Section 54 Capital Gain Exemption cannot be claimed for Multiple Flats

Anita Jayant Oswal Vs DCIT (ITAT Pune)

The issue in the present appeal relates to the exemption u/s 54 of the Act. It is an admitted fact that the appellant had not offered any capital gains on the sale of flat at Mumbai. During the course of assessment proceedings, the assessee had furnished the details of working of capital gains arising on sale of flat at Mumbai and claimed exemption u/s 54 of the Act. The same was negative by the Assessing Officer on the ground that a claim which was not made in the return of income, cannot be made during the course of assessment proceedings. However, the ld. CIT(A) had entertained the additional claim u/s 54 placing reliance on the decision of the Hon’ble Bombay High Court in the case of CIT v. Prithvi Brokers & Shareholders (P.) Ltd., 349 ITR 336 (Bom.) and proceeded to examine the claim on merits. The ld. CIT(A) had extracted the details of investments made in the new two flats and held that two flats cannot be treated as one flat in view of the fact that they cannot be combined into single unit as they are located in different floors placing reliance on the decision of the Hon’ble Bombay High Court in the case of CIT vs. Devdas Naik, 49 taxmann.com 30 (Bom.). Similarly, the ld. CIT(A) placing reliance on the decision of the Hon’ble Jurisdictional High Court in the case of K.C. Kaushik vs. ITO, 185 ITR 499 (Bom.) held that the assessee is entitled for exemption u/s 54 only in respect of one flat and directed the Assessing Officer to exempt the cost of investment in one flat made before due date of filing the return of income of Rs.92,91,220/-. The contention of the ld. AR that the appellant is entitled to the exemption u/s 54 in respect of investment made into two flats cannot be accepted in view of the decision of the Hon’ble Jurisdictional High Court in the case of K.C. Kaushik vs. ITO, 185 ITR 499 (Bom.). Hence, the order of the ld. CIT(A) is based on the decision of the Hon’ble Jurisdictional High Court referred above supra, does not call for any interference. Accordingly, the grounds of appeal filed by the assessee stand dismissed.

FULL TEXT OF THE ORDER OF ITAT PUNE

This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)- 13, Pune [‘the CIT(A)’] dated 15.02.20 18 for the assessment years 20 14-15.

2. The appellant raised the following grounds of appeal :-

“The appellant respectfully submits that the appellant may please be allowed to take the following grounds of appeal against the order of the CIT(A)-13, Pune in Appeal No CIT(A) -1 3/1 6-1 7/593 Dated 15/02/2018 for A.Y. 2014-15.

(1) On the facts and in the circumstance of the case and in law, the Hon ‘ble CIT (A) erred in confirming the action of the Ld AO in rejecting the claim of Rs 31,79,890 out of the total claim of Rs 1,24,71,110 made u/s 54F of the IT Act-1961.

The appellant craves leave to add, alter, amend or delete any or all of the above mentioned grounds of appeal.”

3.Briefly, the facts of the case are as under :-

The appellant is an individual engaged in the business of trading of gold and silver jewellery. The Return of Income for the assessment year 2014-15 was filed on 24.12.2015 declaring total income of Rs.49,02,575/-. During the previous year relevant to the assessment year under consideration, the appellant sold a residential property situated at Mumbai for a consideration of Rs.2,33,00,000/- and the same was not returned in the return of income.

However, the appellant had not offered any capital gains to tax when the query was raised by the Assessing Officer, during the course of assessment proceedings, it is submitted that the flat in Mumbai was sold for consideration of Rs.2,33,00,000/- which was purchased on 21.03.2007 at a cost of Rs.64,68,274/- after the indexation of cost of acquisition, capital gains worked out to Rs. 1,24,71,110/- and the same consideration was invested in the residential apartment which is exempt u/s 54 of the Act. The Assessing Officer had denied the exemption u/s 54 on the ground that the same was not claimed in the return of income placing reliance on the decision of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT, 284 ITR 323 (SC).

4. On appeal before the ld. CIT(A), the ld. CIT(A) held that the claim for exemption u/s 54 can be entertained at the stage of appeal following the decision of the Hon’ble Bombay High Court in the case of CIT v. Prithvi Brokers & Shareholders (P.) Ltd., 349 ITR 336 (Bom.) considering the fact that the appellant had purchased two flats in Pune by two separate purchase deeds dated 28.03 .2013 for an agreed consideration of Rs.1,01,54,550/- and Rs.1,01,58,620/-, extracted the details of payments made for acquisition of both the flats, which are as under :-

“Details of payments made for Flat No.A -904 at Ishanya, Pune

Note: Stamp Duty & Registration charges paid on 28/3/2013 Rs.6,06,550/-

Details of payments made for Flat No.A -1004 at Ishanya, Pune

Note: Stamp Duty & Registration charges paid on 28/3/2013 Rs. 6,06,220/-”

The ld. CIT(A) considering the fact that the flat no.904 was not adjacent flats but located on the 9^th & 10^th floor of the same building and impossibility of combining into one unit or does not have a common kitchen and held that the assessee is not entitled for deduction in respect of both the units placing reliance on the decision of the Hon’ble Bombay High Court in the case of CIT vs. Devdas Naik, 49 taxmann.com 30 (Bom.). The ld. CIT(A) further placing reliance on the decision of the Hon’ble Bombay High Court in the case of K.C. Kaushik vs. ITO, 185 ITR 499 (Bom.) held that the appellant is entitled to claim of deduction only in respect of one flat and proceeded to examine the dates of investments made in the purchase of new flats and concluded vide para 5.3 of his order that the appellant is entitled for deduction of Rs.92,9 1,220/- u/s 54 of the Act.

5. Being aggrieved by the decision of the ld. CIT(A), the appellant is in appeal before us in the present appeal challenging the decision of the ld. CIT(A) rejecting the exemption of Rs.3 1,79,890/- u/s 54 of the Act.

6. It is contended that the order of the ld. CIT(A) rejecting the exemption u/s 54 in respect of second flat cannot be sustained in view of the decision of Co-ordinate Bench of Pune Tribunal in the case of Ms. Anita Mahindrakumar Oberai vs. ITO in ITA 600/PUN/2020 for A.Y. 2015-16 dated 01.02.2022. It is further submitted that the assessee is entitled for exemption u/s 54 prior to the amendment in respect of multiple flats.

7. On the other hand, ld. CIT-DR placing reliance on the orders of the lower authorities submits that the order of the ld. CIT(A) is based on the decision of the Hon’ble Jurisdictional High Court referred above supra and the order of the ld. CIT(A) does not call for any interference.

8. We heard the rival submissions and perused the material on The issue in the present appeal relates to the exemption u/s 54 of the Act. It is an admitted fact that the appellant had not offered any capital gains on the sale of flat at Mumbai. During the course of assessment proceedings, the assessee had furnished the details of working of capital gains arising on sale of flat at Mumbai and claimed exemption u/s 54 of the Act. The same was negative by the Assessing Officer on the ground that a claim which was not made in the return of income, cannot be made during the course of assessment proceedings. However, the ld. CIT(A) had entertained the additional claim u/s 54 placing reliance on the decision of the Hon’ble Bombay High Court in the case of CIT v. Prithvi Brokers & Shareholders (P.) Ltd., 349 ITR 336 (Bom.) and proceeded to examine the claim on merits. The ld. CIT(A) had extracted the details of investments made in the new two flats and held that two flats cannot be treated as one flat in view of the fact that they cannot be combined into single unit as they are located in different floors placing reliance on the decision of the Hon’ble Bombay High Court in the case of CIT vs. Devdas Naik, 49 taxmann.com 30 (Bom.). Similarly, the ld. CIT(A) placing reliance on the decision of the Hon’ble Jurisdictional High Court in the case of K.C. Kaushik vs. ITO, 185 ITR 499 (Bom.) held that the assessee is entitled for exemption u/s 54 only in respect of one flat and directed the Assessing Officer to exempt the cost of investment in one flat made before due date of filing the return of income of Rs.92,91,220/-. The contention of the ld. AR that the appellant is entitled to the exemption u/s 54 in respect of investment made into two flats cannot be accepted in view of the decision of the Hon’ble Jurisdictional High Court in the case of K.C. Kaushik vs. ITO, 185 ITR 499 (Bom.). Hence, the order of the ld. CIT(A) is based on the decision of the Hon’ble Jurisdictional High Court referred above supra, does not call for any interference. Accordingly, the grounds of appeal filed by the assessee stand dismissed.

9. In the result, the appeal filed by the assessee stands dismissed.

Order pronounced on this 26^th day of September, 2022.