The order of the Bench was delivered by
Shailendra Kumar Yadav (Judicial Member)- This appeal has been filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-32, Mumbai, dated December 11, 2012.
2. The following grounds were urged by the assessee :
"(1) The learned Commissioner of Income-tax (Appeals) (CIT (A)) has erred in disallowing exemption under section 54 of the Income- tax Act, 1961, of Rs. 21,03,800. The appellant prays that disallowance of exemption under section 54 of the Income-tax Act of Rs. 21,03,800 shall be deleted.
(2) The learned Commissioner of Income-tax (Appeals) has further erred in this connection in holding that the appellant had purchased two flats in two different buildings and location and only one flat is eligible for exemption under section 54 of the Income-tax Act, 1961, disallowing exemption of second flat under section 54 of the Income- tax Act, 1961.
(3) The learned Commissioner of Income-tax (Appeals) has erred in considering expression a residential house as singular number instead of plural sense that the building or flat should be of a residential in nature.
(4) The learned Commissioner of Income-tax (Appeals) has erred in not considering the judgment of the Karnataka High Court of CIT v. D. Ananda Basappa [2009] 309 ITR 329 (Karn) ; [2009] 223 CTR (Karn) 186 and relying upon judgment of lower authority, i.e., the Income-tax Appellate Tribunal, Mumbai of Sushila Jhaveri.
(5) The Commissioner of Income-tax (Appeals) further erred in this connection in making the foregoing addition in contravention of the principles of natural justice.
(6) The learned Assessing Officer has erred in inflicting interest under section 234B of the Income-tax Act, 1961."
3. The brief facts of the case are that during the year under consideration the assessee sold his tenancy right in a flat at Room No. 1, Ground Floor, Ganga Niwas, Vile Parle(3), Mumbai-57 for a consideration of Rs. 65,00,000. While computing the long-term capital gains the assessee claimed deduction of Rs. 1,76,600 paid as brokerage in connection with the sale of the tenancy right in the said flat. The assessee also claimed deduction under section 54 in respect of purchase of two flats totalling to Rs. 61,79,900. The above two flats were purchased by the assessee in two different co-operative societies on two different dates. In the course of assessment proceedings the Assessing Officer asked as to why exemption under section 54 in respect of one house may not be withdrawn as deduction is available in respect of only one house. The assessee has submitted that both flats were taken in the same Vile Parle (E), Mumbai for residential purpose hence the same may be treated as one residential unit. The Assessing Officer did not agree with the contention of the assessee and he denied deduction in respect of one flat. He also denied deduction of Rs. 1,76,600 claimed by the assessee as brokerage.
4. The matter was carried before the first appellate authority wherein the Commissioner of Income-tax (Appeals) allowed the issue on brokerage which is not the subject-matter before us. However, the Commissioner of Income-tax (Appeals) upheld the order of the Assessing Officer by observing that the action of the Assessing Officer in allowing deduction in respect of only one flat is justified and same was confirmed. The Commissioner of Income-tax (Appeals) observed that the assessee has sold the tenancy right in flat at Room No. 1, Ground Floor, Ganga Niwas, Vile Parle(e), Mumbai- 57 for a consideration of Rs. 65,00,000 and purchased two flats, one at ground floor of Gangotri Prathana CJS Ltd., Prathana Samaj Road, Vile Parle (E), Mumbai-57 whereas the other flat was purchased at 3rd Floor, Hem Prabha CHS Ltd. junction of Chittaranjan Road, and Tilak Maindir Road, Vile Parle (E), Mumbai-57. According to the Revenue the assessee has purchased two flats at different locations in different societies. Accordingly, by no stretch of imagination they can be considered as single flat or single unit residence. The mere fact that two sons of the assessee are residing in those flats, does not make him entitled to claim deduction in respect of two flats located at different places, the Commissioner of Income-tax (Appeals) observed. Accordingly he upheld the order of the Assessing Officer. The Commissioner of Income-tax (Appeals) while dismissing the appeal has drawn strength from the amendment of the provisions of section 54F of the Act.
5. The learned Departmental representative supported the orders of the authorities below. On the other hand, the learned authorised representative for the assessee drew our attention to the decision of the hon'ble Madras High Court in the case of CIT v. Smt. V. R. Karpagam [2015] 373 ITR 127 (Mad) wherein the court observed that the assessee entered into an agreement with a developer for development of a piece of land. Under the agreement, the assessee was to receive 43.75 per cent. of the built-up area after the development. This 43.75 per cent built-up area was translated into five flats. the assessee calculated the capital gains based on the sale consideration of Rs. 1,09,75,620. According to the assessee, this was the value of the flats, which were to be received by her and was equivalent to 56.25 per cent. of the undivided share of the land given by her to the developer. The assessee claimed exemption under section 54F of the Income-tax Act, 1961, on the value of the five flats in the assessment year 2007-08. The Assessing Officer granted the benefit of exemption in respect of one flat and that too with regard to the floor space vis-a-vis 2413.36 sq. ft. The Commissioner (Appeals) held that the claim of the assessee under section 54F for all the five flats could not be admitted but the assessee was entitled to the benefit of section 54F in respect of single flat with the largest area of 4814.36 sq. ft. In her appeal the Tribunal held that the assessee was eligible for exemption under section 54F on all five flats received by her in lieu of the land she had parted with. The hon'ble Madras High Court dismissed the appeal of the Revenue observing that amendments to section 54F effective from April 1, 2015, makes it clear that the benefit of section 54F will be applicable to one residential house in India. Prior to the amendment, it was clear that a residential house would include multiple residential units. All the authorities below have clearly understood that the agreement signed by the assessee with the developer was that the assessee will receive 43.75 per cent. of the built-up area after development, which was constructed as one block, which may be one or more flats. In that view of the matter what was before the Assessing Officer was only the equivalent of 56.25 per cent of land transferred, equivalent to 43.75 per cent. of the built-up area received by the assessee. This built-up area can be translated into five flats. Hence, the transaction in this case was not with regard to the number of flats but with regard to the percentage of the built-up area vis-a-vis the undivided share of land. In this regard the learned authorised representative for the assessee submitted that prior to the amendment to section 54F effective from April 1, 2015 the assessee was entitled for the benefits of more than one flat as discussed above. Similar view has been taken by the hon'ble Andhra Pradesh High Court in the case of CIT v. Syed Ali Adil [2013] 352 ITR 418 (AP). Nothing contrary was brought to our knowledge on behalf of the Revenue in regard to above discussed legal preposition.
6. The facts being similar, following the same reasoning the Assessing Officer is directed to allow the claim of the assessee with respect to two flats purchased by the assessee as discussed above. It is pertinent to mention here that the hon'ble Madras High Court, in the case of CIT v. Smt. V. R. Karpagam [2015] 373 ITR 127 (Mad), has clearly held that the amendment to provision of section 54F is effective from April 1, 2015, which makes it clear that benefit of section 54F will be applicable to one residential house in India. Prior to the amendment it was clear that a residential house would include multiple residential units.
7. In the result, the appeal filed by the assessee is allowed.
The order pronounced in the open court on October 28, 2015.