DCIT Vs Ashok Santu Bhavnani (ITAT Mumbai)
ITAT Mumbai held that exemption provisions of section 54F of the Income Tax Act are beneficial provisions and are to be construed liberally. Accordingly, as assesse invested in one residential property, exemption u/s 54F duly available.
Facts- A.O. is of the opinion that the assessee has utilized the capital gains for purchase of two residential properties for a consideration of Rs. 10,16,19,000/- and issued show cause notice on 13.12.2018. Assessee filed detailed letter dated 15-12-2018 explaining that the assessee has purchased only one residential property and furnished the documents and clarifications. Further, due to amendment in Sec. 54F of the Act applicable from 01.04.2015 where the definition of a residential house is replaced by one residential house in India. Finally the A.O. has observed that the assessee has purchased two adjacent houses and treated as one residential house and cannot be accepted as per the amendment made after 01.04.2015 and exemption u/s 54F of the Act is restricted to one residential house only and determined the long term capital gains of Rs. 2,48,85,866/- and assessed the total income of Rs. 3,16,24,870/- and passed the order u/s 143(3) of the Act dated 20.12.2018.
Aggrieved by the order the assessee has filed an appeal before the CIT(A). CITIA) allowed the appeal. Aggrieved by the CIT(A)order, the revenue has filed an appeal before the Tribunal.
Conclusion- CIT(A) has held that the whole residential unit is required to be treated as one residential house because it has one common entrance, one kitchen, one electricity meter, one piped gas connection, one property tax bill and one Society bill. Even though, the property was purchased by way of two agreements, the appellant has received the same as one single unit. The appellant has also pointed out that the whole building has been constructed similarly. There is one residential flat on each floor and two separate agreements have been entered into by the builder for each residential flat on each floor.
We find that the CIT(A) has considered the facts provisions of law, submissions, and judicial decisions and observed that the assessee has invested in one residential property. Further the Ld.AR has substantiated with the copy of structural plan and the society letter dated 8-04-2019 that it is only one residential unit.Whereas, the provisions of sec54F of the Act are beneficial provisions and are to be construed liberally. The Ld.DR could not controvert the finding of the CIT(A) with new cogent material information or evidence and the CIT(A) has passed a reasoned and logical order. Accordingly, we do not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The revenue has filed the appeal against the order of the Commissioner of Income Tax (Appeals) – 14, Mumbai passed u/s 143(3) r.w.s 250 of the Act. The revenue has raised the following grounds of appeal:
1. Whether, on the facts and in the circumstances of the case, and in the law the learned CIT(A) has erred in allowing deduction u1s.54F in relation to the LTCG invested into two different residential flats despite of the fact that the said section stood amended w.e.f. 01.04.20 15 making it mandatory that deduction under the section is to be allowed for LTCG, to the extent of, utilized for purchase of one residential House.
2. Whether, on the facts and in the circumstances of the case, and in the law the learned CIT(A) has erred in not considering the intent and purpose of legislation behind the amendment brought to section 54F by virtue of which the expression “a residential house” has been replaced by the words “one residential house in India”
3. Whether, on the facts and in the circumstances of the case, and in the law the learned CIT(A) has erred in construing that two separate flats constitute single residential house without calling for approved architectural plan in that respect and not appreciating the fact that the flats were originally owned by two different persons and each flat has separate sale deed, different sized carpet area, different car parking and separate share certificates issued by society office.
4. Whether, on the facts and in the circumstances of the case, and in the law the learned CIT(A) has erred in relying on decision of Hon’ble ITAT in the case of Sanjay B Pahariya Vs ACIT [ITA No.6099/Mum/20 14] and Deepak S Bheda Vs ACIT [23 com 159 Mum] and Sudha Gurtoo Vs ACIT [15 taxmann.com 231 Delhi] that have been pronounced prior to the amendment made to section 54F of the Income Tax, Act, and not appreciating decision of jurisdictional High Court in the case of Prakash Vs /TO [173 taxmann.com 311 (2008)].
2. The brief facts of the case are that, the assessee is an individual and director in M/s Sapiens Technologies India Pvt Ltd. The assessee has filed the return of income for the A.Y 2016-17 on 28.07.2016 disclosing a total income of Rs.67,39,010/-. Subsequently, the case was selected for limited scrutiny under the criteria being “whether deduction from capital gains has been claimed correctly”. The Assessing Officer (A.O) has issued notice u/s 143(2) and U/sec142(1) of the Act.The A.O found that the assessee has sold shares of M/s Ibexi Solutions Pvt Ltd of Rs.5,86,35,866/- and worked out the long term capital gains of Rs.5,65,61,162/-.Whereas, the A.O. is of the opinion that the assessee has utilized the capital gains for purchase of two residential properties No 801 and 802 in Kritika Apartments, Santcruz (West) Mumbai for a consideration of Rs. 10,16,19,000/- and issued show cause notice on 13.12.2018 referred at Para 4 of the A.O order. In compliance, the assessee has filed detailed letter dated 15-12-2018 explaining that the assessee has purchased only one residential property and furnished the documents and clarifications referred at Para 5 of the order. Further, due to amendment in Sec. 54F of the Act applicable from 01.04.2015 where the definition of a residential house is replaced by one residential house in India. Finally the A.O. has observed that the assessee has purchased two adjacent houses and treated as one residential house and cannot be accepted as per the amendmend made after 01.04.2015 and exemption u/s 54F of the Act is restricted to one residential house only and determined the long term capital gains of Rs. 2,48,85,866/- and assessed the total income of Rs. 3,16,24,870/- and passed the order u/s 143(3) of the Act dated 20.12.2018.
3. Aggrieved by the order the assessee has filed an appeal before the CIT(A). The CIT(A) considered the grounds of appeal, submissions of the assessee, findings of the AO and dealt on the provisions and observed at Para 4 of the order and granted the relief considering the judicial decisions. The CIT(A) has observed that the residential property is one residential house and the assessee is entitled for exemption u/s 54F of the Act for investment made in residential house and allowed the assessee’s appeal. Aggrieved by the CIT(A)order, the revenue has filed an appeal before the Tribunal.
4. At the time of hearing, the Ld. DR submitted that the CIT(A) has erred in allowing the deduction u/s 54F of the Act in respect of investment of long term capital gains invested in two residential houses. And the post amended applicable from 01.04.2015, the deduction u/s 54F of the Act is restricted to only one residential house. The Ld. DR further submitted that the CIT(A) erred in considering the two separate flats treating as a single unit without calling for the architectural plan and prayed for allowing the appeal. Contra, the Ld. AR supported the order of the CIT(A) and referred to the judicial decisions and the paper book in respect of purchase transaction of one residential property and substantiated with material evidences.
5. We heard the rival submissions and perused the material available on record. The sole crux of the disputed issue envisaged by the Ld.DR that the CIT(A) has erred in granting exemption u/sec 54F of the Act in respect of two residential flats irrespective of amendment which has come into effect from 01.04.2015 and is applicable to the assessee for investment in one residential house in India. The Ld. DR further submitted that the flat No s 801 and 802 are two separate units and as per amendment only one residential unit is eligible for exemption u/sec54F of the Act. Whereas, the Ld. AR referred to the page 25 of the paper book explaining the transactions with respect to purchase of the property was disclosed and to substantiate that the payment was made by one person referred to page 26 clause -4 as under:
“4. It is clarified that the said consideration payable by the Transferees to the transferor for the purchase of the premises has been borne and paid by the Transferee No. 1 alone and that the name of the Transferee No. 2 has been added for the sake of convenience only.”
6. Further, as per the registered deed of transfer dated 14.08.2015, it is clearly mentioned that the name of the transferee No. 2 has been added for the sake of convenience only and further at page 40 the consideration was mentioned at Para 3 to 4 as under:
3“(a) A sum of Rs. 90,00,000/- has been paid by the transferees to the Transferor, prior to the execution here to earnest money,(the payment and receipt whereof the transferor admits and acknowledges and of and from the payment of the same and every part thereof acquits, releases and discharges the transferees each of them fore ever) and
(b) balance sum of Rs. 4,70,00,000/- has been paid by the transferees, simultaneously against the execution of these presents, making in the aggregate Rs. 5,60,00,000/- being the full and final consideration payable by the Transferees to the Transferor in respect of the premises, (the payment and receipt whereof the transferor hereby admits and acknowledges and of and from the payment of the same and every part thereof acquits, releases and discharges the transferees (and each of them forever)
4. It is clarified that the said consideration payable by the transferees to the transferor for the purchase of the premises has been bone and paid by the transferees in the following portion
