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2019 (7) TMI 802 - AT - Income TaxDeduction u/s 54 - Purchase of one residential property consisting 3 flats on different floor of the same society and 1 in different location - Scope of amendment via The Finance Act 2014 substituting the expression a residential house property with the words one residential house with effect from 01/04/2015 - Profit on sale of property used for residence - flats were acquired under different agreement - HELD THAT - As decided in M/S. TILOKCHAND AND SONS VERSUS ITO 2019 (4) TMI 713 - MADRAS HIGH COURT wherein held 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 u/s 54 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. Accepting the interpretation of word a as occurring in Section 54 as made by Hon ble Madras High Court in Tilokchand Sons V/s ITO supra we hold that on the facts and circumstances the assessee would be eligible to claim deduction u/s 54 on all the four residential houses. Condonation of delay of 326 days - concern CA of a CA firm who was handling assessee s matter left the organization without handing over the papers - HELD THAT - Keeping in view the principle of natural justice and ratio of decision of Hon ble Apex Court in Collector Land Acquisition Vs. Katiji 1987 (2) TMI 61 - SUPREME COURT the bench formed an opinion that the delay deserve to be condoned
Issues Involved:
1. Condonation of Delay 2. Interpretation of Section 54 of the Income Tax Act, 1961 3. Eligibility for Deduction under Section 54 Condonation of Delay: The appeal by the assessee was filed with a delay of 326 days. The delay was attributed to the departure of the Chartered Accountant handling the case, who did not hand over the necessary papers. The assessee sought condonation of the delay based on affidavits. The tribunal, referencing the principle of natural justice and the decision of the Hon’ble Apex Court in Collector, Land Acquisition Vs. Katiji, decided to condone the delay and proceed with the appeal on merits. Interpretation of Section 54 of the Income Tax Act, 1961: Section 54, as it stood during AY 2013-14, allowed for a deduction against Long-Term Capital Gains on the purchase or construction of "a residential house property." The Finance Act, 2014 amended this to "one residential house" effective from 01/04/2015. The tribunal noted that various High Courts, including the Hon’ble Madras High Court in Tilokchand & Sons V/s ITO and the Hon’ble Karnataka High Court in CIT V/s D. Ananda Basappa, had interpreted the word "a" to include plural residential houses. This interpretation was based on the context and legislative history, indicating that the amendment was intended to apply prospectively from AY 2015-16. Eligibility for Deduction under Section 54: The assessee, a resident individual, earned Long-Term Capital Gain on the sale of inherited residential property and claimed deduction under Section 54 for investments in four different flats. The flats were located in different places, with three in the same society but on different floors, and one in a different location. The assessee argued that the investments were made considering family convenience and future financial security for her children. The Assessing Officer (AO) denied the deduction for three flats in Navi Mumbai, relying on the decision of the Hon’ble Punjab & Haryana High Court in Pawan Arya V/s CIT, which limited the deduction to one residential house. The first appellate authority upheld this decision based on the Special Bench of Mumbai Tribunal in ITO V/s Sushila M. Jhaveri and other similar decisions. Tribunal's Analysis and Decision: The tribunal considered various judicial precedents and noted that the interpretation of "a" as including plural residential houses had been upheld by multiple High Courts. The tribunal found that the decisions of the Special Bench of Mumbai Tribunal and the Hon’ble Bombay High Court in CIT V/s Raman Kumar Suri and CIT V/s Devdas Naik were fact-specific and did not negate the broader interpretation of "a" as including multiple houses. The tribunal concluded that the assessee was eligible for deduction under Section 54 for all four residential houses, as the investments were made within the stipulated time and were intended for residential purposes. The tribunal directed the AO to recompute the income of the assessee accordingly, allowing the appeal on this ground. Conclusion: The appeal was partly allowed, with the tribunal condoning the delay and granting the deduction under Section 54 for all four residential houses. The order was pronounced in the open court on 15th July 2019.
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