2018 (1) TMI 794 - AT - Income Tax

Entitled to the benefit of exemption u/s 54 - restriction of deduction to one independent residential unit at the time of reinvestment - whether different flats allotted to the assessee are meant for residential use of the assessee and if such test is fulfilled? - Held that - CIT(A) was of the opinion that the 8 flats allotted to the assessee are meant for utilisation of the joint family comprising of 3 sons and 4 daughters. Nothing was placed on record by the Ld DR to contradict the findings of the Ld. CIT(A). Since the finding of the Ld. CIT(A) was not contradicted by placing any material on record, we are unable to appreciate the contention of the Revenue. See CIT Versus Syed Ali Adil 2013 (6) TMI 278 - ANDHRA PRADESH HIGH COURT - Decided in favour of assessee.

Issues Involved:
1. Eligibility for deduction under Section 54 of the Income Tax Act for multiple residential units.
2. Interpretation of the term "a residential house" under Section 54.
3. Applicability of amendments to Section 54 by the Finance Bill 2014-15.

Issue-wise Detailed Analysis:

1. Eligibility for deduction under Section 54 of the Income Tax Act for multiple residential units:
The primary issue in this case is whether the assessee is eligible for deduction under Section 54 of the Income Tax Act for the value of multiple residential units. The Assessing Officer (A.O.) restricted the deduction to one residential unit, arguing that Section 54 limits the claim of deduction to the purchase of one residential flat. However, the assessee claimed exemption for all eight flats received under a development agreement, asserting that they should be treated as one residential accommodation meant for her residential purpose.

2. Interpretation of the term "a residential house" under Section 54:
The Ld. CIT(A) allowed the assessee's claim by following the jurisdictional High Court's decision in CIT vs. Syed Ali Adil (260 CTR 219) and noted that the amendment to Section 54 by the Finance Bill 2014-15, which emphasized the restriction to "one independent residential unit," was prospective and not applicable to the assessment year under consideration. The Tribunal considered various precedents, including the Hon'ble High Court of Madras in CIT V/s. Smt. V.R. Karpagam, which held that prior to the amendment effective from 01.04.2015, a residential house could include multiple flats/residential units.

3. Applicability of amendments to Section 54 by the Finance Bill 2014-15:
The Tribunal noted that the amendment to Section 54, which specifies "constructed, one residential house in India," was effective from 01.04.2015. Therefore, for the assessment year 2012-2013, the benefit of Section 54 could be extended to multiple residential units, as the amendment was not retrospective. The Tribunal also referenced the jurisdictional High Court's decision in CIT V/s. Vittal Krishna Conjeevaram, which supported the view that multiple independent residential units could be considered as one residential house for the purpose of Section 54.

Conclusion:
The Tribunal upheld the Ld. CIT(A)'s order, confirming that the assessee was entitled to the benefit of exemption under Section 54 for all eight flats, as they were meant for the residential use of the joint family. The Tribunal dismissed the Revenue's appeal, emphasizing that the factual matrix and the binding decisions of the jurisdictional High Court supported the assessee's claim. The decision was pronounced in the open court on 09th January, 2018.

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