But The Assessing Officer Held By His Order Dated23.12.20911 That The Case Is Covered By The Proviso To Section54F(1) Of The Act. This Was On The Basis Of An Op v. Commissioner Of Incometax [(263) Itr 143 (Sc). Therefore, The Revenue Has Come Up Withthe Above Appeal

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 08.02.2016 Coram: The Hon'ble Mr.Justice V.RAMASUBRAMANIANand The Hon'ble Mr.Justice N.KIRUBAKARAN Tax Case Appeal No.54 of 2016 The Commissioner of Income TaxChennai. Chennai....Appellant/Respondent VersusMr.I.Ifthiqar Ashiq172, Raahat Plaza, Arcot Road, Vadapalani,Chennai 26....Respondent/Appellant. Tax Case Appeal filed under Section 260-A of the Income TaxAct, 1961, against the Order dated 11.06.2013 passed by theIncome tax Appellate Tribunal, Madras 'C' Bench, Chennai in ITANo.232/Mds./2013 agaosmt the prderdated14/12/2012 made inITA.No.128/11-12(A)_/VIII on the file of the Commissioner ofIncome Tax (Appeals VIII) Chennai against the Assessment Orderdated 23.12.2011 made in GIR/PAN No.AAHP/11576Q on the file ofIncome Tax Officer, Business Ward III(1), Chennai for theassessent year 2009-10. For Appellant:Mr.M.Swaminathan, Standing CounselFor Respondent :Dr.Anita Sumanth V.RAMASUBRAMANIAN, J JUDGMENT The Revenue has come up with the above appeal, raising thefollowing two substantial questions of law:-"1. Whether on the facts and circumstancesof the case, the Tribunal was right in allowingassessee claim for deduction u/s. 54Fespecially when assessee owned two propertieson the date of transfer of original assets andincome from two properties were chargeable totax under the head income from house property? https://hcservices.ecourts.gov.in/hcservices/ 2. Is not the finding of the Tribunal badespecially when the assessee case is hit byclauses (a)(1) and (b) of the proviso toSection 54F a d therefore no deduction can begranted u/s 54F?" 2. We have heard Mr.M.Swaminathan, learned Standing Counselfor the Department and Dr.Anita Sumanth, learned counselappearing for the respondent/assessee. 3. The Respondent/Assessee filed his Return of Income on4.11.2009 for the Assessment Year 2009-10. The case was selectedfor scrutiny and notice was issued. 4. It was found that the assessee made cash deposits ofRs.66,50,000/- at Indian Bank at various dates. When questioned,the assessee explained that the cash represented the saleproceeds of a land owned by him at Neelankarai. The total saleconsideration was Rs.1,14,88,000/-. The assessee claimed thatthe entire sale consideration was invested in the constructionof a residential house at Kodaikanal. Therefore, he claimedexemption under Section 54F of the Act. 5. But the Assessing Officer held by his order dated23.12.20911 that the case is covered by the proviso to Section54F(1) of the Act. This was on the basis of an opinion tenderedby the Joint Commissioner under Section 144A of the Act. 6. The assessee filed an appeal to the Commissioner ofIncome Tax (Appeals). The appeal was dismissed, forcing theassessee to file a further appeal before the Income TaxAppellate Tribunal. By an order dated 11.6.2013, the Tribunalallowed the appeal of the assessee on the ground that Section 22uses only the expression "building", without qualifying it withan adjective "residential". The Tribunal in support of the saidconsideration, relied upon a decision of the Supreme Court inShambhu Investments Private Limited v. Commissioner of IncomeTax [(263) ITR 143 (SC). Therefore, the Revenue has come up withthe above appeal. 7. The actual question of law that arises for considerationin the appeal is as to whether the case of the assessee iscovered by the substantive part of sub-section (1) of Section54F or the proviso thereunder. 8. If the case of the assessee comes within the substantivepart of Section 54F(1), he is entitled to the deduction. If thecase is covered by the proviso to Section 54F of the Act, theassessee is not entitled to the benefit of the substantive partof sub-section (1) of Section 54F. 7. The actual question of law that arises for considerationin the appeal is as to whether the case of the assessee iscovered by the substantive part of sub-section (1) of Section54F or the proviso thereunder. 8. If the case of the assessee comes within the substantivepart of Section 54F(1), he is entitled to the deduction. If thecase is covered by the proviso to Section 54F of the Act, theassessee is not entitled to the benefit of the substantive partof sub-section (1) of Section 54F. 9. Under the substantive part of Section 54F(1), the capitalgain arising from the transfer of any long term capital asset,not being a residential house, shall not be subjected to thetaxation provisions, if the assessee had within the period ofone year before or two years after the date on which thetransfer took place, purchased a residential house.Alternatively he should have constructed one residential housein India within a period of three years. If these conditions aresatisfied, the capital gain will be dealt with in accordancewith Clauses (a) and (b) of sub-section (1) of Section 54F ofthe Act. 10. There is no dispute about the fact that the assessee inthis case made a transfer of a long term capital asset it whichnot a residential house. There is no dispute about the fact thatthere was capital gain arising from the transaction. There isalso no dispute about the fact that within a period of two yearsafter the date on which the sale of Neelankarai property tookplace, the assessee purchased a residential house in Kodaikanal.Therefore, all the three conditions stipulated in sub-section(1) of Section 54F, is satisfied in the case on hand. 11. But according to the Revenue, the case of the assesseewould fall within the proviso to Section 54F and hence thebenefit is not available to him. To appreciate the reach of thesaid contention, it is necessary to extract proviso to Section54F(1), it reads as follows:- "54F. (1) [Subject to the provisions of sub-section (4), where, in the case of an assesseebeing an individual or a Hindu undivided family],the capital gain arises from the transfer of anylong-term capital asset, not being a residentialhouse (hereafter in this section referred to as theoriginal asset), and the assessee has, within aperiod of one year before or 89[two years] afterthe date on which the transfer took placepurchased, or has within a period of three yearsafter that date constructed, a residential house(hereafter in this section referred to as the newasset), the capital gain shall be dealt with inaccordance with the following provisions of thissection, that is to say,— (a) if the cost of the new asset is not less thanthe net consideration in respect of the originalasset, the whole of such capital gain shall not becharged under section 45 ; (b) if the cost of the new asset is less than thenet consideration in respect of the original asset, so much of the capital gain as bears to the wholeof the capital gain the same proportion as the costof the new asset bears to the net consideration,shall not be charged under section 45: [Provided that nothing contained in thissub-section shall apply where— (a) the assessee,— (i) owns more than one residential house,other than the new asset, on the date of transferof the original asset; or (ii) purchases any residential house,other than the new asset, within a period of oneyear after the date of transfer of the originalasset; or (iii) constructs any residential house,other than the new asset, within a period ofthree years after the date of transfer of theoriginal asset; and (b) the income from such residentialhouse, other than the one residential house ownedon the date of transfer of the original asset, ischargeable under the head “Income from houseproperty”.] Explanation.—For the purposes of this section,— [Provided that nothing contained in thissub-section shall apply where— (a) the assessee,— (i) owns more than one residential house,other than the new asset, on the date of transferof the original asset; or (ii) purchases any residential house,other than the new asset, within a period of oneyear after the date of transfer of the originalasset; or (iii) constructs any residential house,other than the new asset, within a period ofthree years after the date of transfer of theoriginal asset; and (b) the income from such residentialhouse, other than the one residential house ownedon the date of transfer of the original asset, ischargeable under the head “Income from houseproperty”.] Explanation.—For the purposes of this section,— “net consideration”, in relation to the transferof a capital asset, means the full value of theconsideration received or accruing as a result ofthe transfer of the capital asset as reduced byany expenditure incurred wholly and exclusivelyin connection with such transfer." 12. A careful look at the proviso to Section 54F(1) wouldshow that clause (a) of the proviso gives three alternatives.But clause (a) and clause (b) are intertwine with the use of aconjunction "and". 13. In other words, to attract the proviso under Section 54F(1), the conditions stipulated in clause (a)(i) together withclause (b) should be satisfied. Alternatively the contingencystipulated in clause (a)(ii) together with clause (b) should besatisfied or at least the contingency stipulated in clause (a)(iii) together with clause (b) should be satisfied. https://hcservices.ecourts.gov.in/hcservices/ 14. It is not a case of the Department that the case of theassessee would fall under any one of the three sub-clauses ofclause (a) together with clause (b). The case of the Departmentis that the assessee had income from a commercial property thatwas treated as income from house property. To be precise, theassessee had one residential house in Chennai, one commercialflat in Chennai, from out of both of which, he was deriving atotal income of Rs.4,25,131/-. He also had a land in Neelankaraiwhich was sold and a house property was purchased in Kodaikanal. 15. Under Section 22 of the Act, any income from anybuildings, irrespective of which the use which has to be treatedunder the head "income from house property". Therefore, theRevenue cannot take above all the terminology use in clause (b)under the proviso. This is a mistake into which the Revenue hasfallen to treat the case of the assessee as falling within thepurview of the proviso. 16. The facts of the case as narrated in the order ofassessment would show that the assessee did not own more thanone residential house other than the new asset on the date oftransfer of the original asset so as to fall clause (a)(i) ofthe proviso. The assessee did not purchase any residential houseother than the new asset within one year of the transfer of theoriginal asset. Therefore, his case did not also fall withinclause (a)(ii) of the proviso. The assessee did not constructany residential house other than the new asset, so as to fallunder clause (a)(iii). Therefore, the assessee did not satisfyany of the three sub-clauses contained in clause (a). Hence, thequestion of applying clause (b) of the proviso independent ofthe clause (a) of the proviso did not arise. 17. In view of the above, the substantial question of law isanswered in favour of the assessee. Accordingly, the appeal isdismissed. 17. In view of the above, the substantial question of law isanswered in favour of the assessee. Accordingly, the appeal isdismissed. 18. Before parting with, we should record that the Tribunalhas wrongly indicated the address of the respondent/assessee asthat of his counsel. Since the counsel does not want to takecare the Original Order of Assessment and the order of theAppellate Authority contained the correct address of theassessee. Therefore, while issuing a certified copy of theorder, the Registry shall indicate the correct address of theassessee as shown in the Original Order of Assessment withoutshowing the address of the counsel for the assessee. s/d- Assistant Registrar(CS-III) True Copy Sub-Assistant Registrar To 1. Income tax Appellate Tribunal, Madras 'C' Bench, Chennai. 2. The commissioner of Income Tax (Appeals VIII) 2[nd] Floor, 121 MG Road, Nungambakkam, Chennai 34. MG Road, Nungambakkam, Chennai 34. 3. The Income Tax officer, Business Ward III(1) Chennai. + 1 cc to Mr.M.Swaminathan, Senior Standing Counsel for IT Dept. SR 8131 + 1 cc to Dr.Anitha Sumanth, Advocate SR 8165 gj(co)prk13/4 T.C.(A) No.54 of 2016