Case Law Details
ACIT Vs Mr. Bipin N. Sagar (ITAT Mumbai)
Appellant has stated that the transfer is of one residential house. The three adjoining flats were merged and made it one residential house not by the Appellant but by previous owner. The Appellant ever since the date of purchase used it as one residential house. There is one electricity meter in respect of the three flats. As against a long term capital gain of Rs. 3,00,46,935, arising on transfer of a residential house, the Appellant has before the due date of filing return of income deposited a sum of Rs. 3,50,00,000 in an account opened under the Capital Gains Account Scheme.
Generally, it may not be possible to find a bigger residential unit and that requires combining two or more adjoining flats into one unit. However, that does not mean that each flat is in itself a separate residential unit. What is to be seen is whether the adjoining flats were actually united and used as a common single unit or not. Execution of separate agreements cannot decide this issue. The flats were constructed in such a way that adjustment units of flats can be combined into one. The acquisition of flats may be done independently but eventually there is a single unit and house for the purpose of residence.
Further, there is no restriction placed in section 54 that exemption is allowable only in respect of sale of one residential house. There is an inbuilt restriction that capital gain arising from sale of residential house cannot be invested in more than one residential house. However there is no restriction that capital gain arising from sale of more than one residential flat cannot be invested in one residential house. The proposition that the long term capital gain arising on transfer of multiple residential houses can be invested in purchase / construction of one residential house. It is also supported by the decision of the jurisdictional bench of the Tribunal in the case of DCIT v. Ranjit Vithaldas [2012] 23 taxmann.com 226 (ITAT-Mum)] (ITA No. 7443 (Mum) of 2002; AY 1998-99; order dated 22.6.2012). It is held that no restriction placed in section 54 that exemption is allowable only in respect of sale of one residential house. Even if the assessee sells more than one residential houses in the same year and the capital gain is invested in a new residential house, the claim of exemption cannot be denied if the other conditions of section 54 are fulfilled. This aspect had been examined by the Mumbai Bench of the Tribunal in Rajesh Keshav Pillai v, ITO (2011) 44 SOT 617 (Mum.) in which it has been held that exemption u/s 54 will be available in respect of transfer of any number of long term capital assets being residential houses if other conditions are fulfilled. No rulings have been brought on record by the Id. DR to show that the capital gain arising from sale of more than one residential houses cannot be invested in one residential house. The provisions of section 54 as pointed out earlier apply to transfer of any number of residential houses by the assessee provided the capital gain arising there from is invested in a residential house. The exemption u/s 54 is available if capital gain arising from transfer of a residential house is invested in a new residential house within the prescribed time limit.
FULL TEXT OF THE ITAT JUDGMENT
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