Mridula Agarwal vs ITO

“1.

That under the facts and circumstances Ld. CIT(A) erred in law as well as on merits in passing ex-parte order, although all dates of hearing were responded. CIT(A) has been incorrect in mentioning that no one attended on 20.08.19, the last date of hearing, when, CA. J. P. Sharma attended the CIT(A), requested for adjournment, it was refused, even adjournment application not accepted, then on 20.08,19, the said adjournment application had to be sent through ITBA vide Ack. No.20081911493791, thus no proper and reasonable opportunity of hearing has been allowed. In the absence of receipt of any fresh date of hearing and any fresh communication from CIT(A), the written submissions were also sent through ITBA on 30.08.19 vide Ack. No.30081911525702, which have not been considered in the impugned CIT(A) order.

2.

That under the facts and circumstances, the Ld. CIT(A) erred in law in not deciding the appeal on merits substantively even while passing ex-parte asstt. order.

3.

That under the facts and circumstances, the Ld. A.O. has exceeded his jurisdiction by not strictly following and working within the four corners of directions and findings in order u/s.263, hence the impugned order is not sustainable in law being without jurisdiction and illegal.

4.

That under the facts and circumstances, the Ld. A.O. committed serious legal and factual errors in allowing deduction u/s.54 only for Rs.33,61,165 against correctly claimed at Rs.64,23,843, thus short by Rs.30,62,678.

4.1

That in view of the submissions, evidences furnished and the settled legal position as per case laws, the deduction u/s.54 should have been allowed for Rs.64,23,843.”

- Sec.54(1) stood amended vide Fin. (No.2) Act, 2014 whereby "a residential house..." substituted by "constructed, one residential house in India,...". (21-22)

- CBDT vide Explanatory notes to the Prov. of Fin. (No.2) Act, 2014 clarified that this amendment will be applicable w.e.f. A.Y.15-16. (23) Even in large No. of case laws also, similarly has been held that prior amendment in sec-54(1), deduction can be claimed for investment in more than 01 property. Hence, exemption U/s.54 should be allowed for both the properties.

CASE LAWS ON - Sec.54 exemption allowable for inv. in more than 01 house

Rajendra Agrawal vs Ito in ITA No. 2272/Del/2024 Dtd. 26.07..24 (Now filed) (Assessee's husband) - on same property:-

Para-6.3

... we are of the considered view that the appellant/assessee is entitled to claim the deduction on both residential units U/s.54 of the act...

Nilufer Sayed vs ITO [2021] 126 taxmann.com 173 (Mumbai - Trib.) (Now filed)

Prior to 1-4-2015 word 'residential house' as occurring in section 54 can include more than one or plural residential house

Para - 4.5

"Keeping in view the rules of judicial precedents, the aforesaid view of Hon'ble High Courts shall take precedent over the decision of Tribunal (SB) in Sushila M. Jhaveri (supra) as relied upon by Ld. CIT(A)."

Mrs. Thajunnissa Begum vs ITO [2023] 152 taxmann.com 191 (Chennai - Trib.)

INCOME TAX : Before amendment of Sec.54(1) by Finance (No. 2) Act, 2014 with effect from 1-4-2015, in a residence house, if multiple units were there, still assessee could claim benefit of exemption U/s.54.

CIT Vs Syed Ali Adil [2013] 33 taxmann.com 212 (Andhra Pradesh)

IT : Exemption U/s.54 cannot be denied, where residential house property purchased by assessee consists of several independent units.

Disapproved the decision of A.O. quoted in Asstt. Order as under:

Para -10

...The decision in Ms.Suseela M. Jhaveri's case (supra) holding that only one residential house should be given the relief under section 54 does not appear to be correct and we disapprove of it...

CIT VS D. Ananda Basappa [2009] 180 Taxman 4 (Karnataka)

Sec.54 of the Income-tax Act, 1961 - Capital gains - Profit on sale of property used for residential purpose - Asstt. Yr 1996-97 - Whether expression 'a residential house' as occurring in Sec.54(1) should be understood in a sense that building should be residential in nature and 'a' should not be understood to indicate a singular number - Held, yes - Whether when an HUF's residential house is sold and members of HUF, keeping in view future needs in event of separation, invest capital gain in purchasing more than one residential building, benefit of exemption U/s.54(1) would be available to HUF - Held, yes.

Tilolchand & Sons VS ITO [2019] 105 taxmann.com 151 (Madras)

Sec.54 of the Income-tax Act, 1961 - Capital gains - Profit on sale of property used for residential purpose - Asstt. Yr 2005-06 - Whether word 'a residential house' as occurring in Sec.54(1) can include more than one or plural residential house - Held, yes - Whether where assessee HUF sold its residential house and invested capital gain in purchasing more than one residential houses within stipulated time limit, assessee would be entitled to benefit of exemption U/s.54 - Held, yes [Paras 20 and 21] [In favour of assessee]

Saroj Arora vs ITO [2022] 138 taxmann.com 445 (Delhi - Trib.)

INCOME TAX : Where during assessment year 2013-14, assessee claimed benefit of exemption U/s.54 towards purchase of two residential house properties, since amendment to provision of Sec.54, restricting deduction allowed therein to only one residential property, was applicable prospectively, from 1-4-2015 such claim of assessee would not fall within amended provision and was to be allowed.

ACIT vs Shri Shrey Sharma Guleri Prime Channel Software Communications (P.) Ltd [2018] 92 taxmann.com 43 (Mumbai - Trib.)

IT: Basement is part and parcel of residential house, hence assessee having sold basement and realized capital gain which was invested in acquiring two house properties, assessee would be entitled to claim exemption U/s.54.

Nigam Narendrabhai Khansaheb vs DCIT [2022] 140 taxmann.com 137 (Surat-Trib.)

Sec.54 of the Income-tax Act, 1961 - Capital gains - Profit on sale of property used for residence (One residential house) — Asstt. Yr 15-16 - Assessee filed return of income claiming deduction U/s.54 with regard to purchase of two flats from capital gain derived on sale of property - In view of amendment to Sec.54 with effect from Asstt. Yr. 15-16, A.O. allowed exemption with regard to one flat of higher value and disallowed exemption with regards to other flat and added it to capital gain derived by assessee - On appeal, Commissioner (Appeals) confirmed action of A.O. - It was noted that amendment in Sec.54 by substituting words 'one residential house' in lieu of 'a residential house' was made by Parliament by Finance Act, 2014, with effect from 1-4-2015 and applicable from Asstt. Yr 15-16 - Assessee had purchased two flats in Asstt. Yr 14-15 when amendment was not in force - Whether therefore, assessee would be entitled to deduction U/s.54 in respect of both flats and based on this factual position, Assessing Officer was to be directed to grant deduction U/s.54 in respect of second flat - Held, yes [Paras 12 and 13] [In favour of assessee].

TWO - Investment beyond due date of filing ITR allowed even without depositing in capital gain scheme A/c

- Property was sold on 19.10.11. ✓

- Due date of A.Y. 12-13 for filing ITR was 31.08.12 ✓

- Assessee filed ITR on 09.05.13.

- A.O. disallowed deduction of Rs. 21,74,419/- as mentioned in table -01 above for the reason assessee neither invested this amount till filing of ITR nor deposited within time specified u/s 54(2).

- Details of investment is as under:

Date	Amount
18.01.13	10,87,209
09.05.13	10,87,210
Total	21,74,419

There is no dispute regarding investment of Rs. 21,74,419/- in purchase of Flat.

"5.

The revenue carried the matter in appeal before the Tribunal and raised the following ground:-

"On the facts and on the circumstances of the case Ld. Commissioner of Income Tax (Appeals) has erred in law and on the facts in deleting the addition of '98,20,722/u/s. 54F of the IT Act, 1961 which the Assessing Officer had allowed in respect of only one unit by treating the units as two separate residential properties."

The Tribunal confirmed the decision of the CIT (Appeals) by observing as under: -

"6.

We have heard the rival contentions in light of the material produced and precedent relied upon. We find that Id. counsel of the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of the Hon'ble Karnataka High Court in the case of CIT & Anr. Vs. Smt. K.G.Rukminiamma in ITA No. 783 of 2008 vide order dated 27.8.2010 wherein it was held as under :-

"The context in which the expression „a residential house" is used in Section 54 makes it clear that, it was not the intention of the legislation to convey the meaning that: it refers to a single residential house, if, that was the intention, they would have used the word "one." As in the earlier part, the words used are buildings or lands which are plural in number and that: is referred to as "a residential house", the original asset. An asset newly acquired after the sale of the original asset also can be buildings or lands appurtenant thereto, which also should be "a residential house." Therefore, the letter "a" in the context it is used should not be construed as meaning "singular." But, being an indefinite article, the said expression should be read in consonance with the other words „buildings" and lands" and, therefore, the singular a residential house" also permits use of plural by virtue of Section 13(2) of the General Clauses Act. CIT V. D. Ananda Bassappa (2009) 223 (kar) 186: (2009) 20 DTR (Kar) 266 followed."

7.

Upon careful consideration, we find that the contentions of the assessee that the issue is covered in favour of the assessee are correct.

7.1

Ld. Departmental Representative could not controvert the above and no contrary decision was cited before us.

8.

Accordingly, we do not find any infirmity or illegality in the order of the Ld. Commissioner of Income Tax (Appeals) and hence, uphold the same."

"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 house' therefore, includes building or lands appurtenant thereto. It cannot be construed as one residential house.

12.

A Bench of this court case of Smt KG Rukminiamma 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 and vice versa. It was further held that context in which the expression 'a residential house' is used in Section 54 makes it evident that it is not the intention of the legislature to convey the meaning that it refers to a single residential house. It was also held that an asset newly acquired after sale of original asset can also be buildings or lands appurtenant thereto, which also should be residential house, therefore, the letter 'a' in the context it is used should not be construed as meaning singular, but the expression buildings and lands. Accordingly, the contention raised by the revenue was rejected. Similar view was taken by o bench of this court in Khoobchand M. Makhtia supra, B.Srinivas supra and in the case of Smt Jyothi K Mehta supra. The Madras High Court while dealing twith Section 54 of the Act as it stond prior to amendment by Finance Act No.2/2014 in the case of Tilokchand and Sons supra took the similar view and held that the word 'a' would normally mean one but in some circumstances it may include within its ambit and scope some plural numbers also. The Delhi High Court also took the similar view in case of Gita Duggal supra.

13.

It is well settled in law that an Amending Act may be purely clarificatory in nature intended to clear a meaning of a provision of the principal Act, which was already implicit. In view of aforesaid enunciation of law by different High Courts including this court and with a view to give definite meaning to the expression 'a residential house', the provisions of Section 54(1) were amended with an object to restrict the plurality to mean singularity by substituting the word a residential house' with the word 'one residential house'. The aforesaid amendment came into force with effect from 01.04.2015. The relevant extracts of Explanatory note to provisions of Finance Act No.2/2014 reads as under:

20.3

Certain courts had interpreted that the exemption is also available if investment is made in more than one residential house. The benefit was 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.

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 felt the need of amending the provisions of the Act with a view to gwe a deforite 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 court has been decided is alone binding as a precedent. This underlying principle is often termed the ratio decidendi, that is to say, the general reasons given for the decision or the general grounds on which it is based, detached or abstracted from the specific peculiarities of the particular case which gives rise to the decision.

15.

This Court as well as Madras and Delhi High Court have interpreted the expression 'a residential house' and have held that the aforesaid expression includes plural. The ratio of the decisions rendered by coordinate bench of this court are binding on us and we respectively agree with the view taken by this court while interpreting the expression 'a residential house'. Therefore, the contention of the revenue that the assessee is not entitled to benefit of exemption under Section 54(1) of the Act in the facts of the case does not deserve acceptance.

In view of preceding analysis, the substantial question of law framed by this court is answered in favour of the assessee and against the revenue. In the result, the order passed by the assessing officer and Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal insofar as it deprives the assessee of the benefit of exemption under Section 54(1) of the Act are hereby quashed and the is held entitled to benefit of exemption under Section 54(1) of the Act. In the result, the appeal is allowed.