O R D E R
PER SHRI B.C. MEENA, AM
This appeal filed by the assessee emanates from the order of the learned CIT(A), Ujjain, dated 27.8.2014.
2. The only effective ground in this appeal is that the learned CIT(A) has erred in not allowing the benefit of
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section 54F of the Act. The other issue raised in the appeal relates to charging of interest for which we hold that the charging of interest is mandatory and as such there is no merit in this ground. It is dismissed. The assessee has also raised a ground relating to initiating penalty proceedings u/s 271(1)(c) of the Act. This issue is pre-matured, hence it is also dismissed.
3. Now the only ground left for consideration is regarding the claim of the assessee u/s 54F of the Act. The learned CIT(A) has dealt with this issue as under :-
"4.1 Ground no. 1- Through this ground the appellant has challenged the disallowance of exemption u/s 54F amounting to Rs.22,07,836/-. The exemption u/s 54F is available only if on the date of transfer of original assets the appellant does not own more than one residential house property than the new house. He should also
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not purchase any other residential house within a period of two years after such date (or complete construction within a period of three years after such date) other than the new house. However, in this case, the appellant has purchased a house property (Flat No. 701) situated at Aradhana Cooperative Housing Society, Dadar, Mumbai, on 28thNov,.2008 for a cost of Rs.75,77,180/- covering the entire sales consideration on sale of shares i.e. Rs.48,55,249/- and further purchased one more house on same date for a cost of
Rs.1,16,69,050/-. It is clear that he has purchased within a period of two years of the transfer of original asset, a residential house other than the new house.
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4.1.1 The section 54F(2) is reproduced here for the sake of convenience :-
(2) Where the appellant purchases, within the period of (two years) after the date of the transfer of the original asset or constructs within the period of three years after such date, any residential house, the income from which is chargeable under the head "Income from house property" other than the new asset, 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 cases 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
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previous year in which such residential house is purchased or constructed."
4.1.2 The appellant himself has submitted and admitted that he has purchased two flats and that too by two separate sale deeds. The appellant's contention that he is using both the flats as single dwelling unit is not supported by any evidence. No expenses shown to have been incurred for converting both the flats in one flat. Even otherwise, it is undisputed fact that the appellant has purchasaed two separate flats with two separate flat numbers and through two separate sale deeds.
4.1.3 It is worth to note here that the intention of bringing such qualification by the Legislature appears to give exemption u/s 54F to a person who does not own more than one residential house property and who wants to purchase/constructs a residential house by
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covering his other assets like shares, gold, etc. If the taxpayer purchases/constructs two or more houses within the specified time limit then he becomes disqualified to claim the exemption u/s 54F. 4.1.4 The appellant produced the certificate from society dated 16.12.2011. In the certificate the society stated that Shri Ashish Garg owns flat No. 701- Learned CIT(A) and 704C. Certificate also indicates that appellant owns two flats. The A.O. in the order mentioned that the appellant had not shown any cost in respect of converting two flats into one residential unit. The appellant failed to give the evidences that two flats were converted into one residential unit and incurred cost for that. It is also to be mentioned that two separate sale deed has been executed on the same day which makes it clear that both are independent units at the time of purchase.
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Therefore, the A.O. has rightly denied the exemption u/s 54F of the IT Act. Therefore, the addition made by the A.O. amounting to Rs.22,07,836/- is confirmed. The appeal on this ground is dismissed."
4. The learned counsel for the assessee submitted that the learned CIT(A) has not allowed the claim to the assessee on the basis that the assessee was the owner of two flats. The assessee has not shown cost in respect of converting these flats into one residential unit. There were two separate sale deeds for these flats. The learned CIT(A) sustained the order of the Assessing Officer and denied the exemption u/s 54F of the Act.
5. Before us, the learned counsel for the assessee submitted that there are various case laws where the claim has been allowed when the two flatsare connected to one residential unit. He submitted that although there were two flat numbers but it was one residential unit only. The
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learned counsel for the assessee pleaded to allow the appeal. The case laws relied upon are as under :-
1. Decision of Bombay High Court in CIT vs. Devdas Naik; Income Tax Appeal No. 2483 of 2011
2. Decision of Delhi High Court in CIT vs. Gita Duggal; 2013(214) Taxman 0051-Del
3.Decision of Karnataka High Court in CIT vs. Smt. K.G. Rukminiamma
4. Decision of Karnataka High Court in CIT vs D. Ananda Basappa
5. Decision of ITAT, Mumbai in ITO vs. Ms. Sushila M. Jhaveri; 2007 (ID2) GJX-0097-TBOMS
7. On the other hand, the learned DR relied upon the orders of the authorities below.
8. We have heard both the sides and case laws. There were two sale deeds for two flat numbers. The assessee claimed that he has converted these two flats into one residential unit. However, it is for the assessee to establish
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that these flats have been converted into one unit. It can be even verified by conducting on the sport inquiry. The builders are also giving two flat numbers but constructing inter-connected one residential units. This fact needs verification. Therefore, for this limited purpose, the issue is restored to the file of the Assessing Officer to decide whether these two flats were converted into one unit. The Assessing Officer shall decide the issue de novo after providing the assessee an opportunity of being heard.
9. In the result, the appeal is allowed for statistical purposes.
Pronounced in open Court on 21stDecember, 2015 Sd/- sd/-
(D.T. GARASIA) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
21stDecember, 2015
Dn/-
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