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2022 (1) TMI 838 - AT - Income TaxDeduction u/s 54 - investment in two residential property situated at different location - AO found that the assessee has invested in two residential houses to set off its LTCG - scope of amendment - HELD THAT - We find that this controversy has been considered at length by Hon ble High Court of Madras High Court in the case of Trilok Chand 2019 (4) TMI 713 - MADRAS HIGH COURT T he definition of the word Assessee under Section 2(7) of the Act means a person by whom any tax or sum of money is payable under the Act. Thus the HUF is also a person and a separate assessable entity under the Income Tax Act 1961. If the word a as employed under Section 54 prior to its amendment and substitution by the words one with effect from 01.04.2015 could not include plural units of residential houses there was no need to amend the said provisions by Finance Act No.2 of 2014 with effect from 01.04.2015 which the Legislature specifically made it clear to operate only prospectively from A.Y.2015- 2016. Once we can hold that the word a employed can include plural residential houses also in Section 54 prior to its amendment such interpretations will not change merely because the purchase of new assets in the form of residential houses is at different addresses which would depend upon the facts and circumstances of each case. 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 under Section 54 of the Act 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. The Assessee-HUF in the present case in our opinion complied with the conditions of Section 54 of the Act in its true letter and spirit and therefore was entitled to the deduction under Section 54 of the Act for the entire investment in the properties and securities. - Decided in favour of assessee.
Issues Involved:
1. Validity of the order passed by the Commissioner of Income-Tax (Appeals). 2. Deduction under Section 54 of the Income Tax Act, 1961 for two residential properties. 3. Deduction under Section 54 for the residential property at EMAAR MGF, Commonwealth Games Village. 4. Deduction under Section 54 for the residential property at Priyadarshni Vihar, Delhi. 5. Compliance with Section 54(2) regarding the deposit of unutilized amounts in the Capital Gain account scheme. Detailed Analysis: 1. Validity of the Order Passed by the Commissioner of Income-Tax (Appeals): The assessee contended that the order passed by the Commissioner of Income-Tax (Appeals) was "bad in law and void ab-initio." However, the Tribunal did not specifically address this issue, focusing instead on the substantive issues related to the deductions under Section 54. 2. Deduction Under Section 54 for Two Residential Properties: The primary issue was whether the assessee could claim a deduction under Section 54 for investments in two residential properties. The Tribunal referenced the decision of the Hon'ble Madras High Court in the case of Trilok Chand and Sons, which held that the word "a" in Section 54 could include plural residential houses. The Tribunal noted that the amendment to Section 54, which restricted the deduction to one residential house, was effective from 01.04.2015 and was intended to apply prospectively. Therefore, for the assessment year 2013-14, the assessee was entitled to claim deductions for investments in more than one residential property. 3. Deduction for the Residential Property at EMAAR MGF, Commonwealth Games Village: The Assessing Officer (AO) found that the payments for the property at EMAAR MGF were made beyond the specified period of one year. The AO allowed a deduction of ?25,92,437/- for this property, which was 50% of the payments made within the specified period. The Tribunal upheld this finding, noting that the CIT(A) had correctly treated the investment as a case of construction for the purpose of Section 54 and allowed the deduction accordingly. 4. Deduction for the Residential Property at Priyadarshni Vihar, Delhi: The AO allowed a deduction of ?64,05,100/- for the property at Priyadarshni Vihar, Delhi, but disallowed the claim for both properties. The Tribunal, referencing the Madras High Court decision, held that the assessee was entitled to deductions for both properties, as the restriction to one residential house was not applicable for the assessment year in question. 5. Compliance with Section 54(2) Regarding the Deposit of Unutilized Amounts: The AO and CIT(A) disallowed the deduction on the grounds that the assessee did not deposit the unutilized amount in the Capital Gain account scheme as per Section 54(2). The Tribunal noted that the assessee had utilized amounts higher than the Long-Term Capital Gains before the filing of the return of income. Therefore, the Tribunal found that the assessee was entitled to the deduction despite the non-compliance with the deposit requirement. Conclusion: The Tribunal allowed the appeal of the assessee, holding that the assessee was entitled to deductions under Section 54 for investments in two residential properties. The Tribunal relied on judicial precedents and the prospective nature of the amendment to Section 54, which restricted the deduction to one residential house. The order was pronounced in the open court on 13.01.2022.
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