R.Karpagam case (supra). The facts in the case of appellant are clearly distinct. The investment is not in multiple units of the same project and at the same time,but in two distinct properties on different dates. Hence, I am of he view that the ratio of Karpagam case (supra) cannot be applied to the fact of the appellant’s case. Investments in two distinct properties cannot be construed to be one residential unit or block, and hence I am in agreement with the view of the Assessing Officer that the appellant is not eligible for exemption under Section 54F of the Act, because he has purchased another residential house, other than the new asset within a period of one year after the date of the transfer of the original asset. The grounds of appeal are therefore, dismissed.”
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The learned AR for the assessee submitted that learned CIT(A) has erred in confirming the additions made by the Assessing Officer towards denial of exemption claimed u/s.54F of the Act, for purchase of two residential properties without appreciating the fact that the issue is squarely covered by the decision of the Hon’ble Madras High Court, in the case of V R Karpugam(Supra) where under identical set of facts, the Hon’ble Court held that if an assessee purchases more than one residential house as reinvestment, then both the houses qualify for exemption u/s.54F of the Act. The AR further referring to provisions of section 54F of the Act before amendment and after amendment submitted that before amendment to section 54F by the Finance Act, 2014 w.e.f. 01.04.2015, various courts have interpreted the term a residential house means multiple houses for residential purpose in same residential project and hence even though the assessee purchases two residential houses at two different places, the same qualify for exemption u/s.54F of the Act. In this regard, he relied upon the decisions of Hon’ble Madras High Court in the case of CIT vs. V.R.Karpagam (supra) and M/s. Tilokchand &Sons Vs. ITO in T.C(A) No.771 of 2009 dated 14.03.2009.
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The learned DR, on the other hand, supporting the order of the learned CIT(A) submitted that provisions of section 54F of the Act is very clear, as per which, if the assessee purchases more than one residential house, other than new asset within a period of one year, after the date of transfer of original asset, then he is not entitled for exemption u/s.54F of the Act and hence, there is no error in the findings recorded by the Assessing Officer as well as learned CIT(A) to come to the conclusion that assessee has not fulfilled the conditions prescribed u/s.54F of the Act and hence, rightly rejected the claim of exemption and their orders should be upheld.
We have heard both sides, perused the materials available on record and gone through the orders of authorities below along with case laws cited by the learned counsel for the assessee. The provisions of section 54F of the Act, deals with exemption from capital gains arise from transfer of any long term capital asset ,not being residential house, if the assessee has within a period of one year before or two years after the date of transfer purchased or has within the period of three years after the date of transfer constructed a residential house, then capital gain shall be exempted from tax,
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provided the assessee shall not own more than one residential house other than the new asset on the date of transfer of the original asset or purchases any residential house, other than the new asset within a period of one year after the date of transfer of original asset. In this case, the assessee has fulfilled the conditions prescribed u/s.54F of the Act except clause (ii) of the proviso i.e., purchases any residential house other than the new asset within the period of one year after the date of transfer of original asset. As per the facts borne out from records indicate that the assessee has purchased a residential house property on 23.01.2013 for a total consideration of Rs.83,00,000/-. The assessee has also purchased another residential property on 12.04.2013 for a total consideration of Rs.69,00,000/-. Thus, as per the provisions of the section 54F of the Act, the assessee has violated clause (ii) provided in sub-section (a) of section 54F of the Act, where it is stated that if the assessee purchases any new residential house other than new asset within a period of one year after the date of transfer of original asset, then the assessee is not entitled to claim exemption u/s.54F of the Act. In this case on perusal of the facts available on record, lower authorities have recorded categorical findings that assessee has purchased two different residential properties on two different dates
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and claimed exemption u/s.54F of the Act in contravention of provisions of law. Therefore, we are of the considered view that the assessee is not entitled for exemption u/s.54F of the Act.
Coming back to the case laws relied upon by the assessee. The assessee has relied upon the decision of Hon’ble Madras High Court in the case of CIT vs. V.R.Karpagam (supra). We have gone through the said decision and find that the issue for consideration before the Hon’ble Court was in the context of joint development agreement , where the assessee received multiple residential units of the same project and at the same time in pursuant to transfer of undivided land and under those facts, the Hon’ble Court came to the conclusion that a residential house would include multiple units/ residential units. While arriving at the said conclusion, the Hon’ble Court has taken into consideration the amendment to section 54F of the Act by the Finance Act, 2014 w.e.f. 01.04.2015. In this case, the issue before the authorities was whether the assessee is entitled for exemption u/s.54F of the Act, when he purchased two residential house properties at two different locations on two different dates. As we have already noted in earlier paragraphs that if an assessee purchases two different houses at two different locations on two
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different dates is not entitled for exemption u/s.54F of the Act, because of specific provision provided under the Act, the case law relied upon by the assessee is not applicable to the facts of the present case. The assessee has also relied upon the decision of Hon’ble Madras High Court in the case of M/s.Tilokchand & Sons Vs. ITO (supra). We have gone through the decision rendered by the Hon’ble High Court and find that in that case issue before the Hon’ble High Court was in the context of denying exemption u/s.54 of the Act, but not u/s.54F of the Income Tax Act. The Hon’ble High Court after considering relevant facts and provisions of section 54 of the Act held that unlike section 54F, there is no bar in acquiring more than one residential house to meet the needs of the assessee HUF u/s.54 of the Act and hence, allowed the benefit, even though the assessee has purchased two different residential houses at two different locations. We further noted that as per provisions of section 54, the assessee can buy multiple houses, when he sold a residential house and reinvest sale consideration for purchase of another residential house. But there is restriction for purchasing more than one residential house u/s.54F of the Act. Therefore, the case law relied upon by the assessee has no application to the facts of the present case.
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In this view of the matter and considering facts and circumstances of this case, we are of the considered view that assessee is not entitled for exemption u/s.54F of the Act for purchase of two residential houses at two different locations on two different dates. The position remains same even after amendment to section 54F by the Finance Act, 2014 w.e.f. 01.04.2015. Therefore, we are of the considered view that the learned CIT(A) has right in denial of exemption claimed u/s.54F of the Act and hence, we are inclined to uphold the findings of the learned CIT(A) and dismiss the appeal filed by the assessee.
In the result, appeal filed by the assessee is dismissed.
Order pronounced in the open court on 23rd December, 2020
Sd/- Sd/- (धु�वु� आर.एल रे�ी) (जी. मंजुनाथ) (Duvvuru RL Reddy) ( G.Manjunatha ) �याियक सद�य /Judicial Member लेखा सद�य / Accountant Member चे�ई/Chennai, �दनांक/Dated 23rd December, 2020 DS आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु�/CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF.