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TMI Blog2019 (6) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... ember And Shri B.R.R. Kumar, Accountant Member For the Appellant : None For the Respondent : Sh. Surender Pal, Sr. DR ORDER PER B.R.R. KUMAR, A.M.: The assessee filed appeal on 20.03.2019. Vide order sheet dated 09.05.2019,the case was adjourned to 03.06.2019 and the parties were accordingly informed. On the designated date of hearing, nobody attended on behalf of the assessee. Hence, the matter is being adjudicated on merits after taking into consideration the facts available on record. The grounds raised in appeal read as under : 1. The Ld. CIT(A) has erred both in law and in facts in circumstances of the case in disallowing the construction cost of ₹ 24,35,431/- on the presumption that the same is allowable at the time of calculating capital gains as cost of improvement ignoring the fact that the expense of construction cost is allowable deduction u/s 54/54F of the Act if the same is done before the filling of return of income. 2. The Ld. CIT(A) has erred both in law and in facts of the case in making the above disallowance without providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Purchase of unit at 420 Naya Bazar Delhi 13,50,000/- 3. Purchase of unit at 421 Naya Bazar Delhi 21,50,000/- Add: 4. Stamp Duty Registration expenses 8,39,550/- 5. Cost of construction expenses 24,35,431/- Total (1+2+3+4+5) 11,274,981/- Before the ld. CIT(A), the assessee has taken various arguments pertaining to eligibility u/s. 54F which are as under : There have been controversy between taxpayer and income tax department whenever taxpayer claims exemption under section 54 for investment made in multiple houses. Question that now arise whether the prefix 'a' used before the word residential house in sec 54/54F interpreted in singular or plural sense. To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that requirement. A person may construct a house according to his plans, requirements and compulsions. A person may construct a residential house in such a manner that he may use the ground floor for his own residence and let out the first floor having an independent entry so that his income is augmented. It is quite common to find such arrangements, particularly post-retirement. One may build a house consisting of four bedrooms (all in the same or different floors) in such a manner that an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may even arrange for his children and family to stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. There may be several such considerations for a person while constructing a residential house. The physical structuring of the new residential house, whether it is lateral or vertical, cannot come in the way of considering the building as a residential house. The fact that the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vide the written submissions filed before the Tribunal, the assessee contended that the explanation a residential house used in the section should be understood in a sense that the building should be of residential in nature and a should not be understood to indicate a single number. It was contended that as long as the assessee acquires a building which may be constructed in such a manner as to consists of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of section should be taken to have been satisfied. He relied on Ananda Basappa, 309 ITR 329, KG. Rukminiamma 331 ITR 211 and the jurisdictional High Court judgment in the case of CIT vs. Geeta Dugal, 257 CTR 208 wherein multiple investments in units in the same residential complex were treated to qualify for deduction u/s. 54F. Thus, the argument of the assessee revolved around the fact that even multiple residential units should be treated as one house and deduction should be allowed. The provisions of section 54 F are hereby reproduced which reads as under : 54F. (1) Subject to the provisions of sub-section (4), w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head Capital gains relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head Capital gains relating to long-term capital assets of the previous year in which such new asset is transferred. During the proceedings before the ld. CIT(A), the report of the Inspector was obtained to examine whether the construction on premises No. 419, 420 and 421 constitute a residential unit or not. The report of the Inspector is as under Inspector Report S.No. Name a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Third Floor - This floor consists of 5 rooms with one common kitchen space and one common bathroom in which three rooms are found vacant, Further, in one room one-person named Sh. Gopai was found to be present and on asking he informed that he is the staff j | of M/s Shree. Jaina Rice Private Limited and the rent j is not paid by him to anyone. The fifth room was found locked and when asked, the assessee informed that the said side of the building where the room is located has been sold by Sh. Ravi Jain to some Sh. Rakesh Jain. When asked for the proof of the same, he produced the copy of the sale deed which is enclosed with this report. Second Floor - This floor consists of 6 rooms with one common kitchen space and one common bathroom in which four rooms are found vacant. Further, in one room one person named Sh. Mukesh was found to be present and on asking he informed that he is living on rent in the said room since last 5-6 months and rent of ₹ 10,0007- is paid to Sh. Ravi Jain for the same. The sixth room was found locked and when asked, the assessee informed that the said side of the building where the room is located has been s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e than one residential building, it cannot be said that the benefit of exemption is to be denied under s. 54(1) of the IT Act. On facts, it is shown by the assessee that the apartments are situated side by side. The builder has also stated that he has effected modification of the flats to make it as one unit by opening the door in between two apartments. The fact that at the time when the Inspector inspected the premises, the flats were occupied by two different tenants is not the ground to hold that the apartment is not a one residential unit. The fact that the assessee could have purchased both the flats in one single sale deed or could have narrated the purchase of two premises as one unit in the sale deed is not the ground to hold that the assessee had no intention to purchase the two flats as one unit. Hence, keeping in view the fact that primarily the assessee is eligible for deduction u/s. 54F and purchased the plots and constructed residential dwellings on those plots, we hereby hold that the assessee is eligible for the deduction and confirm the order of the ld. CIT(A) to that extent. At the same time, we are not in support of the decision of the ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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