The Income Tax Appellate Tribunal (ITAT), Agra Bench while allowing the deduction ruled that the Amendment restricting Section 54 deduction to only one residential house is prospective.
The assessee, Mr. Dinesh Chandra Dutta Bhargava sold a residential house in Agra on April 21, 2014 for Rs.1,20,00,000/- having the value for the purpose of stamps at Rs.1,22,78,000/-. Out of the long term capital gains, the assessee invested Rs.15,00,000/- in specified bonds under section 54EC and also invested a sum of Rs.43,85,000/- in purchase of a flat and Rs. 48,90,000/- in another flat.
The Assessing Officer observed that deduction under section 54 could be allowed only in respect of one flat.
The assessee preferred appeal before the CIT(A) who sustained the disallowance on the premise that the legal position has changed with effect from April 1, 2015 and in section 54, phrase “a residential house” has been substituted by “one residential house in India”.
The assessee submitted that the CIT(A) while sustaining the disallowance failed to appreciate that the changed legal position in section 54 by Finance Act (Bill No. 2) 2014 was not applicable in the year under consideration, as the amendment was made effective from April 1, 2015 with prospective effect. The two units purchased by assessee are adjacent to each other, as is evident by Khasra No. 519 and 520 and therefore, the same should be considered for deduction under section 54 as per law applicable in the year under consideration.
On the other hand the authority submitted that both the units of residential flats purchased by the assessee situate in different societies and the legislative intent has never been to invest the capital gains in multiple residential houses. Therefore, the impugned order does not call for any interference.
The coram of Dr. Mitha Lal Meena and Laliet Kumar noted that there is nothing on record from the side of Revenue to justify that the said amendment was made applicable with retrospective effect. As regards the disallowance on the premise of investment in two residential flats, the ITAT said that in the case of V.R. Karpaam (Smt.) v. ITO, Tribunal held that ‘a residential house’ in the context could not be construed as a singular and the meaning given in section 54 would apply to section 54F also.
The Tribunal found no justification to discard the claim made by the assessee under section 54 of the Act
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