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2021 (7) TMI 61 - AT - Income TaxDeduction u/s 54 - one residential house is eligible for deduction - CIT-A confirming sale consideration determined by Ld. AO on adopting the market value of 2 residential flats - HELD THAT - We note that the assessment year involved in this case in prior to the amendment restricting the deduction under section 54 to one flat/home. Ld. CIT(A) despite noting that there are various Hon ble High Court decision in favour of assessee chose to follow the ITAT decision to the contrary by observing that he must follow ITAT decision. Here we note that Ld.CIT(A) has grossly misled himself with respect to the cannons of judicial discipline. It is settled law that when on an issue there is no jurisdictional High Court decision other Hon ble High Court decision has to be followed by subordinate Courts and Tribunals. Hence Ld.CIT(a) should have followed the Hon ble High Court decisions in favour of assessee. By writing that Hon ble Supreme court has dismissed the SLP against those orders without any discussion on merits Ld.CIT(A) has further displayed his scant regard to the principle of stare decisis. The dismissal of S.L.P without a speaking order by Hon ble Supreme Court does not in any manner reduce the precedential value of Hon ble High Court decision. Hence we set aside the order of Ld.CIT(A) and direct that the deduction u/s 54 claimed by the assessee is to be allowed.
Issues Involved:
1. Addition of long-term capital gain. 2. Determination of sale consideration. 3. Denial of deduction under Section 54 for the second flat. 4. Applicability of amendments to Section 54. Issue-wise Detailed Analysis: 1. Addition of Long-Term Capital Gain: The Assessee contested the addition of ?37,47,819/- as long-term capital gain on the transfer of a residential house. The CIT(A) confirmed this addition based on a notional sale consideration of ?92,11,288/-, while the market value determined by the Stamp Valuation Department under Section 50C was ?53,70,125/-. 2. Determination of Sale Consideration: The Assessee argued that the AO erroneously determined the sale consideration by considering an excessive area of two flats, converting the carpet area into the built-up area based on incorrect presumptions. Additionally, the sale consideration was determined using the ready reckoner rate without considering locational disadvantages. The Assessee also requested that the valuation matter be referred to the DVO under Section 50C(2) to determine the fair value of the capital asset transferred during the year, which the CIT(A) did not admit. 3. Denial of Deduction Under Section 54 for the Second Flat: The Assessee claimed a deduction under Section 54 for two small flats acquired in the same building, arguing that they constituted one residential house. The CIT(A) confirmed the disallowance of the deduction for the second flat, holding that only one residential house is eligible for deduction under Section 54. The Assessee cited several judicial decisions supporting the claim that multiple flats in the same building could be considered a single residential house, including CIT vs. Gumaninal Jain, ITO vs. Sureddy Venkata Ramanamamma, and CIT vs. Devdas Naik. 4. Applicability of Amendments to Section 54: The Assessee argued that the amendment to Section 54 made in the Finance Act 2014, effective from 01/04/2015, which restricts the deduction to "one residential house," should not apply retrospectively to the Assessment Year 2013-14. The Assessee cited judicial decisions, including CIT vs. V.R. Karpagam and CIT vs. Gita Duggal, to support the claim that prior to the amendment, the deduction under Section 54 was permissible for more than one residential house. Tribunal's Findings: The Tribunal noted that the assessment year involved was prior to the amendment restricting the deduction under Section 54 to one flat/home. The CIT(A) had erred in not following the High Court decisions favoring the Assessee, citing the principle of judicial discipline. The Tribunal emphasized that in the absence of a jurisdictional High Court decision, other High Court decisions should be followed by subordinate courts and tribunals. The Tribunal set aside the CIT(A)'s order and directed that the deduction under Section 54 claimed by the Assessee be allowed. Conclusion: The Tribunal allowed the Assessee's claim of deduction under Section 54 for both flats, setting aside the CIT(A)'s order. The judgment emphasized the importance of following judicial discipline and adhering to High Court decisions in the absence of a jurisdictional ruling. The Assessee's appeal was thus successful.
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