2019 (3) TMI 1034 - AT - Income Tax

Deduction u/s 54 - investment in multiple flats - HELD THAT - Interpretation of the word a preceding the expression residential house has been given wherein it has been observed that a residential house should not be understood to indicate a singular number. In the cited case of CIT vs. Devdas Naik 2014 (7) TMI 173 - BOMBAY HIGH COURT observed that deduction u/s 54 would be available if the flats were used a single unit and used as one house for purpose of residence even if acquisition of flats were done independently. From the above factual matrix coupled with binding judicial precedents, it is clear that deduction u/s 54 would be available to the assessee on account of investment in multiple flats it the same were being used as a single unit. In the present case, we find that this condition has been fulfilled by the assessee. Therefore, in our considered opinion, the assessee was eligible to claim deduction on account of investment made in multiple adjoining flats. computation of capital gain u/s 48 - Deduction of property tax and other payment made to BMC - HELD THAT - So far as the deduction of BMC Property Tax for ₹ 12 Lacs is concerned, the same could not be said to have been incurred wholly and exclusively in connection with the transfer of the property in terms of Section 48 and the deduction of the same has rightly been denied to the assessee. - decided against assessee The other amount stated to be paid by the assessee has been denied for want of requisite explanation before AO. The assessee, in support of the same, has placed on record the relevant receipts. Therefore, the issue of deduction of ₹ 21 Lacs stands remitted back to the file of AO for re-adjudication after appreciating the nature of the payment. The assessee, in turn, is directed to substantiate his claim, in this regard with supporting documents. This ground stand partly allowed for statistical purposes.

Summary

Issues:
1. Interpretation of Section 54 of the Income Tax Act, 1961 regarding deduction for reinvestment in residential property.
2. Disallowance of expenses incurred in connection with the sale/transfer under Section 48(i).

Analysis:
1. The appeal contested the order of the Ld. Commissioner of Income-Tax (Appeals) regarding the interpretation of Section 54 of the Income Tax Act, 1961. The assessee claimed deduction under Section 54 for the reinvestment in four adjoining flats, but the Ld. AO restricted the deduction to one flat only. The Ld. AO reworked the Long Term Capital Gains (LTCG) and added the differential amount to the income of the assessee. The Appellate Tribunal found that the amendment to Section 54, substituting 'a' with 'one,' was applicable only from AY 2015-16, not the impugned AY. The Tribunal observed that the flats were purchased together, with a single payment, and were intended to be used as a single residential unit. Citing judicial precedents, the Tribunal allowed the deduction for investment in multiple flats used as a single unit, overturning the decisions of the lower authorities.

2. Regarding the disallowance of expenses of ?21,00,000 and ?12,00,000 incurred in connection with the sale/transfer under Section 48(i), the Tribunal found that the ?12,00,000 for BMC Property Tax was rightly denied as it was not wholly and exclusively in connection with the transfer of the property. However, the ?21,00,000 payment required further substantiation. The Tribunal remitted this issue back to the Ld. AO for re-adjudication after considering the nature of the payment and the judicial pronouncements cited by the assessee. The assessee was directed to provide supporting documents to substantiate the claim. As a result, this issue was partly allowed for statistical purposes.

In conclusion, the appeal was partly allowed by the Appellate Tribunal, granting the deduction for investment in multiple flats used as a single unit under Section 54, while remitting the issue of the ?21,00,000 payment back to the Ld. AO for further examination based on the provided evidence.