2018 (8) TMI 1745 - AT - Income Tax

Entitlement to exemption u/s 54 - 2 other flats that were gifted by the appellant after the end of the year under appeal which was not relevant to judge the maintainability of the claim for the year under appeal - Held that - As per the provisions of section 54 in the present year, there is no such requirement of law that the new residential house acquired by the assessee for claiming deduction u/s 54 should be for the purpose of the assessee s own residence. The tribunal order followed by CIT (A) having been rendered in the case of Arun Kumar Nathan (2017 (10) TMI 1392 - ITAT BANGALORE) does not lay down a binding precedence because in this tribunal order, a judgment of Hon ble Gujarat High Court rendered in the case of CIT vs. Nathu Hansraj 1976 (1) TMI 29 - GUJARAT HIGH COURT was followed without noticing the changes in the provisions of section 54 in A. Y. 1958 69 and 2013 14 which was before the tribunal in this case. Hence, on this aspect of the objection of the lower authorities that the new two flats are not for own residential use of the assessee, find no merit because there is no such requirement of law at present although it was earlier as per the provisions of section 54 in AY 1968-69 as reproduced by Hon ble Gujarat High Court. As examine the merit in this objection of the lower authorities that deduction u/s 54 is allowable for only one flat in view of the word a residential house. The issue is squarely covered in favour of the assessee by the judgment in the case of K. G. Rukmminiamma (2010 (8) TMI 482 - KARNATAKA HIGH COURT).

Summary

Issues:
Interpretation of exemption u/s 54 for multiple flats gifted by the assessee after the relevant assessment year.

Analysis:
The appeal was filed against the CIT (A)'s order regarding the exemption u/s 54 for flats gifted by the assessee post the relevant assessment year. The AR of the assessee pressed Ground No. 5, arguing for exemption for all three flats. The CIT (A) noted that two flats were gifted and not used by the assessee for residential purposes. The AR referred to various judgments, including a tribunal order and a judgment of the Hon’ble Gujarat High Court, highlighting the requirement of the new residential house being for the assessee’s own residence for claiming deduction u/s 54. However, the tribunal found no such requirement in the present year's provisions of section 54, differing from the previous provisions cited.

The tribunal analyzed the requirement for the new residential house under section 54 and found no stipulation that it must be for the assessee’s own residence in the current provisions. The tribunal rejected the CIT (A)'s objection regarding the two flats not being for the assessee's own residential use, emphasizing the changes in the law over different assessment years. The issue of deduction u/s 54 being allowable for only one flat was addressed, citing a judgment of the Hon’ble Karnataka High Court in favor of the assessee. The tribunal followed the interpretation that the term “a residential house” does not imply singular usage, based on the context and legislative intent, allowing for deduction on multiple residential properties.

The tribunal distinguished the relevance of a recent apex court judgment cited by the revenue’s DR, emphasizing that it applies in cases of ambiguity in exemption provisions, which was not present in this case. Consequently, the tribunal partly allowed the appeal of the assessee, ruling in favor of granting exemption for all three flats gifted by the assessee.