2020 (11) TMI 253 - AT - Income Tax

Rectification of mistake u/s 254 - Deduction u/s. 54F - capital gain on sale of a property at HSR Layout, Bangalore, which capital gain was invested in purchase of a property at N.R. Colony - As per revenue assessee should not own more than one house, other than the new asset - as per revenue since by the Finance Act, 2014, section 54F was amended by substituting the words a residential house with one residential house and since the assessment year in this appeal is after the aforesaid amendment, the conclusions drawn by the Tribunal are incorrect and suffers from an apparent mistake - HELD THAT - We are of the view that there is no mistake, much less an apparent mistake, in the order of the Tribunal. The Tribunal has clearly given a finding that the property at N.R. Colony belonged to one owner, Smt. Janaki Iyengar and as per the Will of Smt. Janaki Iyengar, the Ground Floor of the premises which was numbered as Door No.37 was given to Smt. Janaki s sister, Dr. M. Vaidehi and the 1st Floor numbered as Door No.37/1 was given to Smt. Janaki s nephew, Shri P. Ramanuja Chari. Both these owners of Ground Floor and 1st Floor sold the property to the assessee. The Tribunal clearly observed that the entire property constitutes one residential house, but was bifurcated with two Door Nos. for Ground Floor and 1st Floor with common entrance in Ground Floor only to earmark the share of each beneficiary and that otherwise the property constitutes a single property, though it has two different Door Nos. The Tribunal has reached the conclusion that assessee has purchased only one property and not two properties. Tribunal referred to decisions of High Court of Karnataka referred to by the Hon ble Delhi High Court and those decisions were only purely supportive, but the real conclusion of the Tribunal on facts is that the assessee purchased only one house property - there is no mistake, much less an apparent mistake, in the order of Tribunal. - Decided against revenue.

Summary

Issues:
- Claim of deduction u/s. 54F of the Income-tax Act, 1961 for capital gain on sale of property.
- Interpretation of owning more than one house for deduction eligibility.
- Rectification of errors in the Tribunal's order under section 254(2) of the Act.

Analysis:
1. Claim of Deduction u/s. 54F:
The case revolved around the Assessee's entitlement to claim deduction u/s. 54F of the Income-tax Act for capital gain on the sale of a property at HSR Layout, Bangalore, reinvested in a property at N.R. Colony. The Revenue argued that owning more than one house would disqualify the Assessee from claiming the deduction. The Tribunal analyzed the property purchase details and concluded that despite having different door numbers for the ground and first floor, it constituted a single property. The Tribunal referred to a Delhi High Court case where flats on different floors were considered one property, supporting the Assessee's claim.

2. Interpretation of Owning More Than One House:
The Revenue contended that post-amendment by the Finance Act, 2014, the phrase "a residential house" was substituted with "one residential house" in section 54F. However, the Tribunal found no mistake in its order, emphasizing that the property in question was a single residential house despite having different owners for the ground and first floor. The Tribunal highlighted that the property was bifurcated for convenience but constituted a unified property. It reiterated that the Assessee had purchased only one property, aligning with the legislative intent of the deduction provision.

3. Rectification of Errors in Tribunal's Order:
The Revenue sought rectification of the Tribunal's order under section 254(2) of the Act, alleging an apparent mistake due to the post-amendment language change. The Tribunal dismissed the petition, stating that its findings were based on factual analysis and legal interpretation, not constituting an apparent mistake. It clarified that the power under section 254(2) is not for reviewing decisions but rectifying clear errors on record. The Tribunal upheld its original decision, emphasizing the unity of the property and the Assessee's eligibility for the deduction.

In conclusion, the Tribunal upheld the Assessee's claim for deduction u/s. 54F, emphasizing the unified nature of the property despite separate door numbers. The judgment highlighted the legislative intent behind the provision and rejected the Revenue's plea for rectification, affirming the correctness of its original order.