Mr. George Britto Jesudas Vs. ITO (ITAT Mumbai)
The issue under consideration is squarely covered by the decision of Karnataka High Court in the case of CIT vs. Late Khoobchand M. Makhija order dated 18/12/2013 wherein Hon’ble Court held as under:-
16. In the instant case, one residential house is sold. Out of the sale consideration, it was open to the assessee to purchase a big residential house so as to accommodate both his sons, in which event in terms of Section 54 (1), he would have been entitled to the benefit of the said Section. However, instead of purchasing one big house, having regard to the fact that both his sons are grown up, have families and in order to see that in future there won’t be any litigation or disharmony, he chose to purchase two small residential houses to accommodate both his sons.
17. It is clear that the assessee was not attempting to evade tax. In fact, after purchasing two residential houses, still there remained unutilized capital gain, which he has offered for tax. Therefore, as held in the aforesaid Rukminiamma ‘s case, 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 legislature to convey the meaning that it refers to a single residential house. The letter “a” in the context, which is used, should not be construed as meaning singular, but being a 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.
18. Therefore, we are of the view, in the facts and circumstances of this case, the acquisition of two residential houses by the assessee out of the capital gains falls within the phrase “residential house” and accordingly, the assessee is entitled to the benefit conferred under Section 54(1) of the Act. However, we make it clear that while interpreting this word, the Court or the Tribunal or the authorities have to keep in mind the facts of the particular case. When we have held “a” cannot be read as singular, it also cannot be read as multiples and so as to avoid paying tax under Section 45 of the Act. Therefore, in the facts and circumstances of this case, we answer the first substantial question of law raised in favour of the assessee and against the Revenue.
It is clear from the above decision of Hon’ble Karnataka High Court that exemption u/s.54 is available even in respect of two house property / flats being acquired out of the sale proceeds of long term capital gain. Applying proposition of law to the facts of the instant case, we found that assessee has invested more than the sale proceeds of the industrial gala for purchase of two flats. Respectfully following the decision of Karnataka High Court,we do not find any merit for decline of assessee’s claim of deduction u/s.54 for investment in two flats out of sale proceeds of long term capital gains within the stipulated period provided in the Act.
