2021 (12) TMI 1079 - AT - Income Tax

Exemption u/s 54 - assessee has invested in three residential house properties at three different places - scope of amendment - whether exemption is available in respect of one residential house or more than one? - case of the assessee is that the expression a residential house is to be understood in a sense that the building should be residential one and the word a residential should not be construed as a singular number - HELD THAT - As decided in SYED ALI ADIL 2013 (6) TMI 278 - ANDHRA PRADESH HIGH COURT Even after the amendment of Section 54 and 54F, providing for exemption from long-term capital gains tax, only if the investment is made in one residential house property, one can still invest in more than one house and claim the lax exemption, provided the taxpayer can prove that all such flats are used as a single residential nit by the family, in the abovementioned case, two residential units were purchased, which were separated by a strong wall and were purchased from two different vendors under two separate Sale deeds - The exemption was still granted to the tax payer, because both the flats were capable of being used as a single residential unit. Therefore the letter 'a' in the context it is used should not be construed as meaning singular. But, being an indefinite article, the said expression should be read in consonance with the other words 'buildings' and 'lands' and, therefore, the singular 'a residential house' also permits use of plural by virtue of Section 13(2) of the General Clauses Act. Since there are favourable judgments in support of the contention raised by the assessee, therefore, we hold that assessee is eligible for claim of exemption u/s 54 in respect of purchase of 3 different residential houses and amendment brought in the Finance Act, 2014 w.e.f. 01.04.2015 will not be applicable in AY 2013-14. - Decided in favour of assessee.

Summary

Issues:
Interpretation of "a residential house" for deduction u/s 54 of Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Interpretation of "a residential house" for deduction u/s 54:
The appeal was filed against an order passed for the assessment year 2013-14 regarding the disallowance of deduction u/s 54 of ?49,62,490. The assessee sold 3 units of a property and purchased 3 units in the same city, claiming exemption. The Revenue argued that "a residential house" should be treated as one house, while the assessee contended for multiple units. Various judgments were cited, supporting the view that exemption under section 54 is available for more than one residential unit if used for residential purposes. The amendment in the statute w.e.f. 01.04.2015 was considered clarificatory. The Tribunal held in favor of the assessee, allowing the claim of exemption for the purchase of 3 different residential houses, stating that the amendment from 2014 would not apply to the assessment year 2013-14.

Conclusion:
The Tribunal allowed the appeal, holding that the assessee is eligible for the claim of exemption u/s 54 for the purchase of 3 different residential houses. The judgments cited supported the interpretation that "a residential house" does not necessarily mean a singular unit, and the amendment introduced in 2014 does not apply retrospectively to the assessment year in question.

This detailed analysis provides an overview of the issues involved in the legal judgment, the arguments presented by both parties, the relevant legal interpretations, and the final decision reached by the Tribunal.