2017 (3) TMI 394 - HC - Income Tax

Benefit under Section 54-F - qualify as a residential house occurring in Section 54-F - Held that - No hesitation in holding that in the instant case the assessee having got 15 flats along with his two sons will not disentitle him from getting the benefit under Section 54-F of the IT Act only on the ground that all the 15 flats are not in the same Block, particularly in the light of the admitted factual position that all the 15 flats are located at the same address. As a sequitur, we are unable to persuade ourselves that the 15 flats, even if they are located in different blocks would not disentitle the assessee from getting the benefit of Section 54-F of IT Act. No hesitation in holding that the order of ITAT which has been called in question before us is correct, there is no infirmity in the said order, does not call for any interference and we are of the view that the said order deserves to be confirmed. Once it is in the same location/address, the question of whether it is in the same block or in different blocks does not arise for consideration. To our mind, as long as all the flats are in the same address/location even if they are located in separate blocks or towers it does not alter the position. In the instant case, after all, all the flats are a product of one development agreement of the same piece of land being said land. Therefore, we make it abundantly clear that even if flats/apartments are in different blocks and different towers as long as they are in same address/location it does not disentitle the assessee from getting the benefit of Section 54-F of IT Act. Therefore, the sole and sheet anchor submission of counsel for Revenue that the 15 flats in the instant case are located in the different blocks does not impress us. We are unable to persuade ourselves that this will disentitle the assessee from getting the benefit of Section 54-F as all the flats are in the same location/address and all flats are by products of one development agreement with the same builder. The logic behind our view is that the assessee, irrespective of whether it is one flat or many flats, gets proportionate undivided share in land only for the same piece of land. Therefore, assessee does not buy more than one property in that sense of the matter. Flats, apartments are completely based on co-ownership. Thus we conclude that the assessee is entitled to the benefit of Section 54-F of IT Act. - Decided in favour of assessee.

Issues Involved:
1. Interpretation of the phrase "a residential house" in Section 54-F of the Income Tax Act, 1961.
2. Applicability of Section 54-F benefits to multiple flats received under a joint development agreement.
3. Relevance of case law precedents in interpreting Section 54-F.

Issue-Wise Detailed Analysis:

1. Interpretation of the phrase "a residential house" in Section 54-F of the Income Tax Act, 1961:

The core issue in this case is the interpretation of the phrase "a residential house" as mentioned in Section 54-F of the Income Tax Act. The appellant, the Revenue, contended that the 15 flats received by the assessee and his sons do not qualify as "a residential house" because they are located in different blocks. The Revenue argued that the phrase should be interpreted to mean a single residential unit.

However, the court referred to the Division Bench judgment in V.R. Karpagam's case, which interpreted "a residential house" to include multiple flats as long as they are in the same location/address. The court also noted that this interpretation was not challenged before the Supreme Court and thus holds the field. Additionally, the court referred to the Karnataka High Court's decision in K.G. Rukminiamma's case, which supported the interpretation that multiple flats in the same location can be considered "a residential house."

2. Applicability of Section 54-F benefits to multiple flats received under a joint development agreement:

The assessee entered into a joint development agreement with a builder, resulting in the construction of 16 flats. The assessee received 9 flats, and his two sons received 3 flats each. The Revenue's primary contention was that these flats, being in different blocks, do not qualify for Section 54-F benefits.

The court, however, held that the location/address of the flats is the determining factor for Section 54-F benefits, not whether they are in the same block. The court emphasized that all flats are part of the same development agreement and located at the same address, thus qualifying for the benefits under Section 54-F.

3. Relevance of case law precedents in interpreting Section 54-F:

The court examined several case law precedents to support its decision. It referred to:

- K.G. Rukminiamma's case: The Karnataka High Court held that multiple flats in the same residential building constitute "a residential house" for the purpose of Section 54.
- V.R. Karpagam's case: The Madras High Court held that multiple flats in the same location/address qualify as "a residential house" under Section 54-F.
- Pawan Arya's case: The Punjab and Haryana High Court held that two independent residential houses in different locations do not qualify for Section 54 benefits. However, this case was distinguished on facts as it involved properties in different locations, unlike the present case.

The court concluded that the principles laid down in V.R. Karpagam's case and K.G. Rukminiamma's case apply to the present case, as all flats are in the same location/address.

Conclusion:

The court held that the assessee is entitled to the benefits of Section 54-F of the Income Tax Act, as the 15 flats received under the joint development agreement are located at the same address. The court dismissed the Revenue's appeal, confirming the order of the ITAT, which in turn had confirmed the order of the CIT(A). The court emphasized that the interpretation of "a residential house" includes multiple flats in the same location/address, and the amendment to Section 54-F effective from 01.04.2015, changing "a residential house" to "one residential house," does not impact the present case, which pertains to the assessment year 2012-2013.

← Previous Next →