N.RAVI ARUMUGAVELAN,CHENNAI vs. ITO INTERNATIONAL TAXATION 2(1), CHENNAI

आदेश / O R D E R

PER INTURI RAMA RAO, ACCOUNTANT MEMBER This is an appeal filed by the Assessee directed against the order of the Commissioner of Income Tax (Appeals)-16, Chennai

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(‘CIT(A)’ for short) dated 27.09.2018 for the Assessment Year (AY)

2015-2016.

The Assessee raised the following grounds of appeal: 2.

‘’1. The Commissioner of Income Tax (Appeals) erred in confirming the action of the assessing officer restricting the exemption claimed u/s.54F to only one residential unit of Rs.34 04,651/- instead of allowing the exemption claimed in toto. 2. The Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the sale proceeds were invested by the appellant in construction of only one residential property and not 4 residential properties as erroneously assumed by the Assessing Officer. 3. The Commissioner of Income Tax (Appeals) failed in not considering a plethora of authorities placed before him which say that a building consisting of several units having common passage and unity of structure was only one house. 4. The Commissioner of Income Tax (Appeals) erred in disposing off the appeal hurriedly without even considering a single authority placed before him which shows the preconceived notions with which he disposed of the appeal. 5. The Commissioner of Income Tax (Appeals) ought to have deleted the entire interest levied u/s.234B amounting to Rs.4,34,280/-. 6. Any other grounds that may be adduced at the time of hearing’’.

The appellant is an individual, who is an Non Resident Indian.

He filed return of income for the AY 2015-16 on 21.07.2015

disclosing total income of Rs. 5,570/-. Against the said return of

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income, the assessment was completed by Income Tax Officer,

International Taxation 2(1) , Chennai vide order dated 22.12.2017

passed u/s. 143(3) of the Income Tax Act, 1961 (for short ‘the Act’)

declaring total income of Rs. 64,18,705/-. While doing so, the

Assessing Officer had restricted the deduction claimed u/s.54F of the

Act to the extent of �34,04,651/- as against claim of exemption of

capital gains of �1,28,17,791/-.

The brief facts of the issue are as under:- 4.

During the previous year relevant to assessment year under

consideration, the appellant had sold plot measuring 4800 sq.ft. at

Ram Nagar South Extension, Pallikaranai, Chennai for consideration

of �1,35,00,000/- on 06.02.2015. The sale consideration was invested

in the acquisition of four separate residential units in a building of

two storied house in the ground floor and first floor in plot No.68A and 68B, Ram Nagar North Extension, 8th Main Road, Velacherry,

Chennai. The Assessing Officer was of the opinion that exemption

u/s.54F of the Act can be claimed only to the extent of one residential

unit taking cognizance of the amendment by Finance (No.2) Act, 2014

w.e.f. 01.04.2015. Accordingly, restricted the addition in respect of

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one residential unit rejecting the contention of the assessee that it is

only one single residential unit.

contending that assessee had invested sale consideration in the

construction of one residential property, as it has got only one

common passage and unity of structure placing reliance on the

decisions of Hon’ble Allahabad High Court in the case of Shiv Narain

Chaudari vs. CWT, 108 ITR 104, Hon’ble Gujarat High Court in the

case of CWT vs. S.D. Jadeja, 283 ITR 45, Hon’ble Andhra Pradesh High

Court in the case of CIT vs. Syed Ali Adil, 325 ITR 415, Hon’ble Kerala

High Court in the case of CIT vs. Najima Nizar, 197 ITR 0258 and

Hon’ble Delhi High Court in the case of CIT vs. Gita Duggal, 357 ITR

conclusion that assessee had constructed four flats, considering each

residential unit is independent unit, since each unit has got separate

Electricity Board connection, confirmed the findings of the Assessing

Officer.

Being aggrieved, the appellant is in appeal before us in the 6.

present appeal. It is contented before us that house may consist of

more than one self contained dwelling unit and there is unity of

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structure, hence it will not make the house into several houses and reliance in this regard were placed on the decisions of Hon’ble

Allahabad High Court in the case of Shiv Narain Chaudari (supra),

Hon’ble Andhra Pradesh High Court in the case of Syed Ali Adil

(supra), Bombay Bench of the Tribunal in the case of Fourth WTO vs.

M.V. Patel, 21 ITD 104, Hon’ble Kerala High Court in the case of

Najima Nizar (supra), Hon’ble Delhi High Court in the case of Gita

Duggal (supra) and Bangalore Bench of the Tribunal in the case of

Bhatkal Ramarao Prakash vs. ITO, 102 taxmann.com 145.

We heard the rival submissions and perused the material on 8.

record. The issue in the present appeal revolves around whether the assessee is entitled for exemption u/s.54F of the Act for entire residential unit. The sale consideration received from sale of original

asset was invested by the assessee in the acquisition of an residential building which is two storied house in the ground floor and first floor in plot No.68A and 68B, Ram Nagar North Extension, 8th Main Road,

Velacherry, Chennai. Admittedly, this building got four residential

units. The Assessing Officer had allowed exemption only in respect of

one residential unit treating that the four residential units has four

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independent residential units. Therefore the issue that comes up for

consideration is whether building consisting of several residential units

can be considered as one house property. The Hon’ble Allahabad

High Court in the case of D.M. Chandrashekhar & R.M. Sahai, (1977)

108 ITR 104 held that when building is connected by common passage

and the building has unity of structure and the building are

contiguous to each other and are within common boundary and

irrespective of the fact that the building has different municipal

numbers and different residential units, the house can be considered

as one single house. The relevant paras of the judgment are

reproduced hereunder:-

‘’9. It is undisputed that both portions of the building bearing door Nos. 92 and 92-A, Darbhanga Castle, are contiguous to each other and are within a common boundary and a common compound. Though there are four residental units within that building, they are connected by a common passage and the building has unity of structure. That the portion of the building bearing door No. 92 was built in 1960 while the other portion bearing door No. 92-A was built in the year 1963, would not have any relevance to determine whether both those portions together constitute a house. A house may be built in stages ; a portion of it may be built in one year and another portion of it may be built after an interval of several years. That one portion of the building bears one door number, while the other portion bears another door number and that these two portions are assessed separately by the municipality, are no doubt relevant circumstances in considering whether these two portions constitute one house or two different houses, but these circumstances are not decisive. The

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Tribunal has, in our opinion, attached excessive importance to these two circumstances. As these two portions of the building are contiguous and situate in the same compound and within common boundaries and have unity of structure there is no reason why they should not together be regarded as constituting one house. 10. Bearing in mind the caution uttered by Lawrence J. in Annicola Investments Ltd.'s case [1965] 3 All ER 850 ; [1966] 2 WLR 1204 that the same word occurring in different enactments has to be given a meaning in relation to the context, the object and the purpose of that enactment, we shall advert to a few decisions in which the question whether a building in which there are several dwelling units, can be regarded as one house, was considered. 11. In Kimber v. Admans [1900] 1 Ch D 412 (CA) the facts were these : The plaintiffs were owners of two plots of lands forming part of a building estate, and had built a house on each of these plots. The defendant had purchased the two remaining plots in that building estate. He proposed to erect on those plots four blocks of residential flats. Each block was to contain two flats on the ground floor and two flats on the first floor. The plaintiffs pleaded that the defendant was bound by a covenant that not more than ten houses shall be erected on the said four plots. CozensHardy J. had held that there was no breach of the covenant by the defendant and that the building of the nature which he intended to build was a dwelling house though each building was to contain a number of separate messuages. In appeal, while upholding that decision, Lindley M. R. observed : " What does that (covenant) mean ? Does it refer to the mode in which the building to be erected is to be sub-divided or let, or does it refer to the aggregate of the rooms or whatever the contents of the building may consist of ? I think that the latter is the meaning. The house is the whole amalgamation ...... It applies, not to the interior portions of the building, but to the whole building. 12. In Benabo v. Mayor, Aldermen and Burgesses of the Borough of Wood Green [1945] 2 All ER 162 (KB), the facts were these : The local authority in whose area a house was situated, served a notice upon its landlord to carry out

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certain specified repairs to various parts of the building. At the date of the notice the house was let to two separate tenants, one of whom occupied the ground floor and the other the upper floor. The house was not structurally divided, both tenants using the same entrance door, hall and internal corridor. The local authority had, however, rated the two parts of the house as separate dwellings. The landlord failed to carry out the work required by that notice and the local authority carried out the work and called upon the landlord to pay the cost of such work under the Housing Act, 1936. The landlord pleaded that the notice and the demand which followed it were not valid since separate notices and separate demands in respect of each tenement was required and that the landlord was entitled to know the cost of effecting the repairs for each of the tenements. It was held in that case that for the purpose of the Housing Act, 1936, the fact that the house consisted of two separate dwellings, did not entitle the landlord to separate notices in respect of each dwelling and that as the Act was concerned with " houses " and not " dwellings " only one notice was necessary in respect of the entire house and separate notices were not necessary in respect of each dwelling. Humphreys J. observed thus : " In fact, this was a house which was used by two separate families. The landlord, the person having control, had let certain rooms in the house to one person and certain other rooms to another person. Does that make the house two houses ? In my opinion, emphatically not. It remained one house. I think that is the answer, and a complete answer, to this point. " 13. In Okereke v. Borough of Brent [1966] 1 All ER 150 ; [1966] 2 WLR 169 (CA) the facts were these. A building containing three floors and a basement had been occupied at one time as a single house. Subsequently, it was divided into three separate self-contained dwellings which were rated separately. Two of these were each occupied by a different family and a third was occupied by members of more than one family. The respondent, Borough, had issued a notice to the owner of that building under section 15 of the Housing Act requiring him to effect certain improvements. The owner challenged that notice on the ground that the property did not fall within section 15 of that Act as the building was a mere collection of houses. The Court of Appeal by a majority decision held that the building came within the meaning of

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the word " house " under section 15 of the Housing Act. Salmon L.J. observed thus: " Indeed, in my view it is wrong to hold, if words have any meaning, that each tenement in a tenement block is a house. It may be, as counsel for the respondent suggests, that the occupier of a tenement sometimes refers to it loosely as his house, just as it is said figuratively that an Englishman's home is his castle. This, however, is beside the point, for it seems to me as impossible to hold that a single tenement is a house, as it would be to hold that a suburban villa is a castle. " The aforesaid decisions also support the view we have taken, namely, that a house may consist of more than one self- contained dwelling unit and that if there is unity of structure, the mere fact that such self-contained dwelling units are occupied by different persons, will not make that house into several houses. In the light of the foregoing discussion our answer to the question referred to us is partly in favour of the assessee and partly against it and is as follows :

This judgment was followed by Hon’ble Andhra Pradesh High Court in

the case of Syed Ali Adil (supra), Bombay Bench of the Tribunal in

the case of Fourth WTO (supra), Hon’ble Kerala High Court in the

case of Najima Nizar (supra), Hon’ble Delhi High Court in the case of

Gita Duggal (supra) and Bangalore Bench of the Tribunal in the case

of Bhatkal Ramarao Prakash (supra). Thus in the light of these settled

legal positions, we hold that the investment made by the assessee in plot No.68A and 68B, Ram Nagar North Extension, 8th Main Road,

Velacherry, Chennai consisting only one residential unit which qualifies

for exemption u/s.54F of the Act. Accordingly, we hold that the

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appellant is entitled for exemption from capital gains in respect of the entire investment made in residential property in plot No.68A and 68B, Ram Nagar North Extension, 8th Main Road, Velacherry, Chennai. Accordingly, we allow the appeal filed by the assessee.

In the result, the appeal filed by the assessee is allowed. 9.

Order pronounced on 15th day of July, 2019, at Chennai.

Sd/- Sd/- (एन.आर.एस. गणेशन) (इंटूर� रामा राव) (N.R.S. GANESAN) (INTURI RAMA RAO) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER

चे�नई/Chennai �दनांक/Dated:15th July, 2019 KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF