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TMI Blog2021 (3) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... 54 of the Act. From the various details furnished by the assessee the AO noted that while claiming deduction u/s 54 of the I.T. Act assessee has purchased two properties of different places. He, therefore, asked the assessee to explain the same. Assessee submitted that as per provisions of section 54 of the I.T. Act the assessee should purchase / construct a residential house. Assessee also relied on the various decisions :- CIT VII Vs. Gita Duggal 52 taxmann.com.246(SC) 2014 CIT Vs. Khoobchand M Makhija 43 taxmann.com 143 (Kar)(HC)2014 CIT Bangalore vs Smt. K.G. Rukiminiamma 196 taxman 87 (Karnataka) (HC) 2011 CIT Vs. D Ananada Basappa 180 taxman 4 (Kar) HC 2009 3. However, the AO was not satisfied with the arguments advanced by the assessee distinguishing the decisions cited before him and relied on the explanatory notes to the provisions of the Finance (No.2) Act 2014. The AO held that assessee is entitled to avail exemption u/s 54 of the Act only in respect of acquisition of one residential house property. He, therefore, allowed exemption u/s 54 of the I,.T. Act to the tune of Rs. 58 lacs and made addition of Rs. 22,02,175/- to the total income of the assessee. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the section which requires that the residential house should be built in a particular manner, it seems to us that the income tax authorities cannot insist upon 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 postretirement. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls his residential house and from the sale proceeds he acquires another residential house. 6.5 The controversy raised by different interpretations by certain courts has been put on rest through CBDT Circular no. 01/2015 dated 21st January, 2015 which clearly pointed out that the benefit was always intended for investment in one residential house within India. Accordingly, sub section (1) of section 54 of the income tax Act has been amended to provide that the rollover relief under the said section is available if the investment is made in one residential house situated in India. The circular also posits that since this amendment is in the nature of clarification and explanatory, therefore, it is evident that the exemption was not at all available at any point of time for investment in more than one residential house. 6.6 The interpretation of expression "a residential house" represents only a single residential house also jets strengthen from the fact that if the legislature had intended to allow exemption in respect of investment in more than one house, it would have used the word "any" before residential house. AO in his order highlighted that the word "any" has been used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act in respect of investment made in more than one residential house without appreciating the settled legal position that deduction u/s 54 is allowable in case of investment made in more than one residential house. That the appellant craves leave to add, amend or alter any of the grounds of appeal." 5. Ld. Counsel for the assessee referring to the decision of Hon'ble Karnataka High Court in the case of Arun K. Thiagarajan vs. CIT reported in 117 taxmann.com. 270 submitted that the Hon'ble High Court in the said decision is held that for purpose of allowing benefit of deduction u/s 54(1), expression ' a residential house' included within its ambit plural numbers as well and thus it cannot be construed as one residential house only. He submitted that in that case also the assessee had purchased two different house properties at two different places i.e one property at Koramangala and the other property at Domlur II stage Bangalore respectively on 23rd September 2002 and 23rd October, 2002. The AO denied the claim of exemption u/s 54 of the I.T. Act which was upheld by the Ld. CIT(A) and the Tribunal also dismissed the appeal filed by the assessee. The Hon'ble High Court held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased two different flats on two different dates and, therefore, assessee is not entitled to the deduction u/s 54 of the I.T. Act in respect of the second flat. 11. I have considered the rival arguments made by both the sides, perused the orders of the AO and Ld. CIT(A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. I find the assessee is in the instant case declared capital gain income of Rs. 1,00,00,000/- against which deduction u/s 54 was claimed at Rs. 8002175/- in respect of two house properties, the details of which are as under :- Investment in DLF Magnolilas on 21.07.2011 Rs. 58,00,000/- Investment in DLF Park place on 08.05.2012 Rs. 47,10,369/- 12. According to the AO, in view of provision of section 54 of the Act, assessee is entitled to deduction u/s 54 of the Act for one house property and, therefore, he restricted such deduction to Rs. 50 lacs and made addition of Rs. 22,02,175/- to the total income of the assessee. I find the Ld. CIT(A) upheld the action of the AO reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilized in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilized wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,- (i) the amount not so utilized shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased or has within a period of three years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the Previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section. 11. From close scrutiny of the aforesaid provision, it is axiomatic that property sold is referred to as original asset and the original asset is prescribed as buildings and lands appurtenant thereto and being a residential house. The expression 'a residential house1 therefore, includes building or lands appurtenant thereto. It cannot be construed as one residential house. 12. A Bench of this court in case of Smt. KG Riikminicimma {supra) dealt with the meaning of expression 'a residential house' used in Section 54(1) of the Act while taking into account Section 13(2) of the General Clauses Act, 1897 held that unless there is anything repugnant in the subject or context, the words in singular shall include the plural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over relief under the said Section is available if the investment is made in one residential house situated in India. 20.5 Applicability:- These amendments take effect from 1st April, 2015 and will accordingly apply in relation to Assessment year 2015-16 and subsequent Assessment years. Thus it is axiomatic that the aforesaid amendment was specifically applied only prospectively with effect from Assessment year 2015-16. 14. The subsequent amendment of Section 54( 1) also fortifies the fact that the legislature fell the need of amending the provisions of the Act with a view to give a definite meaning to the expression 'a residential house', which was interpreted as plural by various courts by taking into account the context in which the aforesaid expression was used. The subsequent amendment of the Act also fortifies the view taken by this court as well as Madras High Court and Delhi High Court. It is trite law that the principle underlying the decision would be binding as precedent in a case. In Halsbury Laws of England, Volume 22, Para 1682, Page 796, the relevant extract reads as under: The enunciation of the reasons or principle on which a question before a c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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