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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: HON’BLE SHRI SANDEEP GOSAIN, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
Assessee by : Shri M. Subramanian, Advocate-Ld.AR Revenue by : Chaudhury Arun Kumar Singh-Ld.DR सुनवाईक"तार"ख/ : 04/07/2019 Date of Hearing घोषणाक"तार"ख / : 15/07/2019 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member):- 1.1 Aforesaid appeal by assessee for Assessment Year [in short referred to as ‘AY’] 2013-14 contest the order of Ld. Commissioner of Income-Tax 2 Sapna Mukesh Thappar Assessment Year-2013-14 (Appeals)-42, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)- 42/IT-498/15-16 dated 09/09/2016 on certain grounds of appeal
. 1.2 A preliminary issue of condonation of delay arises in the appeal since the registry has noted that the appeal has been filed with a delay of 326 days. The condonation of the same has been sought by the assessee on the strength of condonation petition dated 05/02/2019 which is accompanied by assessee’s affidavit of same date and affidavit of assessee’s Chartered Accountant Shri Samir R.Sanghvi. It has been affirmed that the appellate order was forwarded by the assessee to the office of the Chartered Accountant M/s Manish Modi & Associates for onward filing of the appeal. However, the concerned Chartered Accountant CA Sneha Shah who was handling assessee’s matter, left the organization without handing over the papers which resulted into delayed filing of the appeal. The Ld. DR submitted that the assessee remained negligent in preferring appeal within prescribed time. Upon careful consideration, keeping in view the principle of natural justice and ratio of decision of Hon’ble Apex Court in 167 ITR 471 (SC) Collector, Land Acquisition Vs. Katiji, the bench formed an opinion that the delay deserve to be condoned. Accordingly, we proceed to dispose-off the appeal on merits. 2.1 Section 54 of the Income Tax Act, 1961 [in short ‘Act’], as it stood during AY 2013-14, provides for a deduction 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 3. Sapna Mukesh Thappar Assessment Year-2013-14 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. 2.2 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 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 4 Sapna Mukesh Thappar Assessment Year-2013-14 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. 2.3 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 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 5 Sapna Mukesh Thappar Assessment Year-2013-14 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 '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 6 Sapna Mukesh Thappar Assessment Year-2013-14 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.)].' 2.4 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 7 Sapna Mukesh Thappar Assessment Year-2013-14 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. The decision of Hon’ble Punjab & Haryana High Court in Pawan Arya V/s CIT [11 Taxmann.com 312] was distinguished in this case also by noticing that in that case the assessee was claiming exemption by purchasing two independent residential houses situated at different locations i.e. one in Delhi and other in Faridabad. 3.1 Keeping in mind the aforesaid legal position, the assessee before us is a resident individual who earned Long-Term Capital Gain of Rs.297.16 Lacs on sale of certain inherited residential property. The assessee’s share in the property was to the extent of 18.78%. The assessee claimed deduction u/s 54 on account of investment made in following 4 properties by asserting that the conditions to claim the deduction were duly fulfilled by her: - No. Particulars Amount (Rs.) 1. Flat No.A103, Oshiwara Jogeshwari 1,78,71,080 Scheme Deposit 11,50,000 2. Flat No.101 Vakratunga Apartment Nerul, Navi Mumbai 37,06,080 3. Flat No.104 Vakratunga Apartment Nerul, Navi Mumbai 37,06,080 4. Flat No.1001 Vakratunga Apartment Nerul, Navi Mumbai 31,81,080 TOTAL 2,96,14,320/- The flat Nos. 2 to 3 are stated to be situated on first floor whereas flat No.4 is stated to be situated at 10th floor. However, all the 3 flats are admittedly 8 Sapna Mukesh Thappar Assessment Year-2013-14 within one boundary wall of a Society. The first flat is stated to be situated at altogether different location. 3.2 The assessee, in defence, submitted that the assessee being single parent and having two kids, made investment in different properties, keeping in view the location convenience from point of view of the college / educational institution of the two kids. It was further submitted that the assessee tried to buy 3 different adjacent flats in Navi Mumbai. However, due to non-availability of adjacent flats, she settled for 2 different floors. Nevertheless, the investment was structured in such a way so as to give financial security to two kids in their future and to avoid probable differences / disputes amongst them. It was also pleaded that all the flats were in self- occupation and used for no other purpose. The flats were bought at different locations to simplify the family requirement within budget and bought with an intention to use them as a single residential house. However, disregarding the same and placing reliance on the decision of Hon’ble Punjab & Haryana High Court rendered in Pawan Arya V/s CIT [11 Taxmann.com 312], Ld. AO denied deduction to the extent of investment in three flats situated at Navi Mumbai, which aggregated to Rs105.93 Lacs.
Aggrieved the assessee preferred further appeal before Ld. first appellate authority wherein Ld. CIT(A), at para 5.2, considered the decision of Special Bench of Mumbai Tribunal in ITO V/s Sushila M.Jhaveri [107 ITD 327] to arrive at conclusion that the word ‘a’ was intended for investment in one residential house property only. The said decision, in the opinion of Ld. CIT(A), was approved by Hon’ble Bombay High Court in CIT 9 Sapna Mukesh Thappar Assessment Year-2013-14 V/s Raman Kumar Suri [212 Taxman 411]. Further reliance was placed on the decision of Hon’ble Bombay High Court in CIT V/s Devdas Naik [49 Taxmann.com 30] and the decision of Mumbai Tribunal in Neville J.Pereira V/s ITO [8 Taxmann.com 68] to confirm the stand of Ld. AO.
Aggrieved, the assessee is in further appeal before us. Although the assessee has raised as many as 7 Grounds of appeal
, however, Ld. Authorized Representative for Assessee, Shri M. Subramanian, submitted that the assessee is pressing only for adjudication of Ground Nos. 4 & 5, which read as under: -
4. On the facts and in the circumstances of the case and in law, the learned C.I.T(A) erred in confirming the action of the A.O. in determining the capital gains income at Rs. l,07,95,556/-as against the returned capital gains income of Rs.1,02,316/-.
5. On the facts and in the circumstances of the case and in law, the learned C.I.T(A)erred in dismissing the appeal and thereby denying the full benefits of the provisions of section 54 of the Act.”
Both the representatives have advanced arguments in support of the submissions, which we have considered and deliberated on the judicial pronouncements as cited before us. Our adjudication is given in succeeding paragraphs. 6.1 We have carefully considered the factual matrix as enumerated by us the in preceding paragraphs. We are of the considered opinion that keeping in view the rules of judicial precedents, the view of Special Bench of Mumbai Tribunal in ITO V/s Sushila M.Jhaveri [supra] as well as Mumbai Tribunal in Neville J.Pereira V/s ITO [supra] stand overruled by the decision of Hon’ble High Courts of Karnataka as well as of High Court of 10 Sapna Mukesh Thappar Assessment Year-2013-14 Madras. 6.2 The facts in the case of CIT V/s Raman Kumar Suri [212 Taxman 411] are different. The perusal of the said decision would reveal that two flats were joined together before the assessee became the owner of the two flats and the Tribunal, following the decision of Special Bench in ITO V/s Sushila M.Jhaveri [supra], held that since the assessee acquired one residential house consisting of two flats, it could not be said that the assessee had purchased two flats and therefore, full deduction was allowable to the assessee. The revenue preferred further appeal before Hon’ble Bombay High Court wherein the Hon’ble Court dismissed the revenue’s appeal by holding that no substantial question of law arose. In that decision, the Hon’ble Court, in our opinion, was clinched with limited question to determine to correctness of the Tribunal decision on a certain factual matrix. The said decision could not be used in the reverse manner to draw an analogy that if the assessee had purchased more than one residential house, the deduction of the same would not be allowable to the assessee. The effect of the amendment made by The Finance Act, 2014 in Section 54 was nowhere in the consideration of Hon’ble Court, in that decision. 6.3 Similar was the factual matrix in the decision of Hon’ble Bombay High Court in CIT V/s Devdas Naik [supra] wherein it was admitted position that though the flats were acquired under different agreement, however general / internal layout plan indicated that there was only one common kitchen for both flats and both flats were used as a single unit and the flats were constructed in such a way that adjacent units or flats could be combined 11 Sapna Mukesh Thappar Assessment Year-2013-14 into one. In that decision, the Hon’ble Court, in similar manner, dismissed revenue’s appeal finding that no substantial question of law arose. 6.4 Proceeding further, we find that the recent decision of Hon’ble Madras High Court in Tilokchand & Sons V/s ITO [supra] squarely applies to the fact of the case. While arriving the decision, the Hon’ble court has followed the decision of Hon’ble Karnataka High Court in CIT V/s D. Ananda Basappa [supra] & CIT V/s Khoobchand M. Makhija [supra]. Similar is the interpretation of word ‘a’ by Hon’ble Karnataka High Court in CIT V/s Smt. K.G.Rukminiamma [supra] and the decision of Hon’ble Madras High Court in its earlier decision titled as CIT V/s Gunamal Jain [supra] after applying the decision of same court in CIT V/s V.R. Karpagam [supra]. 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. In fact, similar is the view of Hon’ble Andhra Pardesh High Court in CIT V/s Syed Ali Adil [33 Taxmann.com 212]. No direct decision of Hon’ble Bombay High Court, on this point, has been placed on record by any of the representative. 6.5 The decision of Hon’ble Punjab & Haryana High Court in Pawan Arya V/s CIT [supra] has already been distinguished in many of the above cited cases. Even otherwise the ratio of decision of Hon’ble Apex Court rendered in CIT Vs. Vegetable Products Ltd. [88 ITR 192] would apply wherein Hon’ble Court has held that “if two reasonable constructions of a taxing provisions are possible, that construction which favors the tax payer must 12 Sapna Mukesh Thappar Assessment Year-2013-14 be adopted.” Therefore, the decisions cited in para 6.4 would take precedent over this decision. 6.6 Keeping in view the above position, 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 all the four residential houses as tabulated by us in para 3.1. The Ld. AO is directed to recompute the income of the assessee in terms of our above order. Both the grounds stand allowed.