2021 (5) TMI 374 - AT - Income Tax

Disallowance of assessee s claim made u/s. 54/54F - Long term capital gains earned by the assessee was invested in purchase of two houses/flats instead of one residential unit - HELD THAT - It is not in dispute that the amendment in section 54 was made w.e.f. 01.04.2015, which does not fall within the assessment year under consideration. There is nothing on record from the side of Revenue to justify that the said amendment was made applicable with retrospective effect. In such circumstances. As regards the disallowance on the premise of investment in two residential flats, we find that in the case of V.R. Karpaam (Smt.) 2013 (8) TMI 477 - ITAT CHENNAI Tribunal held that a residential house in the context could not be construed as a singular and the meaning given in section 54 would apply to section 54F also. New asset defined in section 54F as a residential house has to be understood in plural. It is not necessary that all residential units should be single door number allotted. Tribunal, following the ratio in CIT v. K.G. Rukminiamma 2010 (8) TMI 482 - KARNATAKA HIGH COURT , allowed the claim of assessee - no justification to discard the claim made by the assessee u/s. 54 of the Act in the present case. We are, therefore, not inclined to sustain the impugned order. - Decided in favour of assessee.

Summary

Issues:
Challenge to disallowance of claim made under section 54/54F of the Income Tax Act for investing in two houses instead of one residential unit.

Analysis:
1. The appellant challenged the order of the ld. CIT(A) sustaining the disallowance of the claim made under section 54/54F of the Act by the Assessing Officer. The appellant sold a residential house and invested in two flats, leading to the disallowance.

2. The Assessing Officer disallowed the claim as the appellant invested in two flats instead of one residential unit. The ld. CIT(A) upheld this disallowance citing the amendment in section 54 effective from 01.04.2015, replacing "a residential house" with "one residential house in India."

3. The appellant contended that the amended legal position in section 54 was not applicable for the assessment year under consideration. The appellant argued that the two units purchased were adjacent to each other and should be considered for deduction under section 54 as per the law applicable in the relevant year.

4. The Tribunal analyzed the legal position and relevant precedents. Referring to the decision in V.R. Karpaam v. ITO, the Tribunal held that "a residential house" can be construed in plural, allowing for investment in multiple residential units. Following this interpretation, the Tribunal allowed the appellant's claim under section 54.

5. The Tribunal found that the amendment in section 54 was not applicable retrospectively for the assessment year in question. As per legal interpretations and precedents, the Tribunal concluded that the appellant's investment in two residential flats should be considered for deduction under section 54. Therefore, the impugned order was not sustained, and the appeal of the assessee was allowed.