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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A.L.SAINI, AM
IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A.L.SAINI, AM आयकरअपीलसं./ITA No.743/SRT/2018 (िनधा�रणवष� / Assessment Year: (2015-16) (Virtual Court Hearing) Nigam Narendrabhai Khansaheb DCIT,Circle-1(3), Surat C-101, Krish Enclave Building, Nr. Vs. Terapanth Bhavan, Beside Aagam Row Houses, City Light, Surat-395007 �थायीलेखासं./जीआइआरसं./PAN/GIR No.: ACLPK 9225 C (Appellant ) (Respondent)
Assessee by : Shri Rasesh Shah, C.A Respondent by : Ms. Anupama Singla, SR-DR सुनवाईकीतारीख/ Date of Hearing : 04/03/2022 घोषणाकीतारीख/Date of Pronouncement : 10/05/2022 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to assessment year 2015- 16, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-2, Surat, [‘CIT(A)’ for short] dated 14.09.2018, which in turn arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’), dated 29.12.2017.
The grounds of appeal raised by the Assessee are as follows:-
“1. The Income Tax Department valuation Cell has denied the available photograph and the documents and taken the valuation at lower rate. Considering the available fact and as per the Government approved Valuation report (given by Shri Ramesh Jain) the value of property as on 01.04.1981 to be considered at 10.09 lacs. In IT Department Valuation report itself the Officer shown that the assessee has taken lower value of plot land however the instance of value of plot land is more than the value taken by the assessee. Considering the available fact and construction done by assessee before 01.04.1981 the value of property as on 01.04.1981 to be taken as Rs.10.08.lacs.
ITA No.743/ASR/2018 A.Y. 15-16 Nigam N Khansaheb. 2. Considering the time given by AO for produce the proof of cost of improvement and last minute rush the assessee was not able to produce the documentary evidence. Now the assessee is having proof of Approval taken from society for the same. In addition the assessee has taken loan from society and many of society document was destroyed in 2006 flood. Now assessee is producing the documents for establish the construction of first floor on same property and full renovation done by them in financial year 2000- 01. 3. As per IT Act, 1961 Section 54 says that assessee can purchases (before 1 year and after 2 years) from the date of Transfer of House Property) residential house to get exemption of Long Term Capital Gain. The amendment is done in said section of IT Act, 1961 in AY 2015-16 that assessee can purchases only one residential house for getting exemption under section 54. In captioned case the assessee has received sale consideration in AY 2014-15 and also payment for purchase of two flats is done in AY 2014-15. Only the registration of sale deed is done in AY 2015-16. Since the amendment in IT Act is announce in July, 2015 and the sale deed of the property purchased done in month of May, 2015.The assessee has claimed purchases of two flats for exemption under section 54 of the IT Act,1961. The appellant craves leave to add, alter and/or amend the above ground/grounds of appeal either before or at the time of hearing of the appeal.” 3. We note that assessee has raised multiple grounds of appeal, however, at the time of hearing, the solitary grievance of the assessee, has been confined to the issue that whether exemption under section 54 of the Act is available for two flats (houses) in case registration of sale deed is done in AY 2015-16, whereas the amendment in section 54 of the Act was announced in July, 2015 and the sale deed of the property purchased was done in Month of May, 2015, before amendment in section 54 of the Act. The assessee has claimed purchases of two flats for exemption under section 54 of the Income Tax Act,1961.
Brief facts as discernable from the orders of lower authorities are that assessee filed return of income on 18.03.2016, declaring total income of Rs.16,92,310/-. During the scrutiny proceedings, the assessing officer observed that assessee had claimed deduction u/s 54 of the Act with regard to purchase of two flats from the capital gain derived on sale of property. The assessee had purchased two flats, one flat was valued at Rs.58,07,300/- and another flat valued at Rs.89,85,600/-. Both the flats had been purchased on the same date. In view of the amendment to
ITA No.743/ASR/2018 A.Y. 15-16 Nigam N Khansaheb. section 54 of the Act, the assessing officer was of the opinion that assessee was eligible to claim deduction for only one flat. Therefore, assessing officer issued a notice to the assessee stating that why exemption u/s 54 of the Act for one flat valued at Rs.58,07,300/- should not be disallowed and another flat which was valued higher at Rs.89,85,600/- should be granted exemption, in view of the amendment to section 54 of the Act. 5. In response, the assessee submitted before the assessing officer that as per section 54 of the Act, the assessee can purchase house (before 1 year and after 2 years) from the date of transfer of house property. Therefore, exemption under section 54 should be allowed for both flats (both house). 6. However, assessing officer rejected the contention of the assessee and noted that amendment was done in the said section 54 of the Act in assessment year 2015- 16, hence the assessee was eligible for purchase of only one residential house for getting exemption u/s 54 of the Act. Therefore, assessing officer held that amended provisions were applicable from assessment year 2015-16 onward. In view of the matter, exemption with regard to one flat of higher value amounting to Rs.89,85,600/- was allowed and as regards other flat valued at Rs.58,07,300/-, the same was disallowed and added to the capital gain derived by the assessee. 7. On appeal, ld CIT(A) confirmed the action of the assessing officer. Aggrieved, the assessee is in further appeal before us. 8. Shri Rasesh Shah, Learned Counsel for the assessee, pleads that assessee is eligible for deduction u/s 54 of the Act, when a residential property is purchased one year before or two years after the date of transfer, so the amendment in section 54 of the Act is not applicable to the assessee under consideration. The assessee purchased of two flats in assessment year 2014-15 when the amendment was not in force. Therefore, ld Counsel prays the Bench that assessing officer should be directed to allow the exemption on second house.
ITA No.743/ASR/2018 A.Y. 15-16 Nigam N Khansaheb. 9. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 10. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Though facts have been discussed in detail in the foregoing paragraphs, however in the succinct manner, the relevant facts and background are reiterated in order to appreciate the controversy and the issue for adjudication. The Assessee under consideration earned long term capital gain on sale of the property. Against the said long term capital gain, assessee claimed deduction u/s 54 of the Act, with regard to the purchase of two flats valuing to Rs. 89,85,600/- and Rs. 58,07,300/- respectively, located at C/101 and E/202 of ‘Krish Enclave’, Umra, Surat. Assessing officer allowed the deduction u/s 54 of the Act in respect of one flat at Rs.89,85,600/- and disallowed the deduction u/s 54 in respect to second flat, valued at Rs.58,07,300/-. The Assessing Officer held that assessee is not eligible for deduction u/s 54 for two houses/flats. The assessee can claim deduction under section 54 of the Act in respect of one house/flat. The assessing officer observed that amendment in section 54 of the Act was made by Parliament with effect from assessment year 2015-16 by substituting the words "One residential house" in lieu of "A residential house". 11. We note that flats were purchased by the assessee in assessment year 2014-15 however the sale deed was executed in assessment year 2015-16. Since the assessee has purchased these two flats in assessment year 2014-15 therefore, as per the provisions of section 54 of the Act, the assessee is entitled to claim the deduction. The provisions of section 54 of the Act are reproduced below, ( to the extent relevant for our analysis):
ITA No.743/ASR/2018 A.Y. 15-16 Nigam N Khansaheb. “Section 54:Profit on sale of property used for residence: (1)Subject to the provisions of sub-section (2), where in the case of the assessee, 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 which is chargeable under the head “Income from house property’ ( hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two year after the date on which the transfer took place, purchased, or has within a period of three years after that date, constructed one residential house in India, 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 following provisions of this section, that is to say-……..”
From the above noted section 54 of the Act, we note that the words “one residential house” was substituted by the Finance Act 2014, with effect from 1st April 2015 and applicable from assessment year 2015-16. Prior to assessment year 2015-16, the words in said section was “a residential house”. Before amendment in section 54 of the Act, even though section 54 mentions that proceeds should be invested in "a residential house", it being a beneficial provision, it should be construed liberally and the deduction cannot be restricted to only one residential house and it should be extended to the purchase of two adjacent residential flats. Therefore, the term “a residential house” used to interpret prior to assessment year 2015-16, ‘as more than ‘one residential house’. In the assessee`s case under consideration we note that assessee purchased two flats (house) in A.Y. 2014-15 when the amendment was not in force, therefore assessee is eligible for deduction under section 54 of the Act, for second house also. We note that above section 54 clearly says: “the assessee has within a period of one year before” can purchase the house. In the instant case the amendment in section 54 of the Act was announced in July, 2015 whereas sale deed of the property purchased was done in Month of May, 2015, that is, before amendment in section 54 of the Act. Hence, based on this factual position, the assessee is eligible to claim deduction under section 54 of the Act, on two flats (two houses).
ITA No.743/ASR/2018 A.Y. 15-16 Nigam N Khansaheb.
Thus, it is abundantly clear that assessee is eligible for deduction u/s 54 of the Act, when a residential property is purchased one year before or two years after the date of transfer so the amendment is not applicable, as the assessee purchased two flats in assessment year 2014-15 when the amendment was not in force. Hence, based on this factual position, we direct the assessing officer to grant deduction under section 54 of the Act in respect of second flat valued at Rs.58,07,300/-.
In the result, the appeal of the assessee is allowed.
Order is pronounced on 10/05/2022 by placing the result on the Notice Board.
Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat/िदनांक/ Date: 10/05/2022 Dkp Outsourcing Sr.P.S. Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat