2019 (9) TMI 1031 - AT - Income Tax

Eligibility of claim of deduction u/s.54 - two new residential properties purchased by the assessee out of sale consideration of old property - HELD THAT - We find that the issue in dispute is squarely covered in favour of the assessee by the Co-ordinate Bench of this Tribunal in case of Ravishankar vs. ACIT 2018 (1) TMI 980 - ITAT MUMBAI wherein as held as prior to A.Y 201516 no restriction was placed by the legislature in respect of investments in the residential houses that an assessee could make for claiming deduction under Sec. 54 of the Act. We thus are of the view that the claim of deduction raised by the assessee under Sec. 54 in respect of investment made towards purchase of residential house at Mumbai and Pune was well in order. We thus in context of the issue under consideration set aside the order of the CIT and uphold the claim of deduction as was raised by the assessee Section 54 of the Act uses the expression a residential house . This expression has been interpreted by the Courts to include investment being made in residential house / houses in order to be eligible to claim deduction u/s.54 of the Act and it does not restrict the claim of deduction u/s.54 of the Act to one house only. We also find that the amendment which had been brought in the Act is only w.e.f. A.Y.2015-16 and cannot be made applicable to the year under consideration as has been held in the aforesaid decision supra. Assessee is entitled for deduction u/s.54 - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of Delay in Filing the Appeal
2. Eligibility of Deduction under Section 54 of the Income Tax Act for Multiple Residential Properties

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal by the assessee was delayed by 554 days. The delay was attributed to the assessee's initial decision not to appeal due to the litigation cost and counsel's fees. The assessee later received a penalty notice under Section 271(1)(c) of the Income Tax Act, prompting him to file an appeal. The Tribunal considered the assessee's affidavit, which stated that he was unaware that penalty provisions would follow the order of the CIT(A) and that he was not conversant with the intricacies of the Income Tax Act. The Tribunal, referencing the Supreme Court decision in Collector, Land Acquisition vs. MST. Katiji and Others, condoned the delay, noting the peculiar facts and circumstances of the case, including the assessee's age and desire for peace of mind.

2. Eligibility of Deduction under Section 54 of the Income Tax Act for Multiple Residential Properties:
The core issue was the eligibility for deduction under Section 54 of the Act concerning the purchase of two new residential properties from the sale consideration of an old property. The Tribunal referenced the Co-ordinate Bench decision in the case of Ravishankar vs. ACIT, which interpreted Section 54 to allow deductions for investments in multiple residential properties. The Tribunal noted that the amendment to Section 54, which restricted the deduction to "one residential house in India," was effective from 01.04.2015 and did not apply to the assessment year in question (A.Y. 2010-11).

The Tribunal further cited the High Court of Karnataka's decision in Commissioner of Income Tax vs. Khoobchand M. Makhija, which clarified that the term "a residential house" should not be construed as singular but could include multiple houses. The Tribunal also referred to similar judgments from the High Courts of Madras and Andhra Pradesh, which supported the view that prior to the amendment, there was no restriction on the number of residential properties for claiming deduction under Section 54.

The Tribunal concluded that the assessee's claim for deduction under Section 54 for investments in two residential properties was valid and allowed the grounds raised by the assessee.

Conclusion:
The appeal was allowed, with the Tribunal condoning the delay in filing and upholding the assessee's eligibility for deduction under Section 54 for multiple residential properties. The decision emphasized the interpretation of "a residential house" to include multiple houses and the non-applicability of the amendment restricting the deduction to one house for the assessment year in question.