The Income Tax Appellate Tribunal (ITAT), Pune Bench, has recently in an appeal filed before it, held that capital gain exemption u/s 54 cannot be claimed for multiple flats.
The aforesaid observation was made by the ITAT Bench when an appeal was preferred before it by an assessee, as against the order of the Commissioner of Income Tax (Appeals) Pune ,dated 15.02.2018, for the assessment years 2014-15 .
The brief facts of the case were that the appellant was an individual engaged in the business of trading of gold and silver jewellery. And the Return of Income for the assessment year 2014-15 was filed by him on 24.12.2015 declaring total income of Rs.49,02,575/-.
It was found by the department that during the previous year relevant to the assessment year under consideration, the appellant had sold a residential property situated at Mumbai, for a consideration of Rs.2,33,00,000/- and the same was not returned in the return of income.
However, the appellant had not offered any capital gains to tax when the query was raised by the Assessing Officer, during the course of assessment proceedings, and it was submitted by the appellant that the flat in Mumbai was sold for consideration of Rs.2,33,00,000/- which was purchased on 21.03.2007 at a cost of Rs.64,68,274/-, after the indexation of cost of acquisition, capital gains worked out to Rs.1,24,71,110/- and the same consideration was invested in the residential apartment, which is exempt u/s 54 of the Act.
The Assessing Officer however, denied the exemption u/s 54 on the ground that the same was not claimed in the return of income, placing reliance on the decision of the Supreme Court in the case of Goetze (India) Ltd. vs. CIT.
The assessee appellant preferred an appeal against the same before the CIT(A). And on appeal before the CIT(A) held that the claim for exemption u/s 54 can be entertained at the stage of appeal, following the decision of the Bombay High Court in the case of CIT v. Prithvi Brokers & Shareholders (P.) Ltd.
However, considering the fact that the appellant had purchased two flats in Pune, by two separate purchase deeds, dated 28.03.2013, for an agreed consideration of Rs.1,01,54,550/- and Rs.1,01,58,620/-, wherein the 2 flats were was not adjacent but located on the 9th & 10th floor of the same building , thus evidencing the impossibility of being combined into one unit or having a common kitchen , held that the assessee was not entitled for deduction in respect of both the units, placing reliance on the decision of the Bombay High Court in the case of CIT vs. Devdas Naik.
And with the CIT(A) further placing reliance on the decision of the Bombay High Court in the case of K.C. Kaushik vs. ITO, and holdingthe appellant to be entitled to the claim of deduction only in respect of one flat, heproceeded to examine the dates of investments made in the purchase of new flats and concluded in his order that the appellant is entitled for deduction of Rs.92,91,220/ only u/s 54 of the Act. And it is being aggrieved by the decision of the ld. CIT(A), that the appellant has preferred the instant appeal before us the ITAT Bench.
With Shri Naresh Kumar on behalf of the assesseecontending that the order of the CIT(A) rejecting the exemption u/s 54 in respect of second flat cannot be sustained in view of the decision of Co-ordinate Bench of the Pune Tribunal in the case of Ms. Anita Mahindrakumar Oberai vs. ITO, and hence that the assessee is entitled for exemption u/s 54 prior to the amendment in respect of multiple flats, it was submitted by Shri M. G. Jasnani, the CIT-DR, that the order of the CIT(A) was based on the decision of the Jurisdictional High Court and therefore that order of the CIT(A) does not call for any interference.
Hearing the opposing contentions of both the sides and perusing the materials available on record, the Bench consisting of ParthaSarathi Chaudhury, the Judicial Member and Inturi Rama Rao, the Accountant member observed and held as follows :
“The contention of the ld. AR that the appellant is entitled to the exemption u/s 54 in respect of the investment made into two flats cannot be accepted in view of the decision of the Hon’ble Jurisdictional High Court in the case of K.C. Kaushik vs. ITO. Hence, the order of the ld. CIT(A) which is based on the decision of the Hon’ble Jurisdictional High Court, does not call for any interference. Accordingly, the grounds of appeal filed by the assessee stand dismissed.”
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