Income-tax Appeal No. 113 of 2004. Case: Commissioner of Income Tax and Anr. Vs D. Ananda Basappa. High Court of Karnataka (India)

Case NumberIncome-tax Appeal No. 113 of 2004
CounselFor Appellant: M.V. Seshachala, Adv. and For Respondents: K.R. Prasad, Adv.
JudgesK. Sreedhar Rao and C.R. Kumaraswamy, JJ.
IssueIncome Tax Act - Sections 54, 54F, 54(1); Finance Act, 2000; General Clauses Act - Section 13
Citation2009 (223) CTR (Kar) 186, 2009 (309) ITR 329 (KAR), 2009 (2) KCCRSN 50, 2009 (180) TAXMAN 4 (Kar)
Judgement DateOctober 20, 2008
CourtHigh Court of Karnataka (India)

Judgment:

  1. The respondent-assesses is a Hindu undivided family. The assessee sold a residential house for Rs. 2,12,50,000 in the year October, 1995. The assessee purchased two residential flats adjacent to each other from M/s. Ormonde Private Developers Ltd. The assessee has, however, taken two separate registered sale deeds in respect of the two flats situate side by side purchased on the same day. The vendor has certified that he has effected necessary modifications to the two flats to make it one residential apartment. The assessee sought for exemption under Section 54 of the Income Tax Act.

  2. The assessing authority gave exemption for capital gains to the extent of purchase of one residential flat. It was found in the inspection by the inspector that the residential flats were in occupation of two different tenants disclosing separate enjoyment. Therefore, it is held that Section 54(1) of the Income Tax Act does not permit exemption for the purchasers for more than one residential premises. The Commissioner of Income Tax confirmed the order of the assessing authority. The Tribunal, in appeal set aside the order of the Commissioner of Income Tax and held that the purchase of the two flats made by the assessee has to be treated as one single residential unit and that the assessee is entitled for full exemption.

  3. The following are the substantial questions of law framed for consideration:

    (a) Whether the Tribunal was correct in holding that out of the sale proceeds of the property bearing No. 9, Brunton Road, Bangalore, owned by the assessee he could invest the same in two residential flats bearing No. G-01 and G-02, and claim deduction in respect of both these flats in accordance with Section 54 read with Section 54F of the Act for the assessment year 1996-97?

    (b) Whether the proviso to Section 54F of the Act, as it stood prior to the amendment brought about by the Finance Act, 2000, can be read to mean that for the assessment year 1996-97 the assessee would be entitled to relief in respect, of more than one dwelling unit for the purpose of claiming exemption under the head 'Capital Gains'?

  4. In the provision of Section 54(1) of the Income Tax Act, the relevant portion is extracted herein for convenient reference:

    Subject to the provisions of Sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or...

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