SHR PEDDAKOTA PARVATEESAM NAIDU,CHENNAI vs. ITO, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-5, Chennai, dated 25.07.2016 and pertains to assessment year 2012-13.

The only issue arises for consideration is disallowance of the claim of assessee under Section 54 of the Income-tax Act, 1961 (in short 'the Act').

Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the assessee sold a residential flat at Shanthi Colony, Annanagar, Chennai on 07.04.2011, for a total consideration of `80,00,000/-. The assessee has invested the sale proceeds in a new flat and claimed deduction under Section 54 of the Act. The Assessing Officer disallowed the claim of the assessee on the ground that the assessee has invested in two flats. Referring to the judgment of Madras High Court in CIT v. V.R. Karpagam (2015) 373 ITR 127, the Ld.counsel submitted that the amendment made by Finance Act, 2014 came into effect with effect from 01.04.2015.

On the contrary, Shri A.V. Sreekanth, the Ld. Departmental Representative, submitted that for the purpose of claiming exemption under Section 54F of the Act, the assessee has to invest in one residential unit. In this case, according to the Ld. D.R., the assessee has purchased two flats, therefore, the Assessing Officer has rightly disallowed the claim of the assessee.

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee has invested the capital gain in two residential flats. The question arises for consideration is for the assessment year 2012- 13, whether the assessee is eligible for exemption under Section 54F of the Act when the investment was made in two flats? After referring to an identical amendment made in Section 54F of the Act by Finance Act, 2014, the Madras High Court in the case of V.R.

Even though the CIT(Appeals) reproduced the order of the Madras High Court, it is not clear from the facts of the case whether the residential units purchased by the assessee were comprised in one single unit. In view of the above, this Tribunal is of the considered opinion that the facts need to be clarified. Accordingly, the orders of the authorities below are set aside and the issue of claim of deduction under Section 54F of the Act is remitted back to the file of the Assessing Officer. The Assessing Officer shall reconsider the issue afresh in the light of the judgment of Madras High Court in V.R. Karpagam (supra) and find out whether the two flats purchased by the assessee constitute one unit or not and thereafter decide the issue in accordance with law, after giving a reasonable opportunity to the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purposes.