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2007 (4) TMI 289 - AT - Income TaxComputation of Capital gain - investment made in two independent residential houses - Whether, the phrase a residential house used in of sections 54(1) and 54F means one residential house or more than one residential house independently located in the same building/compound/city? - HELD THAT - If the investment is made in two independent residential houses, even located in the same complex, then, in our opinion, exemption cannot be allowed for investment in both the houses. However, the choice would be with assessee to avail exemption in respect of anyone house as held in the case of K.C. Kaushik 1990 (4) TMI 38 - BOMBAY HIGH COURT . The view taken by us in this para is also justified by the decision in the case of B.B. Sarkar v. CIT 1981 (5) TMI 21 - CALCUTTA HIGH COURT , wherein purchase of ground floor of a house and thereafter construction of first floor was held to be an investment in one house only. If a floor is constructed to the new house or if it is renovated it remains a house and this will not be two houses. Thus, it is held that exemption under sections 54 and 54F of the Act would be allowable in respect of one residential house only. If the assessee has purchased more than one residential house, then the choice would be with assessee to avail the exemption in respect of either of the houses provided the other conditions are fulfilled. However, where more than one unit are purchased which are adjacent to each other and are converted into one house for the purpose of residence by having common passage, common kitchen, etc., then, it would be a case of investment in one residential house and consequently, the assessee would be entitled to exemption. Hence, we find that investment was made in two flats located at different localities in Mumbai. Accordingly, the assessee was entitled to exemption in respect of investment in one house only of her choice. The Assessing Officer has already allowed exemption in respect of house which permitted higher deduction. Therefore, on the basis of opinion expressed by us, we reverse the order of the learned CIT(A) on this issue and restore the order of Assessing Officer. Disallowance on brokerage payment - HELD THAT - We don't find any infirmity in the order of the learned CIT (A). The Assessing Officer has not disputed the allow ability of the claim of assessee. The claim had been disallowed on the ground that assessee failed to produce the proof of payment. The learned CIT (A) has allowed the claim after considering the proof of payment. It is also not the case of revenue that provisions of rule 46A had been violated by the learned CIT (A). Thus no interference is called for. In the result, appeal is partly allowed.
Issues Involved:
1. Interpretation of the phrase "a residential house" under sections 54 and 54F of the Income-tax Act, 1961. 2. Allowability of brokerage paid in computing capital gains. Issue-Wise Detailed Analysis: 1. Interpretation of "a residential house": The primary issue revolves around the interpretation of the phrase "a residential house" under sections 54 and 54F of the Income-tax Act, 1961. The question is whether this phrase means one residential house or more than one residential house independently located in the same building/compound/city. Arguments by Revenue: - The revenue contended that exemption under section 54/54F would be available only in respect of investment made in one residential house. - Reliance was placed on the judgment of the Hon'ble Jurisdiction High Court in the case of K.C. Kaushik v. P.B. Rane, Fifth ITO [1990] 185 ITR 499 (Bom.). - The word "a" means only one. Even if the word "a" means "any," it does not mean many. The word "any" would mean one out of many. Arguments by Assessee: - The assessee argued that the exemption would be available even if the investment is made in two house properties, though distantly located from each other. - Relied on various decisions of the Tribunal, including Ratanchand Murarka v. Joint CIT and others, which held that exemption under section 54/54F was available in respect of investments made in two house properties even if they were distantly located. - The judgment of the Hon'ble Bombay High Court in K.C. Kaushik was distinguishable as the questions before the High Court were different from the present case. - The word "a" is an indefinite word and can mean "any," which in turn could mean more than one. Tribunal's Analysis: - The Tribunal noted that both the words "a" and "any" are ambiguous and have various meanings depending upon the context in which they are used. - The Legislature used the word "a" in sections 54 and 54F, while the word "any" was used in sections 54B, 54D, 54E, 54EA, and 54EB, indicating different intentions. - The intention of the Legislature was to allow exemption in respect of investment in one residential house only. - The Tribunal agreed with certain decisions where exemption was allowed in respect of investments in two adjacent or contiguous units converted into one residential house by having a common passage/staircase, common kitchen, etc., intended to be used as a single house for the residence of the family. - If the investment is made in two independent residential houses, even located in the same complex, exemption cannot be allowed for investment in both houses. The assessee has the choice to avail exemption in respect of any one house. Conclusion: - Exemption under sections 54 and 54F would be allowable in respect of one residential house only. - If the assessee has purchased more than one residential house, the choice would be with the assessee to avail the exemption in respect of either of the houses provided the other conditions are fulfilled. - In the present case, investment was made in two flats located at different localities in Mumbai. The assessee was entitled to exemption in respect of investment in one house only of her choice. The Assessing Officer had already allowed exemption in respect of the house which permitted higher deduction. Therefore, the Tribunal reversed the order of the learned CIT(A) and restored the order of the Assessing Officer. 2. Allowability of Brokerage Paid: The next issue relates to the disallowance of Rs. 1,51,500 being brokerage paid in computing the capital gain. Arguments by Revenue: - The Assessing Officer disallowed the claim merely on the ground that the assessee failed to produce proof of payment. The Xerox copy of the brokerage bill was not considered as evidence. Arguments by Assessee: - On appeal, the assessee produced proof of payment along with the bank statement of the assessee. - The learned CIT(A) allowed the claim after considering the proof of payment. Tribunal's Analysis: - The Tribunal found no infirmity in the order of the learned CIT(A). - The Assessing Officer had not disputed the allowability of the claim but disallowed it on the ground of lack of proof of payment. - The learned CIT(A) allowed the claim after considering the proof of payment. - It was not the case of the revenue that the provisions of rule 46A had been violated by the learned CIT(A). Conclusion: - The Tribunal upheld the order of the learned CIT(A) allowing the brokerage claim. Final Judgment: The appeal was partly allowed. The Tribunal held that exemption under sections 54 and 54F is allowable in respect of one residential house only, and the brokerage paid was allowable as claimed by the assessee.
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