2018 (11) TMI 629 - AT - Income Tax

Exemption u/s 54F - Long Term Capital Gain (LTCG) - separate unit - constructing a residential house - Held that - In the present appeal, no doubt flat No.1502 is situated at 15th Floor while the other flats were situated on 13th & 14th Floor of the same building and the claimed deduction was rejected by the AO with respect to flat situated in 15th Floor by holding that it is separate and residential unit having separate entrance, therefore, it is a separate unit, consequently, cannot be considered as one unit to enable the assessee to claim the deduction. The fact remains that all the three flats are in the same building and also are situated on floors above each other i.e. 13th, 14th & 15th Floor, while the flats at 13th & 14th Floor are duplex flats joined with each other but the fact remains the third flat is situated on the immediate next floor i.e. 15th floor of the same building which is in the immediate vicinity. This question has been settled in CIT vs Gita Duggal 2011 (6) TMI 890 - ITAT DELHI and also in SMT. KG. RUKMINIAMMA 2010 (8) TMI 482 - KARNATAKA HIGH COURT . As further noted that the SLP, filed by the Revenue was dismissed by Hon ble Apex Court. The only requirement, as per the section, is that it should be a residential house and there is nothing in the section which requires that the residential house should be built in a particular manner. A person may construct a house according to his requirements/needs and sometime due to compulsions. There may be several such consideration for a person while constructing a residential house. Identical ratio was laid in SMT. KG. RUKMINIAMMA 2010 (8) TMI 482 - KARNATAKA HIGH COURT . So far as in CIT vs Raman Kumar Suri 2012 (12) TMI 421 - BOMBAY HIGH COURT is concerned, it was decided rather in favour of the assessee, wherein, two flats were interconnected as one residential unit, wherein, exemption was disallowed on different facts. This decision is dated 27/11/2012, whereas, the decision in the case of CIT vs Syed Ali Adil 2011 (8) TMI 1104 - ITAT HYDERABAD is of later date and the decision in CIT vs Gita Duggal is of 2011 (6) TMI 890 - ITAT DELHI . The facts of the case of the present assessee are similar to the facts in Gita Duggal (decided by Hon ble Delhi High Court) and the cases from Hon ble Karnataka High Court. Thus, considering the totality of facts and the aforesaid decisions, this ground of the assessee is allowed. Addition on account of loss under the head Income from House Property - Held that - We direct the Ld. Assessing Officer to examine the factual matrix and then decide in accordance with law. The assessee be given opportunity of being heard. Thus, this ground is allowed for statistical purposes. Demand of ₹ 49,04,380/-, as per the assessee, there is calculation mistake - Held that - The assessee is directed to furnish the necessary evidence to substantiate its claim. Assessing Officer is directed to verify the claim of the assessee and if any calculation mistake is found, the same may be directed to be verified/corrected. Otherwise, AO may decide in accordance with law, thus, this ground of the assessee is allowed for statistical purposes. Appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues Involved:
1. Confirming the addition of ?1,07,54,234/- on account of Long Term Capital Gain under section 54F of the Income Tax Act, 1961.
2. Confirming the addition of ?1,50,000/- on account of loss under the head ‘Income from House Property’.
3. Addition of ?21,430/- on account of expenses under the head business income.
4. Confirming the demand of ?49,04,380/- due to alleged calculation mistake.

Issue-wise Detailed Analysis:

1. Addition of ?1,07,54,234/- on account of Long Term Capital Gain under section 54F of the Income Tax Act, 1961:

The assessee, a shareholder of M/s Rajdeep Realtors Pvt. Ltd., sold shares for ?3,82,00,000/- and invested the proceeds in three flats in the Gaurav Palace building, claiming an exemption under section 54F. The Assessing Officer allowed the exemption for two duplex flats (1301 and 1401) but disallowed it for flat 1502, citing it was on a different floor. The Tribunal examined whether the claimed deduction for flat 1502 was allowable and whether to follow the Special Bench decision in Ms. Sushila M. Jhaveri or non-jurisdictional High Court decisions. The Tribunal noted that the term "a residential house" should be interpreted to include multiple units if they form a single residential house. The Tribunal referenced several High Court decisions, including CIT vs Gita Duggal and CIT vs Syed Ali Adil, which supported a broader interpretation of "a residential house." The Tribunal concluded that the assessee's investment in three flats in the same building, even if on different floors, should be considered as one residential house for the purpose of section 54F. Thus, the ground was allowed in favor of the assessee.

2. Addition of ?1,50,000/- on account of loss under the head ‘Income from House Property’:

The assessee claimed a deduction for interest paid to the bank, which the Assessing Officer disallowed. The Tribunal noted that similar deductions were allowed in subsequent assessment years (2014-15 and 2015-17). The Tribunal directed the Assessing Officer to verify the facts and decide accordingly, allowing the ground for statistical purposes.

3. Addition of ?21,430/- on account of expenses under the head business income:

The assessee did not press this ground. Consequently, the Tribunal dismissed it as not pressed.

4. Confirming the demand of ?49,04,380/- due to alleged calculation mistake:

The assessee claimed there was a calculation mistake in the demand. The Tribunal directed the Assessing Officer to verify the claim and correct any mistakes found. This ground was allowed for statistical purposes.

Final Decision:

The appeal of the assessee was partly allowed for statistical purposes, with specific directions for the Assessing Officer to verify and correct the claims related to the loss under the head ‘Income from House Property’ and the alleged calculation mistake in the demand.