In Mr. Ravi Shankar vs. The Assistant Commissioner of Income Tax, Mumbai bench of Income Tax Appellate Tribunal (ITAT) proclaimed in its recent order that pre-amended capital gain under section 54 of the Income Tax Act 1961 can be availed for two residential houses.
The assessee in the present case is an individual who is an architect by profession has filed his return of income for the relevant assessment year and declared a total income of Rs.59,07,550. The return of income was processed under section 143(1) of the Act.
During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee, during the year under consideration sold his residential property for a consideration of Rs. 5,30,00,000 and claimed exemption on both residential properties purchased by him.
However, the AO rejected assessee’s claim of exemption on both residential properties finding that as the claim of deduction under Sec. 54 was allowed for the purchase of one residential house only. Thereafter, the assessee submitted before the AO that both of the new houses purchased by him were meant for his self-occupation, therefore both are eligible for exemption under the aforementioned section of the act. But the AO rejected the claim of the assessee.
On appeal CIT (A) also upheld the order of the AO. Aggrieved by the order of the authority assessee approached the tribunal on further appeal.
After giving a thoughtful consideration to the both submissions, the tribunal bench consists of Judicial Member Ravish Sood and Accountant Member Rajendra observed that the assessee is entitled to the benefit conferred under Section 54(1) of the Act since the acquisition of two residential houses by the assessee out of the capital gains falls within the phrase “residential house”.
The division bench also supported assessee’s submission in light of the order pronounced by Madras High Court in a previous case on a similar issue and the bench also specified that the assessee was entitled to claim the deduction in respect of investments made in more than one residential house. The tribunal bench concluded the issue by declaring that there no restriction was placed by the legislature in respect of investments in the residential houses that an assessee could make for claiming deduction under Sec. 54 of the Act. Thus the bench allowed assessee’s claim on an exemption.
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