2019 (12) TMI 1543 - AT - Income Tax

Deduction u/s 54F - claim denied on reinvestment in multiple properties located in different addresses - scope of amendment - HELD THAT - As decided in the recent decision in the case of Tilokchand Sons v ITO 2019 (4) TMI 713 - MADRAS HIGH COURT has held that profit on sale of property used for purchasing more than one residential houses within stipulated time limit, the assessee would be entitled to the benefit of exemption under section 54 of the Act If the word 'a' as employed under Section 54 prior to its amendment and substitution by the words 'one' with effect from 01.04.2015 could not include plural units of residential houses, there was no need to amend the said provisions by Finance Act No.2 of 2014 with effect from 01.04.2015 which the Legislature specifically made it clear to operate only prospectively from A.Y.2015- 2016. Once we can hold that the word 'a' employed can include plural residential houses also in Section 54 prior to its amendment such interpretations will not change merely because the purchase of new assets in the form of residential houses is at different addresses which would depend upon the facts and circumstances of each case. So long as the same Assessee (HUF) purchased one or more residential houses out of the sale consideration for which the capital gain tax liability is in question in its own name, the same Assessee should be held entitled to the benefit of deduction under Section 54 of the Act, subject to the purchase or construction being within the stipulated time limit in respect of the plural number of residential houses also. The said provision also envisages an investment in the prescribed securities which to some extent the present Assessee also made and even that was held entitled to deduction from Capital Gains tax liability by the authorities below. If that be so, the Assessee-HUF in the present case, in our opinion, complied with the conditions of Section 54 of the Act in its true letter and spirit - Decided in favour of assessee.

Summary

Issues Involved:
- Deduction under section 54F of the Income Tax Act, 1961.
- Reinvestment in multiple residential properties.
- Applicability of amendments to section 54F.

Detailed Analysis:

Deduction under Section 54F of the Income Tax Act, 1961:
The primary issue in this appeal is whether the assessee is entitled to claim a deduction under section 54F of the Income Tax Act, 1961, for reinvestment in multiple residential properties. The Revenue contended that the deduction should be restricted to one residential property, while the assessee argued that there was no such restriction for the assessment year 2008-09.

Reinvestment in Multiple Residential Properties:
The assessee sold immovable property and reinvested the proceeds in two residential properties. The Assessing Officer (AO) restricted the deduction under section 54F to one property, disallowing the claim for the second property. The AO's decision was based on a combined reading of sub-sections (1) and (2) of section 54F, which he interpreted as allowing deduction for only one property.

Applicability of Amendments to Section 54F:
The amendment to section 54F, which restricts the deduction to one residential property, was introduced prospectively from the assessment year 2015-16. The assessee argued that for the assessment year 2008-09, there was no such restriction, and relied on judicial precedents that supported this view.

Tribunal's Findings:
The Tribunal reviewed the facts and the submissions from both parties. It noted that the assessee had deposited ?1,51,00,000 in the Capital Gains Scheme and invested the remaining ?18,49,40,160 in two residential properties. The Tribunal referred to the decisions in the cases of V.R. Karpagam and Gumanmal Jain, which supported the assessee's claim for deduction for multiple properties.

The Tribunal also considered the recent decision in the case of Tilokchand & Sons v. ITO, where the Hon’ble Jurisdictional High Court held that the benefit of exemption under section 54 of the Act is available for investment in more than one residential house within the stipulated time limit. The Tribunal reproduced relevant portions of this decision, emphasizing that the amendment restricting the deduction to one residential house was intended to apply prospectively from the assessment year 2015-16.

The Tribunal concluded that the Revenue's contention was devoid of merits and upheld the CIT(A)'s decision to allow the assessee's claim for deduction under section 54F for both residential properties. The appeal filed by the Revenue was dismissed.

Conclusion:
In summary, the Tribunal held that for the assessment year 2008-09, the assessee was entitled to claim a deduction under section 54F for reinvestment in multiple residential properties. The amendment restricting the deduction to one residential property was applicable prospectively from the assessment year 2015-16, and thus did not affect the assessee's claim for the relevant assessment year. The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decision in favor of the assessee.