Ita/25/2011 Of Arun K Thiagarajan v. To Sale Consideration Of The Property Sold Disregarding The Guidance Value As Re

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 18 DAY OF JUNE 2020| PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE M.NAGAPRASANNA_ ILT.A. NO.25 OF JZO1 BETWEEN: ARUN K THIAGARAJAN|NO.37, KANAKAPURA ROADBASAVANAGUD]IBANGALORE -—- 560 OO4 ... APPELLAN[. (By Sri.A.SHANKAR SR.ADV. ALONG WITH SRI.M.LAVA AND SRI.GURUMURTHY FOR SRI.S.SUKUMAR, ADV.)| AND: 1.|COMMISSIONER OF INCOME-TAX (APPEALS )-iI BANGALORE NO.59, HMT BHAVAN.% FLOOR, BELLARY ROADBANGALORE - 560 037.% FLOOR, BELLARY ROADBANGALORE - 560 037. 2 |THE DEPUTY COMMISSIONER| OF INCOME-TAX, CIRCLE 3(1) UNITY BUILDING ANNEXURE MISSION ROAD| BANGALORE 560 O2/. .., RESPONDENTS (By Sri.K.V.ARAVIND, ADV.) - - - THIS ITA IS FILED UNDER SECTION 260-A OF I.T.ACT, 1961ARISING OUT OF THE ORDER DATED 17.09.2010 PASSED IN ITA) NO.644/BANG/2010 FOR THE ASSESSMENT YEAR 2003-04,|PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO:PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: (1)FORMULATE THE SUBSTANTIAL QUESTIONS OF|LAW STATED THEREIN. LAW STATED THEREIN. (II)ALLOW THE APPEAL AND SET ASIDE THE ORDER.PASSED BY THE ITAT, BANGALORE IN ITA’NO.644/BANG/2010DATED17.09.2010.ASANNEXURE-C IN THE INTEREST OF JUSTICE AND.EQUITY.PASSED BY THE ITAT, BANGALORE IN ITA’NO.644/BANG/2010DATED17.09.2010.ASANNEXURE-C IN THE INTEREST OF JUSTICE AND.EQUITY. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax)Act, 1961 (hereinafter referred to as the Act for short)has been preferred by the assessee. The subject matterof the appeal pertains to Assessment year 2003-04. Theappeal was admitted by a bench of this Court vide orderdated 29.06.2011 on the following substantial question.of law: (I)Whether the order passed by the IncomeTax Appellate Tribunal confirming ne.order passed by the appellate autnority|and the assessing officer that the|appellant is not entitled to exemption|under Section 54 as he has purcnasedTax Appellate Tribunal confirming ne.order passed by the appellate autnority|and the assessing officer that the|appellant is not entitled to exemption|under Section 54 as he has purcnased more than one house Is_ perverse,arbitrary and contrary to law laid down|by the division bench of this court in ITANo. 7783/2008 dated 27.08.2010 2.|Tne issue, wnicn arises for consideration inthis appeal is whether the assessee is entitled to claimexemption under Section 54 of the Act as he hadpurchased more than two houses. In order to appreciatethe factual background, in which the aforesaid issuearises for consideration, reference to relevant facts isnecessary, which are stated herein after: 3.The assessee was the owner of a residentialproperty situate at Harrington Road Chetpet, Chennai.The said property was sold vide registered sale deeddated|09.10.2002|for.aconsiderationofRs.2,68,89,375/-. The assessee filed return of incomeon 09.07.2003 for Assessment year 2003-04 declaring|income of Rs.1,68,52,920/-, under the head incomefrom salary, Nouse property, capital gains and income from other sources and paid tax of Rs.49,57,/06/-. Theassessing officer issued a notice under Section 148 ofthe Act calling upon the assessee to file the return ofincome disclosing true particulars of income chargeableto tax. The assessee vide communication dated31.03.2008 submitted that original return of income betreated as return of income for proceeding underSection 148 of the Act. The assessee also sought forthe reasons recorded for issue of notice, which wereprovided to him on 12.08.2008. from other sources and paid tax of Rs.49,57,/06/-. Theassessing officer issued a notice under Section 148 ofthe Act calling upon the assessee to file the return ofincome disclosing true particulars of income chargeableto tax. The assessee vide communication dated31.03.2008 submitted that original return of income betreated as return of income for proceeding underSection 148 of the Act. The assessee also sought forthe reasons recorded for issue of notice, which wereprovided to him on 12.08.2008. 4The assessee declared long term capital gainarising out of the sale of the above property ofRs.15,44,009/-.afterclaiming|deduction|towardsincidental charges for transfer of property, the cost ofacquisition and the deduction admissible under Section54 of the Act in respect of two properties purchased inBangalore viz., Koramangala and Domlur, II Stage,Bangalore, respectively on 23.09.2002 and 23.10.2002. —The assessing officer by an order dated 24.12.2008 inter alia held that fair market value for the proposes ofassessment is to be adopted on the basis of guidancevalue as prescribed by stamp valuation authorities. Itwas further held that the guidance value of the propertysold was Rs.4,62,56,000/- and the aforesaid value wasadopted subject to valuation report. It was further heldthat assessee’s claim for deduction under Section 54 ofthe Act in respect of investments made in acquiring tworesidential properties is not admissible in view of thedecisionoftheIncome.Tax!AppellateTribunal|(hereinafter referred to as ‘the Tribunal’ for short) dated30.04.7008|In|ITOVS.SMT.H.V.RAJILAKSHMI. Therefore, the assessee’s claim for deduction underSection 54 of the Act was restricted to acquiring oneresidential building and deduction was allowed in respectof higher value of investment i.e., RsS.97,15,652/-,whichWaSIn|respect.ofpropertysituateInKoramangala. Thus, it was held that assessee haddeliberately furnished inaccurate particulars in relation to sale consideration of the property sold disregardingthe guidance value as required under Section 50C of theAct and therefore, the assessee has rendered himself.liable for levy of penalty under Section 271(1)(c) of theAct. 5.|Being aggrieved, the assessee filed an appealbefore the Commissioner of Income Tax (Appeals). TheCommissioner of Income Tax (Appeals) by an orderdated 15.03.2010 inter alia held that Section 50C comesinto play only when there is a valuation at a highervalue for stamp valuation purposes by the stateauthority then declared by the assessee concerned inthe sale deed. It was further held that the property wasregistered for a consideration of Rs.2,68,89,375/-,whereas, the valuation adopted by the stamp valuationauthority is Rs.4,06,56,/35/-. Therefore, by placingrellance on decision of the Lucknow Bench of thetribunal In.,JITENDRA MOHAN SAXENA VS. ITO,(305 ITR (AT) 62), the assessing officer was directed| CO re-cOMpuUuTthevalue|ofthepropertyat Rs.4,06,56,735/-. It was further held that decision ofthis court In|‘CIT VS. ANAND BASAPPA’‘, 309 ITR329does not apply to the fact situation of the case as.the assessee had made investment in_= residentiaproperties, which are situate in different places inBangalore and therefore, the benefit of exemption underSection 54 of the Act cannot be granted. In the result,the appeal was partly allowed. 6.|The assessee approached the tribunal byfiling an appeal. The tribunal by an order dated17.09.2010 inter alia by taking into account the saleinstances in the vicinity during the relevant period putforth by the assessee, subject property being a cornerplot and the fact that District Valuation Officer had fixedland rate at Rs.2,220/- per square feet withoutassigning any basis or comparison / citing any saleinstances in the vicinity for the relevant period, thevalue of the land was fixed at Rs.1,869/- per square 6.|The assessee approached the tribunal byfiling an appeal. The tribunal by an order dated17.09.2010 inter alia by taking into account the saleinstances in the vicinity during the relevant period putforth by the assessee, subject property being a cornerplot and the fact that District Valuation Officer had fixedland rate at Rs.2,220/- per square feet withoutassigning any basis or comparison / citing any saleinstances in the vicinity for the relevant period, thevalue of the land was fixed at Rs.1,869/- per square feet. | Accordingly, the value of the property wasdetermined at Rs.2,/1,03,329/- and the assessingofficer was directed to re-compute the value of thepropertyaltRs.2,/1,03,330/-insteadofRs.4,06,56,735/-. The tribunal agreed with the findingsrecorded by the Commissioner of Income Tax (Appeals)insofar as it pertains to denial of benefit under Section54 of the Act. In the result, the appeal was partlyallowed. In the aforesaid factual background, theassesses have approached this court. J.Learned Senior Counsel for the assessee nasSubmitted that claim of the assessee in this appealrelates to exemption under Section 54 of the Act inrespect.ofinvestment.made.In|CWOresidential.properties. It is argued that there is no dispute withregard to computation of capital gains or factum ofinvestments in two properties. It is pointed out thatSection 54(1) was amended by Finance Act, 2014 witheffect from 01.04.2015, by the which the words ‘constructed a residential house’ were substituted andthe words ‘constructed one residential house In India’was substituted. It is argued that the expression ‘aresidential house’ used in Section 54 of the Act refers tothe nature of house and the number of residential unitsto be purchased by the assessee and therefore, the.assessee was eligible for exemption. In this connection,reliance has been placed on Circular No.1/2015 issuedby Central Board of Direct Taxes dated 20.01.2015 andit is argued that the aforesaid amendment is prospectivein nature. It is also urged that several courts including abench of this court has interpreted the expression ‘aresidential house’ and have held that the letter ‘a’ in thecontext, in wnicn it is used should not be construed assingular but the expression also permits use of plural. ©In support of aforesaid submission, reliance has beenplaced on the following decisions in ~CIT VS. KG.RUKMINIAMMA*,337ITTRVe i(KARNATAKA),"B.SRINIVAS VS. ITO’, ITA NO.1134/2008, ‘CIT AND ANR. VS. LATE KHOOBCHAND M.MAKHIJA‘-,ITA NO.496/2007 (KARNATAKA), ‘CIT AND ANR.VS. SMT.JYOTHI K MEHTA’, ITA NO.194/2010(KARNATAIKA), ‘TILOKCHAND AND SONS VS. ITO“,413 ITR 189 (MADRAS), CIT VS. GITA DUGGAL',228 TAXMAN 62 (SC), ‘CIT VS. GITA DUGGAL’, 357ITR 153 (DELHI), *' CIT VS. D.ANAND BASAPPA‘,309[TR329(KARNATAKA),"CITYS,VRKARPAGAM,, 373 ITR 127 (MADRAS), ‘CIT VS.SYED ALI ADIL’, 352 ITR 418 (ANDHRA PRADESH),‘G.CHINNADURAI VS. ITO’, 74 TAXMANN.COM 227(MADRAS ). 8.|On the other hand, learned counsel for therevenue submitted tnat tne word used a residentialhouse’ has to be interpreted in the facts andcircumstances of tne case. It is furtner submitted tnatassessee in the facts of tne case is not entitled to tnebenefit of Section 54(1) of the Act and the same wouldamount to abuse of law. It is further submitted tnat an 8.|On the other hand, learned counsel for therevenue submitted tnat tne word used a residentialhouse’ has to be interpreted in the facts andcircumstances of tne case. It is furtner submitted tnatassessee in the facts of tne case is not entitled to tnebenefit of Section 54(1) of the Act and the same wouldamount to abuse of law. It is further submitted tnat an attempt is made by the assessee to evade the tax..Learned counsel for the revenue has invited ourattention to the decision relied by learned SeniorCounselfor.theaSSeCSSCAIntheCAaSCofK,G.RUKMINIAMMAsupra and has pointed out tnat ona site a_ residential premises existed, which wasdemolished and was given to a builder under a JointDevelopment Agreement for putting up fiats. In theaforesaid factual Dackground, it was held that all fourflats are situate in a residential building and therefore,constitute ‘a residential nouse for the purposes ofSection 54 of the Act. Similarly, it is pointed out that inall the cases relied upon by the assessee in the factsituation of tne cases referred to by the counsel forassessee, it was held that assessee is entitled to benefitto Section 54(1) of the Act. Therefore, the aforesaiddecision is of no assistance to the assessee.| 9 |By way of rejoinder, learned Senior Counselfor tne assessee has submitted that there is no finding by any of the authorities that assessee had engagedeither in tax planning or tax evasion and in variousdecisions, the expression ‘a residential house’ has beeninterpreted and the ratio laid down in the aforesaiddecision applies to the fact situation of the instant case.| 10. We have considered the submissions made.on both the sides and have perused the record. In orderto appreciate the rival submissions made at the bar, wedeem it appropriate to reproduce Section 54(1) of theAct, which read, prior to its amendment by Finance ActNo.2/2014, as under: 54(1) Subject to the provisions of sub-Section (2), where, in the case of anassessee being an individual or a Hindu|undivided family, the capital gain arises fromthe transfer of a long-term capital asset,|being buildings or lands appurtenant thereto,and being a residential house, the income of which is chargeable under the head "Incomefrom house property” (hereafter in_ thissection referred to as the original asset), and the assessee has within a period of one year|before or two years after the date on which|the transfer took place purchased or has|within a period of three years after that dateconstructed,aresidentia]house,then,instead of the capital gain being charged to income-tax as income of the Previous year inwhich the transfer took place, it shall be|dealt with in accordance with the following|provisions of this section. 11. From)closescrutinyoftheaforesaidprovision, it is axiomatic that property sold is referred toas original asset and the original asset is prescribed asbuildings and lands appurtenant thereto and being aresidential house. The expression ‘a residential house’therefore,|includesbuilding|OT|landsappurtenant.thereto. It cannot be construed as one residentia]house. _— 172. A Bench of this court In case ofSMT_.KGRUKMINIAMMAsupra dealt with the meaning of|expression ‘a residential house’ used in Section 54(1) of 11. From)closescrutinyoftheaforesaidprovision, it is axiomatic that property sold is referred toas original asset and the original asset is prescribed asbuildings and lands appurtenant thereto and being aresidential house. The expression ‘a residential house’therefore,|includesbuilding|OT|landsappurtenant.thereto. It cannot be construed as one residentia]house. _— 172. A Bench of this court In case ofSMT_.KGRUKMINIAMMAsupra dealt with the meaning of|expression ‘a residential house’ used in Section 54(1) of the Act while taking into account Section 13(2) of theGeneral Clauses Act, 1897 held that unless there isanything repugnant in the subject or context, the wordsin singular shall include the plural and vice versa. Itwas further held that context in which the expression ‘aresidential house’ Is used in Section 54 makes it evidentthat it is not the intention of the legislature to conveythe meaning that it refers to a single residential house. ©It was also held that an asset newly acquired after saleof original asset can also be buildings or landsappurtenant thereto, which also should be residentialhouse, therefore, the letter ‘a’ in the context it is usedShould not be construed as meaning singular, but theexpression should be read in consonance with otherwords viz., buildings and lands. Accordingly, thecontention raised by the revenue was rejected. SimilarVIEWWaStaken|by|abench|ofthis.COUTTInKHOOBCHAND M, MAKHIJASUPfIa,|B,SRINIVASSupra and in the case ofSMT.JYOTHI K MEHTASUDPId. The Madras High Court while dealing with Section 54 ofthe Act as it stood prior to amendment by Finance ActNo.2/2014 in the case of'TILOKCHAND AND SONSSupra took the similar view and held that the word ‘a’would normally mean one but in some circumstances itmay include within its ambit and scope some pluralnumbers also. The Delhi High Court also took thesimilar view In case Of GITA DUGGALSUDPfd. | 13. It is well settled in law that an Amending Act.may be purely clarificatory in nature intended to clear ameaning of a provision of the principal Act, wnicn wasalready implicit.[SEE: DECISION OF THE SUPREMECOURT IN ‘CIT VS. NEW DELHI VS. RAMKRISHNADAS’ IN CIVIL APPEAL NO.3211/2019 DECIDEDON 26.03.2019]_In view of aforesaid enunciation otf law by different High Courts including this court andwith a view to give definite meaning to the expression ‘aresidential house’, the provisions of Section 54(1) wereamended with an object to restrict the plurality to mean singularity by substituting the word ‘a residential house’with the word ‘one residential house’. The aforesaidamendment|CamMeintoforcewitheffectfrom01.04.2015. The relevant extracts of Explanatory noteto provisions of Finance Act No.2/2014 reads as under: 20.3 Certain courts had _ interpretethat the exemption is also available ifinvestment [is meade in more than onresidentia| house. The benefit was [intendedfor investment |[n one residential housewithin India. Accordingly, sub-Section (1) ofSection 54 of the Income-Tax Act has been|amended to provide that the rollover relief|under the said Section Is available if the|investment [is made in one residential houseSituated in India. 20.5 Applicability:- These amendmentstake effect from 1[Su]April, 2015 and willaccordingly apply in relation to Assessment|year 2015-16 and subsequent Assessment|Yeas. Thus it is axiomatic that the aforesaid amendment.was specifically applied only prospectively with effectfrom Assessment year 2015-16. 20.3 Certain courts had _ interpretethat the exemption is also available ifinvestment [is meade in more than onresidentia| house. The benefit was [intendedfor investment |[n one residential housewithin India. Accordingly, sub-Section (1) ofSection 54 of the Income-Tax Act has been|amended to provide that the rollover relief|under the said Section Is available if the|investment [is made in one residential houseSituated in India. 20.5 Applicability:- These amendmentstake effect from 1[Su]April, 2015 and willaccordingly apply in relation to Assessment|year 2015-16 and subsequent Assessment|Yeas. Thus it is axiomatic that the aforesaid amendment.was specifically applied only prospectively with effectfrom Assessment year 2015-16. 14. The subsequent amendment of Section 54(1).also fortifies the fact that the legislature felt the need ofamending the provisions of the Act with a view to give adefinite meaning to the expression ‘a residential house’,which was interpreted as plural by various courts bytaking into account the context in which the aforesaidexpression was used. The subsequent amendment ofthe Act also fortifies the view taken by this court as wellas Madras High Court and Delhi High Court. It is tritelaw that the principle underlying the decision would bebinding as precedent in a case.In HALSBURY LAWS|OF ENGLAND, Volume 22, Para 1682, Page 796, the.relevant extract reads as under: The enunciation of the reasons or'principle on which a question before a court|has been decided is alone binding as a precedent. This underlying principle ts often|termed the ratio decidendi, that is to Say,|the general reasons given for the decision or the general grounds on which it Is based,|detached or abstracted from the specific|peculiarities of the particular case which|gives rise to the decision. [ALSO SEE: *STATE OF HARYANA VS. RANBIR~, (2006) 5 SCC 167 & 'GIRNAR TRADERS VS. STATEOF MAHARASHTRA’, (2007) 7 SCC 555|}. 15. This Court as well as Madras and Delhi High.Court have interpreted the expression ‘a _ residentiahouse’ and have held that the aforesaid expressionincludes plural. The ratio of the decisions rendered bycoordinate bench of this court are binding on us and werespectively agree with the view taken by this courtwhile interpreting the expression ‘a residential house’. | Therefore, the contention of the revenue that theassessee is not entitled to benefit of exemption under Section 54(1) of the Act in the facts of the case does notdeserve acceptance. In view of preceding analysis, the substantial|question of law framed by this court is answered infavor of the assessee and against the revenue. In theresult, the order passed by the assessing officer andCommissioner of Income Tax (Appeals) and the IncomeTax Appellate Tribunal insofar as it deprives theassessee of the benefit of exemption under Section54(1) of the Act are hereby quashed and the assessee isheld entitled to benefit of exemption under Section54(1) of the Act. In the result, the appeal is allowed. Sd/-JUDGE Sd/-|JUDGE