THE issue before the Bench is - Whether five independent flats in a multi-storey construction can be considered as a single residential unit for the purpose of claiming exemption u/s 54F, without considering the intention of the legislature to restrict the reinvestment to only one more residential unit under Section 54F and Whether the phrase "a residential house" can be assumed in plural connotation for the purpose of reinvestment of capital gain for claiming exemption under Section 54F. And the verdict favours the assessee.
The assessee, an individual, had entered into an agreement with one M/s.Mount Housing and Infrastructure Ltd., for development of a piece of land measuring 13,059 sq.ft. owned by her at Door No.29F, Race Course, Coimbatore. As per the agreement, the assessee was to receive 43.75% of the built up area after the development. This 43.75% built up area was translated into five flats. The assessee, while filing her return of income, calculated the capital gains based on the sale consideration of Rs.1,09,75,620/-. As per the assessee, this was the value of the flats, which were to be received by her and was equivalent to 56.25% of the undivided share of land given by her to M/s.Mount Housing and Infrastructure Ltd. The assessee claimed exemption u/s 54F on the value of the five flats. According to the assessee there were no capital gains whatsoever left for assessment. Before AO, two issues were raised, one on the value of the built-up area of the five flats and the other was whether the assessee would be entitled to the benefit of Section 54F in respect of the five flats. The AO granted the benefit of capital gains in respect of one flat and that too on the higher extent with regard to the floor space, viz., 2413.36 sq.ft.
On appeal, CIT(A) held that the claim of the assessee u/s 54F for all the five flats could not be admitted, but however, he took the view that the assessee would be entitled to the benefit of Section 54F in respect of one single flat with largest area of 4814.36 sq.ft. and accordingly directed AO to calculate the exemption u/s 54F. On further appeal, Tribunal held that as the assessee's representative admitted that with regard to the substitution of sale consideration based on the cost of construction of the developer, M/s.Mount Housing and Infrastructure Ltd., the order of CIT(A) could not be faulted. Also, the Tribunal, by considering the provision of Section 54F and taking note of the decision of the Karnataka HC in the case of CIT V. Smt. K.G.Rukminiamma 2010-TIOL-778-HC-KAR-IT, which referred to Section 13 of the General Clauses Act, held that the word 'a' appearing in Section 54F should not be construed in singular, but should be understood in plural. It was further held that the principles mentioned in Section 54, as interpreted by the Karnataka HC in the above-said decision, would apply paripassu to Section 54F also. Hence, the Tribunal concluded that the assessee was eligible for exemption u/s 54F on the five flats received by her in lieu of the land she had parted with.
On appeal before the HC, the Revenue's counsel submitted that a residential house mentioned in Section 54F should not be construed as one unit, even though different flats were constructed; but it should be construed as one residential flat, as every residential apartment contains separate kitchen, entrance etc. It was also pointed out to the amendment brought to Section 54F vide Finance (No.2) Act, 2014 with effect from 01.04.2015, wherein the word 'a residential house' was substituted to 'one residential house'. Hence, the assessee was not eligible for exemption u/s 54F.
Held that,
++ we find that the relevant provision is this case is Section 54F. It is relevant to note herein that an amendment was made to the above-said provision with regard to the word 'a' by the Finance (No.2) Act, 2014, which will come into effect from 01.04.2015. The said amendment reads as: "32a. Words constructed, one residential house in India shall be substituted for constructed, a residential house by the Finance (No.2) Act, 2014, with effect from 01.04.2015." The above-said amendment to Section 54F of the Income Tax Act, which will come into effect only from 01.04.2015, makes it very clear that the benefit of Section 54F of the Income Tax Act will be applicable to constructed, one residential house in India and that clarifies the situation in the present case, i.e, post amendment, viz., from 01.04.2015, the benefit of Section 54F will be applicable to one residential house in India. Prior to the said amendment, it is clear that a residential house would include multiple flats/residential units as in the present case where the assessee has got five residential flats. We may also mention here that all the Authorities below have clearly understood that the agreement signed by the assessee with M/s.Mount Housing Infrastructure Ltd., is that the assessee will receive 43.75% of the built-up area after development, which is construed as one block, which may be one or more flats. In that view of the matter what was before the Assessing Officer is only equivalent of 56.25% of land transferred, equivalent to 43.75% of built up area received by the assessee. This built up area got translated into five flats. Hence, we are of the opinion that the transaction in this case was not with regard to the number of flats but with regard to the percentage of the built up area, vis-a-vis, the Undivided Share of Land;
++ in similar circumstances, this Court, by order dated 04.01.2012 in T.C.(A)No.656 of 2005 held that the above provision refers to a residential house meaning thereby that even if there are four different flats and if it is considered for the property assessed as one unit and one door number is given, it should be construed as a residential unit, namely, one unit. In that sense, the said provision is available to the assessee. In the decision reported in (2012) 75 DTR 56 (Dr.(Smt.) P.K.Vasanthi Rangarajan, this Court, while dealing with the benefit of exemption under Section 54F, followed the above - said decision of this Court in T.C.(A)No.656 of 2005 and granted the benefit to the assessee u/s 54F on the investment made in the four flats. Hence, the above-said decisions of this Court make it clear that the property should be assessed as one unit, even though different flats are available. Here also, as per the assessment order, all the flats have one door number, namely, Door No.29F, Race Course, Coimbatore. In the light of the above, we find no question of law much less any substantial question of law arises for consideration in this Tax Case (Appeal). Accordingly, this Tax Case (Appeal) stands dismissed. No costs.
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