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2023 (11) TMI 741 - AT - Income TaxLTCG - Deduction u/s 54 on investment made in five house properties - partial deduction allowed as two flats purchased on the same floor cannot be considered as one unit as another flat is located between these two flats - investment in multiple houses - scope of amendment - HELD THAT - In this case, the assessee had entered into an agreement with the builder and as per the development agreement, the assessee (land owner) parted from land and she was to receive 43.75 per cent of built up area, which was translated to 5 flats. The Hon ble High Court in Smt. V.R. Karpagam 2014 (8) TMI 899 - MADRAS HIGH COURT held that the said five flats in the same building can be construed as a single unit and therefore, exemption u/s 54F can be allowed in respect of these multiple units. Amendment to section 54/54F whereby the words a residential house has been replaced with the words one residential house in India is applicable with effect from 01.04.2015 and prior to the amendment, the earlier legal position will continue to hold. It is also inferred that post amendment, i.e. after 01.04.2015, the exemption u/s 54 will be available only in respect of one residential house in India and not in respect of multiple houses. Amendment made available on the statute, vide the Finance (No. 2) Act, 2014 w.e.f. 01.04.2015 pursuant whereto the term a residential house had been substituted by one residential house in India , rather supports the fact that the restriction of making the investment in only one residential house had been made available on the statute only with effect from A.Y. 2015-16, and as such cannot be extended to the years prior to that. We find that our aforesaid view is fortified by the judgment of Hon ble High Court of Karnataka in the case of CIT Vs. Khoobchand M. Makjija 2013 (12) TMI 1525 - KARNATAKA HIGH COURT Since the issue pertains to assessment year 2013-14 i.e. before the amendment in the statute the appeal of the assessee is hereby allowed.
Issues:
The appeal involves the interpretation of the provisions of section 54 of the Income Tax Act, 1961 regarding the eligibility for exemption/deduction for investment in multiple house properties. Issue 1: Interpretation of Amendment to Section 54 of the Act The appellant challenged the disallowance made by the Assessing Officer (AO) regarding the appellant's claims for exemption/deduction under section 54 of the Income Tax Act, 1961. The appellant argued that the amendment made by the Finance Act, 2014, changing "a residential house" to "one residential house" was a prospective amendment, and prior to the amendment, the word "a" was a grammatical reference, not a numeric reference. The AO restricted the exemption to investment in one house property, denying the benefits for investment in multiple properties. The appellant contended that prior to the amendment, investment in multiple houses was permitted, citing various decisions in support. The Tribunal analyzed the legal position and held that the amendment effective from 01.04.2015 clarified that the exemption under section 54 would be available only for one residential house in India post-amendment. The Tribunal allowed the appeal, emphasizing that the restriction of investment in only one residential house was applicable from A.Y. 2015-16, and could not be extended to prior years. Issue 2: Denial of Exemption for Investment in Multiple Properties The AO disallowed the appellant's deduction claimed under section 54 of the Act for investment in five house properties, restricting the exemption to one property only. The AO held that the deduction was allowable only for investment in one house property, and not for multiple units unless they could be jointly enjoyed as one unit. The Tribunal considered various case laws and legal positions on the issue. The Tribunal noted that prior to the amendment to section 54, the benefit could be allowed for investment in multiple units construed as a single residential unit. Citing judgments and legal precedents, the Tribunal concluded that the restriction of investing in one residential house was effective only from the assessment year 2015-16, and allowed the appellant's appeal for the assessment year 2013-14. Separate Judgement by the Judges: The Order was pronounced in the Open Court on 17/11/2023 by Dr. B. R. R. Kumar, Accountant Member of the Appellate Tribunal ITAT Delhi.
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