August 2014
Capital gain: Exemption u/s. 54: A. Y. 2007- 08: Sale of bungalow jointly owned with wife: Purchase of adjacent flats one in the name of assessee and other jointly with wife and used as single residential house: Assessee entitled to exemption u/s. 54 in respect of investment in both houses:
By K. B. Bhuj le Advocate
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CIT vs. Devdas Naik (Bom): ITA No. 2483 of 2011 dated 10/06/2014: In the A. Y. 2007-08, the assessee sold a bungalow jointly owned with wife for a consideration of Rs. 3 crore. With this sum they bought three flats, one in the assessee’s name, another in the name of assessee and his wife and third in the name of the wife. The assessee claimed exemption u/s. 54 of the Income-tax Act, 1961 in respect of his investment by him in two flats. The two flats were adjacent, converted into single residential house with one common kitchen, though purchased from two different sellers under two distinct agreements. The Assessing Officer held that the assessee was entitled to exemption u/s. 54 in respect of only one flat and disallowed the claim in respect of the second flat. The Tribunal relied on the decision of the Special Bench in ITO vs. Ms. Sushila M. Jhaveri;107 ITD 327 (Mum)(SB) and allowed the assesee’s claim.
On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:
“i) Admitted fact is that the flats were converted into one unit and for the purpose of the residence of the assessee. It is in these circumstances the Commissioner held that the acquisition of the flats may have been done independently but eventually they are a single unit and house for the purpose of residence. This factual finding could have been made the basis for recording a conclusion in favour of the assessee. We do not find that such a conclusion can be termed as perverse.
ii) R eliance placed by the Tribunal on the order passed by it in the case of Ms. Sushila M. Jhaveri and which reasoning found favour with this Court is not erroneous or misplaced. The language of the section has been noted in both the decisions and it has been held that so long as there is a residential unit or house, then the benefit or deduction cannot be denied.
iii) I n the present case, the unit was a single one. The flats were constructed in such a way that they could be combined into one unit. Once there is a single kitchen, then, the plans can be relied upon.
iv) We do not think that the conclusion is in any way impossible or improbable so as to entertain this appeal. In this peculiar factual backdrop, this appeal does not raise any substantial question of law. The appeal is devoid of any merits and is dismissed.”
