2018 (4) TMI 1061 - AT - Income Tax

Exemption u/s 54F - separate and independent residential units having separate entrances and cannot be considered as one unit to enable the assessee to claim the deduction - Held that - We find that the assessee purchased two units, property No. 1601 and 1602 by one sale agreement with the builder, which are situated opposite to each other on the same floor. As per submissions of the assessee, it is observed that the assessee had purchased properties according to his plans and requirements which were explained before the lower authorities. It is not disputed that the staircase and common passage was not exclusively used by the assessee. See CIT Versus Gita Duggal 2013 (3) TMI 101 - DELHI HIGH COURT - the residential house consists of several independent units can be permitted to act as an impediment to the allowance of the deduction under Section 54/54F - Decided in favour of assessee.

Summary

Issues Involved:

1. Legality and validity of the order passed by the CIT(A).
2. Disallowance of ?1,91,00,000 under Section 54F by the AO and its confirmation by the CIT(A).
3. Non-allowance of deduction under Section 54F for ?3,82,00,000 in respect of investment in Flat at Tower Tulip, Omaxe Forest, Faridabad.
4. Non-reliance on jurisdictional High Court and other court case laws by the AO and CIT(A).

Issue-wise Detailed Analysis:

1. Legality and Validity of the Order Passed by the CIT(A):

The assessee challenged the order passed by the CIT(A), claiming it was illegal, invalid, and bad in law. The Tribunal examined the procedural aspects and found no procedural irregularities or legal deficiencies in the order of the CIT(A). Hence, this ground was not upheld.

2. Disallowance of ?1,91,00,000 under Section 54F by the AO and its Confirmation by the CIT(A):

The core issue revolved around the disallowance of ?1,91,00,000 under Section 54F by the AO, which was confirmed by the CIT(A). The AO observed that the assessee invested in two separate flats (Flat Nos. 1601 and 1602) in the same building but not adjacent to each other, separated by a common passage, lobby, and staircase. The AO disallowed the claim under Section 54F, arguing that the section does not permit exemption for investment in more than one property.

The CIT(A) upheld the AO's decision, stating that the judicial pronouncements relied upon by the assessee were not similar to the facts of the case. The CIT(A) emphasized that the exemption under Section 54F cannot be allowed for properties that are not adjacent and contiguous.

3. Non-allowance of Deduction under Section 54F for ?3,82,00,000 in Respect of Investment in Flat at Tower Tulip, Omaxe Forest, Faridabad:

The assessee claimed a deduction of ?3,82,00,000 under Section 54F for investment in two flats. The CIT(A) restricted the deduction to ?1,91,00,000, maintaining that the investment in two separate units does not qualify for exemption under Section 54F. The CIT(A) distinguished the case from the judicial precedents cited by the assessee, particularly the case of CIT vs. Gita Duggal, where the exemption was allowed for a house consisting of several independent units.

4. Non-reliance on Jurisdictional High Court and Other Court Case Laws by the AO and CIT(A):

The assessee argued that the AO and CIT(A) did not consider relevant judicial precedents, including the jurisdictional High Court's decision in CIT vs. Gita Duggal. The Tribunal noted that the CIT(A) did consider the judicial precedents but found them not applicable to the facts of the case. The CIT(A) highlighted that the facts in the present case were different from those in Gita Duggal, where the exemption was allowed for a house with several independent units constructed as per the assessee's requirements.

Tribunal's Findings:

The Tribunal found that the assessee purchased two units (Flat Nos. 1601 and 1602) in the same building, which were opposite to each other on the same floor. The Tribunal observed that the assessee purchased the properties according to his plans and requirements, similar to the case of Gita Duggal. The Tribunal held that the expression "a residential house" should not be interpreted to mean a single unit. Instead, it should be understood as a building of residential nature, even if it consists of multiple independent units.

The Tribunal relied on the judicial precedent set by the Delhi High Court in CIT vs. Gita Duggal and similar cases, concluding that the assessee is entitled to the benefit of Section 54F as claimed. The Tribunal allowed the appeal, stating that the assessee's investment in the two flats qualifies for the exemption under Section 54F.

Conclusion:

The Tribunal allowed the appeal, granting the assessee the benefit of Section 54F for the investment in the two flats. The Tribunal emphasized that the term "a residential house" should be interpreted broadly to include multiple units within the same building, aligning with the judicial precedents cited by the assessee. The Tribunal's decision underscores the importance of considering the legislative intent and judicial interpretations while applying tax provisions.