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2016 (9) TMI 155 - HC - Income TaxReopening of assessment - grant of exemption under Section 54F - Held that - The expression a residential house used in Section 54, should not be taken to convey the meaning that it refers to a single residential house and if that was the intention of the legislature, the framers of the statute would have used the word one instead of a . In fact, the facts of the case in Smt.V.R.Karpagam (2014 (8) TMI 899 - MADRAS HIGH COURT) is more or less identical to that of the case on hand, which also pertained to a development of a property, originally owned by the assessee and the consideration was that the owner/assessee was to receive 43.75% of built up area after development, which translated into five flats. In the instant case, there is no doubt raised by the respondent with regard to the petitioner s eligibility to claim exemption under Section 54F, but the dispute is as to whether the petitioner is entitled to claim such exemption for all the five flats or for only one flat. In the light of the above it is held that the petitioner is entitled to the benefit of exemption under Section 54F as claimed by him and the reasons for reopening the assessment for the relevant assessment year is unsustainable. - Decided in favour of assessee.
Issues Involved:
1. Legitimacy of reopening the assessment under Section 148 of the Income Tax Act, 1961. 2. Eligibility for exemption under Section 54F of the Income Tax Act, 1961, for investments in multiple residential flats. 3. Interpretation of the term "a residential house" under Section 54F. 4. Impact of partial completion of construction on the claim for exemption under Section 54F. Detailed Analysis: 1. Legitimacy of Reopening the Assessment under Section 148: The petitioner challenged the reopening of the assessment for the year 2011-12, initiated by the respondent through a notice dated 27.03.2015, under Section 148 of the Income Tax Act, 1961. The respondent's reason for reopening was based on the belief that the petitioner had not fully disclosed taxable income. The petitioner argued that the reopening was based on an erroneous assumption regarding the nature of the investment in multiple flats, which was permissible under Section 54F at the relevant time. 2. Eligibility for Exemption under Section 54F for Investments in Multiple Residential Flats: The petitioner claimed exemption under Section 54F for an amount of ?2,62,50,000/- invested in five flats. The respondent contended that the exemption under Section 54F is allowable only for a single residential property and not for multiple units. The petitioner relied on precedents such as Smt. V.R. Karpagam vs. ITO and Dr. Smt. P.K. Vasanthi Rangarajan vs. CIT, which supported the view that investments in multiple residential units could still qualify for exemption under Section 54F. 3. Interpretation of the Term "a Residential House" under Section 54F: The court examined whether the term "a residential house" in Section 54F should be interpreted as allowing exemption for multiple residential units. The petitioner cited the decision in CIT vs. Smt. K.G. Rukminiamma, where it was held that "a residential house" could include multiple units. The court agreed with this interpretation, noting that the legislative intent did not restrict the term to a single unit, and the use of the indefinite article "a" should be read in consonance with the plural form "buildings and lands" used in the statute. 4. Impact of Partial Completion of Construction on the Claim for Exemption: The respondent argued that the exemption could not be granted as the construction of the flats was only 70% complete. The court referred to the decision in CIT vs. Praveen Kumar, which held that if the assessee had invested in the construction within the stipulated time, the exemption could not be denied merely because the construction was not fully completed. The court found that the petitioner had fulfilled the conditions for exemption by investing in the construction within the required timeframe. Conclusion: The court concluded that the petitioner was entitled to the benefit of exemption under Section 54F for the investment in multiple flats. The reasons for reopening the assessment were deemed unsustainable. The Writ Petition was allowed, and the impugned proceedings were quashed, with no costs awarded. Consequently, connected Miscellaneous Petitions were also closed.
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