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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI ABRAHAM P. GEORGE
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE
BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
IT(IT)A No.1541/Bang/2014 Assessment year : 2011-12
Income Tax Officer Vs. Mr. Christina Ann Kuriacose, (International Taxation), C/o. V.K. Sudhakar Shetty, Ward 1(2), VKS Shetty & Co., CA, No.55, I floor, 10th Cross, Bangalore. Mahalakshmipuram, W O C Road, Bangalore – 560 086. PAN : BLQPK 8496N APPELLANT RESPONDENT
Appellant by : Shri Sunil Kumar Agarwal, Jt. CIT(DR) Respondent by : Shri V.K. Sudhakar Shetty, CA
Date of hearing : 29.07.2015 Date of Pronouncement : 14.08.2015
O R D E R Per N.V. Vasudevan, Judicial Member
In this appeal filed by Revenue, its grievance is that CIT (A) allowed deduction claimed by the assessee u/s.54 of the Income-tax Act, 1961 (“the
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Act” for short), construing the word ‘a’ appearing in the said section to be plural in nature.
Facts apropos are that assessee along with her family members was
owning a residential property comprising 3 acres and 12 guntas area at Sy.no.51, K Narayanapura village, K. R. Puram Hobli, Bangalore East
Taluk. The property was acquired on 11.12.1967. It was agricultural in nature at the time of acquisition, but converted as non-agricultural on
23.11.1994. Residential house was subsequently constructed therein in the year 1998-99 and thereafter it was jointly owned and enjoyed by the
family of assessee. On 28.03.2011, they entered into a joint development
agreement (JDA for short) with one M/s. Brigade Enterprises, for construction of residential apartments on the property. Joint development
agreement was also registered. As per this JDA, 35% of the super built-up area in the form of residential apartments was to be delivered to the family
of assessee, including the assessee. Share of assessee in the total area to
be allocated was 6.05%. In the return filed for impugned assessment year, assessee disclosed the transaction and the capital gains arising therefrom,
but claimed exemption u/s.54 of the Act. During the course of assessment proceedings, in support of such claim, assessee had placed reliance on the
judgment of Hon’ble jurisdictional High Court in the case of CIT v. K. G. Rukminiamma [(2011) 331 ITR 211]. However, contention of the assessee
was not accepted by AO. According to him, assessee could at best claim
exemption u/s.54 of the Act with respect to only one residential property.
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6.05% share received by the assessee translated to 4 ½ flats. As per the AO, in a later judgment in the case of CIT v. Khoobchand M. Makhija
[(2014) 223 Taxman 189], Hon’ble High Court had held that interpretation of the word ‘a’ appearing in Section 54 of the Act, was to be made
considering the facts of each case. According to him, therefore, judgment
in K. G. Rukminiamma’s case (supra) could not be applied here. He restricted the claim of exemption to value of one flat and disallowed the
balance claim. Effective disallowance of deduction u/s.54 of the Act, came to Rs.61,76,068/-.
Aggrieved, assessee moved in appeal before CIT (A). Reliance was
once again placed on the judgment of Hon’ble jurisdictional High Court in K. G. Rukminiyamma (supra). CIT(A), relying on the above judgement,
held that assessee could not be denied deduction claimed by it u/s.54(1) of the Act. He allowed the appeal of the assessee.
Now before us, Ld. DR submitted that Section 54(1) of the Act stood
amended vide Finance (No.2) Act, 2014, w.e.f.01.04.2015, whereby “constructed a residential house” has been substituted by “constructing one
residential house in India”. Therefore, according to him, the intention of Legislature was always to restrict the deduction to one residential house
and, therefore, an interpretation giving plurality to the word ‘a’ was not
correct.
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Per contra, Ld. AR submitted that the relevance of the amendment to Section 54F as well as Sec.54F(1) had come up before the Hon’ble
Madras High Court in the case of CIT v. V. R. Karpagam [(2014) 90 CCH 034]. As per Ld. AR, it was held clearly that amendment which came into
effect from 01.04.2015, could be construed only prospectively.
We have perused the orders and heard the rival contentions. The claim of assessee for the impugned assessment year was under section
54F of the Act. There is no dispute that assessee was having 6.05% rights in the residential house property and land which was given for joint
development. May be it is true that the said percentage of share, when
translated to units would result in 4 ½ residential flats. However, in our opinion, this could not have been a reason for denying deduction u/s.54 of
the Act, for the simple reason that the jurisdictional High Court in the case of K. G. Rukminiamma (supra) was seized of almost a similar situation,
where also the claim was with regard to exemption claimed by an assessee
u/s.54 of the Act, on transfer through JDA, wherein four flats were to be received as consideration. Judgment was in favour of the assessee. The
effect of amendment was also a subject matter before the Hon’ble Madras High Court in the case of V. R. Karpagam (supra), where the assessee had
moved in appeal against a decision of Chennai Tribunal in ITA. No.1082/Mds/2010, dt 07.03.2013, wherein one of us was a party. It was
held by the Lordship as under at para 5 to 12 of the order :-
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“5. The Tribunal, after considering the orders of the Authorities below, held in paragraph No.4 of the order that as the assessee’s representative admitted that with regard to the substitution of sale consideration based on the cost of construction of the developer, M/s. Mount Housing and Infrastructure Ltd., the order of the Commissioner of Income Tax (Appeals) could not be faulted. Also, the Tribunal, by considering the provision of Section 54F of the Income Tax Act and taking note of the decision of the Karnataka High Court in the case of CIT V. Smt. K.G. Rukminiamma reported in 331 ITR 211, which referred to Section 13 of the General Clauses Act, held that the word ‘a’ appearing in Section 54F of the Income Tax Act should not be construed in singular, but should be understood in plural. Hence, following the said decision of the Karnataka High Court, the Tribunal held as follows: “8. Their Lordships has clearly held in the above judgment that ‘residential house’ in the context could not be construed as a singular. In the said case also, claim for exemption was with regard to four flats in lieu of share in land, but the claim was under section 54 of the Act and not under section 54F of the Act. However, in our opinion the meaning given to the expression “a residential house” will apply paripassu to Sec. 54F also, since the expression used here is also ‘a residential house’. New asset defined in the sec.54F, as residential house’ has also to be understood in the plural. It is not necessary that all residential units should have a single door number allotted to it as argued by the Ld. D.R. No doubt Hon’ble jurisdictional High Court in the case of G.Saroja (supra) did consider the fact that different flats were having one door number. However, this alone was not the reason why assessee was held to be eligible for claiming of exemption under section 54F of the Act. Their Lordships took cue from the decision of Hon‘ble Karnataka High Court in the case of
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Smt.K.G.Rukminiamma (Supra). Similar exemption was given by the Hon'ble jurisdictional High Court again in the case of Dr. (Smt.)P.K. Vasanthi Rangarajan (supra) wherein there was no c/aim that flats allotted in lieu were having single number. We are therefore of the opinion that assessee was eligible for c/aiming exemption under section 54F of the Act on the five flats received by her in lieu of the land she had parted with.” 6. The Tribunal further held that the principles mentioned in Section 54 of the Income Tax Act, as interpreted by the Karnataka High Court in the above-said decision, would apply paripassu to Section 54F also. Hence, the Tribunal came to the conclusion that the assessee was eligible for exemption under Section 54F of the Income Tax Act on the five flats received by her in lieu of the land she had parted with. Aggrieved by this order of the Tribunal, the Revenue has preferred the present appeal raising the above-said substantial questions of law. 7. Learned counsel appearing for the Revenue submits that a residential house mentioned En Section 54F of the Income Tax Act should not be construed as one unit, even though different flats are constructed; but it should be construed as one residential flat, as every residential apartment contains separate kitchen, entrance etc. He also pointed out to the amendment brought to Section 54F of the Income Tax Act vide Finance (No.2) Act, 2014 with effect from 01.04.2015, wherein the word ‘a residential house’ is substituted to ‘one residential house’. Hence, the assessee is not eligible for exemption under Section 54F of the Income Tax Act. 8. We have heard the learned Standing counsel appearing for the Revenue at length and perused the materials placed before this Court and the decision relied on by the Tribunal in the case of CIT V. Smt. K. G.Rukminiamma reported in 331 ITR 211. We find that the relevant provision is this
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case is Section 54F of the Income Tax Act, which reads as follows: 54F. Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house. - - (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before 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 (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,-- (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45: (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: Provided that nothing contained in this sub-section shall apply where— (a) the assessee, — (i) owns more than one residential house, other than the new asset, on the date of transfer of the original
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asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property’
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 (No.2) Act, 2014, which will come into effect from 01.04.2015. The said amendment reads as follows:
“32a. Words “constructed, one residential house in India” shall be substituted for “constructed, a residential house” by the Finance (No.2) Act, 2014, with effect from 01.04.2015.” 10. 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 01.04.2015, 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 flats/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 M/s.Mount Housing Infrastructure Ltd., is
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that the assessee will receive 43.75% of the built- 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 Officer is only equivalent of 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 flats but with regard to the percentage of the built up area, vis-a-vis, the Undivided Share of Land. 11. 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 a 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 the assessee.” 12. In the decision reported in (2012) 75 DTR 56 (Dr.(Smt..) P.K.Vasanthi Rangarajan, this Court, while dealing with the benefit of exemption under Section 54F, followed the above-said decision of this Court in T.C.(A)No.656 of 2005 and granted the benefit to the assessee under Section 54F of the Income Tax Act on the investment made in the four flats.”
Accordingly, we are of the opinion that assessee was eligible for the claim u/s.54(1) of the Act. We do not find any reason to interfere with the order of CIT (A).
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In the result, appeal of Revenue stands dismissed.
Pronounced in the open court on this 14th day of August, 2015.
Sd/- Sd/-
( ABRAHAM P. GEORGE ) ( N.V. VASUDEVAN ) Accountant Member Judicial Member Bangalore, Dated, the 14th August, 2015.
/D S/ Copy to: 1. Appellant 2. Respondents 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file
By order
Assistant Registrar / Senior Private Secretary ITAT, Bangalore.