The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the assessee is eligible for Section 54 exemption in respect of the purchase of 3 different residential houses.
The assessee, Sunandan Kumar Minocha has constructed 4 flats consisting of 4 units, i.e., one flat on each floor in a building which was purchased in the FY 1995-96. Out of these 4 units, the assessee had sold 3 units during the year under consideration. The indexed cost of acquisition of property resulted in long-term capital gain. The assessee claimed that it has purchased new residential property worth Rs.1,70,83,921.50 and claimed deduction u/s 54 which resulted in ‘nil’ long-term capital gain. AO observed that the assessee has invested the receipts of sale proceeds of its 3 units in 3 different locations of the city and, therefore, deduction u/s 54 is not available, because the same is available only in “a” residential house and not for every residential property in addition to the first house.
AO, after considering various judgments and Explanatory Note to Finance Act, 2014, amending the statute w.e.f. 01.04.2015, i.e., AY 2015-16. He restricted the claim of deduction u/s 54 to only one flat having a higher value of Rs.1,04,86,714/- and accordingly, he worked out the disallowance of Rs.49,62,490/-.
The case of the assessee is that the expression “a residential house” is to be understood in a sense that the building should be a residential one and the word “a residential” should not be construed as a singular number.
On the other hand, the case of the Revenue is that “a residential house” should be treated as one residential house and the amendment brought in the statute w.e.f. 01.04.2015 is mere clarificatory.
The Coram of President, G.S.Panu, and Judicial Member, Amit Shukla held that assessee is eligible for claim of exemption u/s 54 in respect of the purchase of 3 different residential houses and amendment brought in the Finance Act, 2014 w.e.f. 01.04.2015 will not be applicable in AY 2013-14.
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