M/S.tilokchand & Sons,Hiran Bros, 39 v. The Income Tax Officer,Ward Ii (4), Madurai

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 14.03.2019 CORAM:THE HON'BLE DR. JUSTICE VINEET KOTHARIandTHE HON'BLE MR. JUSTICE C.V.KARTHIKEYAN M/s.Tilokchand & Sons,Hiran Bros, 39-40,Dhanappa Mudali Street,Madurai. .. Appellant/Respondent ..Vs.. The Income Tax Officer,Ward II (4), Madurai... Respondent/Appellant Prayer : Tax Case (Appeal) is filed under Section 260-A of theIncome Tax Act, 1961, against the order of the Income TaxAppellate Tribunal, Chennai 'B' Bench, dated 27.02.2009 passedin I.T.A.NO.1990/Mds/2007 for the Assessment Year 2005-06, andagainst the order of the Commissioner of Income Tax (Appeals-I),Madurai, dated 03.05.2007, made in ITA No.0463/2009-07 for theAssessment year 2005-2006 and against the order of the IncomeTax Officer, Madurai, dated 12.02.2007 in Pan No.AABHT1598 R forthe Assessment year 2004-2005. For Appellant : Mr.T.N.SeetharamanFor Respondent: Ms.Premalatha Assisted by Mr.M.Swaminathan Senior Standing Counsel J U D G M E N T (Judgment of the Court was delivered by DR.VINEETKOTHARI, J.) The Assessee, M/s.Tilokchand & Sons, a Hindu UndividedFamily (in short 'HUF'), a separate assessable entity under theIncome Tax Act, has filed this Appeal under Section 260 A of theIncome Tax Act (in short ‘the Act’), aggrieved by the order https://hcservices.ecourts.gov.in/hcservices/ passed by the Income Tax Appellate Tribunal on 27.02.2009,allowing the Revenue's Appeal and denying the benefit ofdeduction from capital tax as per Section 54 of the Act, asclaimed by the Assessee for the A.Y.2005-2006. 2. This Appeal was admitted by a Co-ordinate Bench of thisCourt on 14.09.2009 on the following substantial Questions OfLaw: "1. Whether on the facts and in thecircumstances of the case, the Appellate Tribunalwas right in law in holding that the appellantHindu Undivided Family is entitled to exemptionunder Section 54 of the Income Tax Act, 1961 withrespect to the investment out of long term capitalgains made in one residential house only?2.Whether on the facts and in the circumstances ofthe case, the Appellate Tribunal was right in lawin denying the exemption under Section 54 of theAct, when, unlike section 54F, there is no bar inacquiring more than one residential house to meetthe needs of the appellant Hindu Undivided Family?3.Whether on the facts and circumstances ofthe case and in law, the Appellate Tribunal's viewthat exemption under Section 54 is available inrespect of one residential house only inaccordance with the scope and ambit of Section 54of the Act?4.Whether on the facts and circumstances ofthe case and in law, the Appellate Tribunal's wasright in law in denying exemption on the amountdeposited in Capital Gains Account Scheme, whichis eligible for exemption under Section 54 (2) ofthe Act?" 3.The facts in brief resulting in the present Appeal filedby the Assessee before us are as under: (i) The Assessee, a HUF, comprising of 11 members, Karta,his wife, two major sons with their own families includingminors, sold its residential house situated at East Avani MoolaStreet, Madurai to one Smt.M.Jeyalakshmi for a consideration ofRs.1,17,00,000/-, which resulted in Long Term Capital Gains tothe extent of Rs.1,00,93,149/- . The Assessee claimed the saidCapital Gains as exempt from the Income Tax, since the Assesseeaccording to him had complied with the conditions of Section 54of the Income Tax Act, 1961 by purchasing new properties whichwere in the form of two residential houses and one plot of landand deposit of the part of the capital gains in the prescribedinvestment securities. The details of the sale considerationreceived by the Assessee and the investment made for the (i) The Assessee, a HUF, comprising of 11 members, Karta,his wife, two major sons with their own families includingminors, sold its residential house situated at East Avani MoolaStreet, Madurai to one Smt.M.Jeyalakshmi for a consideration ofRs.1,17,00,000/-, which resulted in Long Term Capital Gains tothe extent of Rs.1,00,93,149/- . The Assessee claimed the saidCapital Gains as exempt from the Income Tax, since the Assesseeaccording to him had complied with the conditions of Section 54of the Income Tax Act, 1961 by purchasing new properties whichwere in the form of two residential houses and one plot of landand deposit of the part of the capital gains in the prescribedinvestment securities. The details of the sale considerationreceived by the Assessee and the investment made for the purchase of the new property as given by the Assesee arereproduced hereunder for ready reference: FACT SHEETA.Sale of Property (Residential House) at No.11,East Avani Moola Street, Madurai Date of Sale:16.09.2004 Sale Consideration: Rs.1,17,00,000/- Long Term Capital Gain thereon: Rs.1,00,93,149/-B.Purchase of Properties 1.Residential House at No.122, 3rd Cross Street,Anna Nagar, Madurai Name of Purchaser: Thiru Tilokchand (PANAABHT 1598 R)* Document No.3349 of 2004 Date of Purchase: 01.12.2004 Purchase Consideration: Rs.32,00,000/- Stamp Duty and Registration Fee etc- Rs. 3,45,000/-Total_____________Rs.35,45,000/-______________ 2.Residential House at No.24, Dhanappa MudaliStreet, Madurai Name of Purchaser: Thiru.D.Tilokchand (PANAABHT 1598 R)* Document No.1323 of 2005 Date of Purchase: 24.02.2005 Purchase consideration: Rs.39,00,000/- Stamp Duty and Registration Fee etc- Rs. 4,45,000/- Total Rs.43,45,000/-__________________________ 3.Plot at K.K.Nagar Main Road, Madurai Name of Purchaser:Thiru.D.Tilokchand (PANAABHT 1598 R)* Document No.3430 of 2004 https://hcservices.ecourts.gov.in/hcservices/ Date of Purchase : 08.12.2004 Purchase consideration :Rs.11,38,193/- Stamp Duty and Registration Fee etc-Rs. 1,72,807/- ____________ Total Rs.13,11,000/- ____________ *PAN number of Tilokchand & Sons (HUF) 4.Deposit under Capital Gain Account Scheme. SB-CGS 137016 with Canara Bank, South Veli StreetBranch,Madurai in the name of Tilokchand & Sons-HUF-Balance as on 31.07.2005-Rs.20,25,048/-" 4. The Assessing Authority however denied the benefit ofdeduction under Section 54 of the Act to the Assessee and partlyallowed only in respect of the residential house purchased bythe Assessee at the highest of three purchases atRs.43,45,000/- viz., the property at No.24, Dhanappa MudaliStreet, Madurai, and thus imposed the tax on the balance amountof capital gains which was assessed @ Rs.57,48,149/-, afterdeducting a sum of Rs.43,45,000/- from Long Term Capital Gainson sale declared by the Assessee at Rs.1,00,93,149/-. 5. The First Appeal filed by the Assessee came to beallowed by the CIT (Appeals) following the decision of theTribunal in the case of D.Anand Basappa Vs. ITO (91 ITD 53)The relevant portion of the order of the CIT (Appeals) is quotedhereunder for ready reference:- "The appellant relied upon the recentdecision of the Income-tax Appellate Tribunal BBench in the case of ITO Vs.P.C.Ramakrishna,which was delivered on 28.07.2006. The facts ofthe case are more similar to the assessee's case.In the case of K.C.Kaushik there was a number oftransactions and the question of law which wasreferred to the High Court was whether theassessee can enjoy the benefit under Section 54when he did not reside in the property purchasedowning to this transfer to any other place. Herethe facts are different. The only point to be https://hcservices.ecourts.gov.in/hcservices/ "The appellant relied upon the recentdecision of the Income-tax Appellate Tribunal BBench in the case of ITO Vs.P.C.Ramakrishna,which was delivered on 28.07.2006. The facts ofthe case are more similar to the assessee's case.In the case of K.C.Kaushik there was a number oftransactions and the question of law which wasreferred to the High Court was whether theassessee can enjoy the benefit under Section 54when he did not reside in the property purchasedowning to this transfer to any other place. Herethe facts are different. The only point to be https://hcservices.ecourts.gov.in/hcservices/ considered in interpreting the expression 'aresidential property' in the case of ITOVs.P.C.Ramakrishna, HUF, the Income -tax AppellateTribunal vide para 20 of page 370 of its order hasreferred to the case of another ITAT BangaloreBench decision in the case of D.Anand Basappa Vs.ITO 91 ITD 53. and the ratio of this decision wasfollowed. In the case of Shri.Anand Basappa, theITAT while interpreting the meaning of a'residential house' has held that- It is alsoobserved in Mrs.Gulshanbanoo R.Mukhi's case(supra) that the intention of legislature is clearto grant exemption for only one house. We areunable to find any such intention anywhere stated.It cannot be presumed that if the legislatureintended more than one residential unit, it couldhave used the words 'house or houses' . It canequally also be held that if the intention oflegislature is to restrict the deduction for onlyone house, then instead of using the words 'aresidential house' the words 'one residentialhouse' would have been used therein. It may alsobe noted that under General Clauses Act, as perS.13 singular shall include plural vice versa.Reliance placed on the decision of Hon'ble SupremeCourt in Vegetable Products Ltd. case to theextent that if the language of the statute isplain, the fact that the consequences of givingeffect to it may lead to absurd result, is of noeffect in interpreting the provisions. However,the same decision also holds that if there isambiguity in interpretation of the provisions, theone which is in favour of the assessee, should beadopted. The varying decisions at extreme endscan definitely result into saying that there is anambiguity in the provision. Thus the one infavour of assessee is to be adopted rather thanapplying a strict meaning by saying that there isno ambiguity. Thus this issue is decided infavour of the assessee.9.This is the judgment of the jurisdictionalTribunal and it is the latest one. Therefore, itwill have precedence over any other judgment andis also binding on the authorities below it. Themain substance of this judgment is that theexpression 'a residential house' can also meanmore than one. This is again drawn from section13 of the General Clauses Act which clearlydefines that singular shall include plural and vice versa. Therefore, the expression 'aresidential house' appearing in section 54connotes abstract plurality. Respectfullyfollowing the Judgment of the Income-tax AppellateTribunal I hold that the appellant is entitled toclaim full exemption under Section 54 of theIncome-tax Act in respect of all the threeproperties purchased which was absolutelynecessary to accommodate all the 11 members of theHUF,and investment in CGAS. In other words, theappellant is entitled to exemption of the fullamountoflongtermcapitalgainofRs.1,00,93,149/-The A.O. is directed to modify the assessmentorder accordingly.10. As a result, the appeal is Allowed." vice versa. Therefore, the expression 'aresidential house' appearing in section 54connotes abstract plurality. Respectfullyfollowing the Judgment of the Income-tax AppellateTribunal I hold that the appellant is entitled toclaim full exemption under Section 54 of theIncome-tax Act in respect of all the threeproperties purchased which was absolutelynecessary to accommodate all the 11 members of theHUF,and investment in CGAS. In other words, theappellant is entitled to exemption of the fullamountoflongtermcapitalgainofRs.1,00,93,149/-The A.O. is directed to modify the assessmentorder accordingly.10. As a result, the appeal is Allowed." 6. The Revenue filed Second Appeal before the Income TaxAppellate Tribunal, which allowed the Appeal filed by theRevenue by its impugned order dated 27.02.2009 and restored theorder passed by the Assessing Officer. The operative portion ofthe order passed by the Tribunal is quoted below for readyreference:- "Therefore, in view of the facts,circumstances, relevant provisions of law andratio of the above decision of the Hon'ble BombayHigh Court in the case of K.C.Kaushik V. P.B.Rane,Fifth Income Tax Officer and others [supra], whichis direct on the point, it is held that theAssessing Officer is legally correct inrestricting the claim of the assessee underSection 54 with respect to the investment out ofLTCG made in one residential house only to theextent of Rs.43,45,000/- as indicated in theassessment order, in the absence of assesseehaving given preference with regard to any otherhouse, thereby disallowing the claim with respectto other two properties as well as investment madein the CGAS and the ld. CIT(A)'s action in givingdifferent interpretation to the provisions isfound to be not legally and factually correct toallow the entire claim of the assessee, as such,while accepting the appeal of the Department, wereverse the impugned order and restore that of theAssessing Officer.8.As a result, the appeal of the Revenue getsaccepted." 7. The learned counsel for the Assessee Mr.T.N.Seetharamansubmitted before us that Section 54 of the Act permits theAssessee to either purchase a residential house or construct aresidential house, within a prescribed time period, and subjectto said conditions being fulfilled, the Assessee is alloweddeduction or exemption from the Capital Gains accrued to him onthe sale of the Capital Asset. Section 54 deals with purchaseand sale of the property, house or residence. When the sale ofcapital asset, which is not the residential house, and re-investment out of sale proceeds is made for thepurchase/construction of residential house of the Assessee, thededuction is given as per Section 54F of the Act. Both theseprovisions were amended by Finance (No.2) Act 2014 with effectfrom 01.04.2015 viz., A.Y.2015-2016 and the words “a residentialhouse” were substituted by "one residential house” in India.The learned counsel for the Assessee, therefore, contended thateven though the Assessee-HUF purchased the new propertiesviz., two residential houses and one plot of land in the name ofthe Assessee-HUF in Madurai itself, the original capital asset,viz., the residential house was sold by the Assessee-HUFresulting in capital gains, therefore, the benefit of Section54 of the Act ought to have been given in respect of purchase ofall the three new assets acquired by the Assessee, viz., tworesidential houses within one year and one plot of land on whichthe third residential house was also constructed within theprescribed period of three years. 8. He urged that prior to amendment with effect from01.04.2015 words “a residential house” included within its sweepmore than one residential house also, because of the provisionsof Section 13 of the General Clauses Act, 1897, whichstipulates that ‘words in the singular shall include theplural, and vice versa’. He submitted that object of Section 54is to extend the benefit of exemption of deduction in the handsof the Assessee, who invests the realisation on the sale ofcapital asset in the form of a residential house and which saleproceeds may be invested on one or more residential unitsdepending upon the circumstances of the case like the one inhand, where the HUF comprising of father and two elder sons withtheir respective families considered it appropriate to buy threedifferent units of residential houses at different addresses inMadurai itself viz., two existing residential houses and oneplot of land over which the Assessee-HUF constructed aresidential house within the prescribed time frame. He reliedupon two decisions of the Karnataka High Court in the case ofCIT Vs. Khoobchand M.Makhija ((2014) 43 taxmann.com 143 (Karn))and CIT Vs.D.Ananda Basappa ((2009) 309 ITR 329 (Karn)). 9. The Division Bench of Karnataka High Court inKhoobchand M.Makhija (supra) dealt with the the meaning of word https://hcservices.ecourts.gov.in/hcservices/ 'a' as employed by Section 54 of the Act and referring toSection 13 of the General Clauses Act,1897 also, the DivisionBench of the Karnataka High Court categorically held that wherethe Assessee HUF sold a residential house and out of capitalgains purchased one property at No.623 on 27.05.1996 and priorto that he also entered into an agreement of sale in respect ofanother property No.739 for consideration of Rs.75,00,000/- andpaid a sum of Rs.44,00,606/- on the date of Agreement of Saleand paid the balance sale consideration on 28.09.1996, theAssessee was entitled to deduction under Section 54 (1) of theAct in respect of purchase of the two residential houses and aword 'a residential house' was intended to include pluralresidential houses, within the meaning of Section 54 of the Act.The relevant discussion of the Division Bench of the KarnatakaHigh Court is quoted below for ready reference:- "9. The word 'a' is not defined in the Act.When a word is not defined in the Act itself, itis permissible to refer to dictionaries to findout the general sense in which that word isunderstood in common parlance. However, inselecting one out of the various meanings of aword, regard must always be had to the context asit is a fundamental rule that the meanings ofwords and expressions used in an Act must taketheir colour from the context in which theyappear. Therefore, when the context makes themeaning of a word quite clear, it becomesunnecessary to search for and select a particularmeaning out of the diverse meanings a word iscapableof,accordingtolexicographers.Dictionaries are not dictators of statutoryconstruction where the benignant mood of a law,and more emphatically, the definition clausefurnishes a different denotation. A statute cannotalways be construed with the dictionary in onehand and the statute in the other. Regard mustalso be had to the scheme, context and to thelegislative history. Words and expressions attimes have a 'technical' or a 'legal meaning' andin that case they are understood in that sense.Judicial decisions expounding the meaning of wordsin construing statutes in pari materia will havemore weight than the meaning furnished bydictionaries.(PrinciplesofStatutoryInterpretation by Justice G.P.Singh - pages 279and 280). It is in this background, it isnecessary to understand the meaning of the word'a' in the context in which it is used in the saidSection. 10. The words "a" or "an" and "the" are calledArticles. They come before nouns. There are twoArticles - a (or an) and the. "a" or "an" iscalled the Indefinite Article, because it usuallyleaves indefinite the person or thing spoken of."The" is called the Definite Article, because itnormally points out some particular person orthing. The indefinite article is used beforesingular countable nouns. The definite article isused before singular countable nouns, pluralcountable nouns and uncountable nouns. Theindefinite Article is used in two contexts,firstly, in its original numerical sense of one.Secondly, in the vague sense of a certain. It isalso used in the sense of any, to single out anindividual as the representative of a class. It isalso used to make a common noun of a proper noun. 11. In the Strouds Judicial Dictionary of Wordsand Phrases dealing with this letter 'a', it issaid 'a' is sometimes read as 'the'. 'a' maysometimes be read as 'some'. But, more frequently'a' is the equivalent of 'any'. However, it isdifficult to read 'a' as 'all'. 12. In the Concise Oxford Dictionary of CurrentEnglish, dealing with the letter 'a' is statedthat, 'a' sometimes called indefinite article,used with apparent plurals of number. " 10. The Karnataka High Court even prior to the aforesaiddecision in the case of CIT Vs. Khoobchand M.Makhija ((2014) 43taxmann.com 143 (Karn)), dealt with similar controversy in thecase of CIT Vs.D.Ananda Basappa ((2009) 309 ITR 329 (Karn)).There also the Assessee was an HUF which earned capital gain onthe sale of the residential house and purchased two flatssituated side by side adjacent to each other by separate SaleDeeds, which were later on joined to be converted into oneresidential Apartment in the property developed by M/s.OrmondePrivate Developers Ltd. The Court, in these circumstances,again held in favour of the Assessee-HUF that when HUFresidential house is sold, the proposition that the CapitalGain should be invested for the purpose of only 'one'residential house is an incorrect proposition. After all, HUFis held by the members as joint tenants. When the memberskeeping in view the future needs in event of separation,purchase more than one residential building, it cannot be said that benefit of exemption is to be denied under Section 54 ofthe Act. The relevant portion of the said Judgment is alsoquoted below for ready reference. "5.A plain reading of the provision ofSection 54(1) of the Income-tax Act discloses thatwhen an individual-assesses or Hindu undividedfamily-assesses sells a residential building orlands appurtenant thereto, he can invest capitalgains for purchase of residential building to seekexemption of the capital gains tax. Section 13 ofthe General Clauses Act declares that whenever thesingular is used for a word, it is permissible toinclude the plural. 6. The contention of the Revenue is that thephrase 'a' residential house would mean oneresidential house and it does not appear to thecorrect understanding. The expression 'a'residential house should be understood in a sensethat building should be of residential in natureand 'a' should not be understood to indicate asingular number. The combined reading of Sections54(1) and 54F of the Income-tax Act disclosesthat, a non residential building can be sold, thecapital gain of which can be invested in aresidential building to seek exemption of capitalgain tax. However, the proviso to Section 54 ofthe Income-tax Act, lays down that if the assesseehas already one residential building, he is notentitled to exemption of capital gains tax, whenhe invests the capital gain in purchase ofadditional residential building. 7. When a Hindu undivided family's residentialhouse is sold, the capital gain should be investedfor the purchase of only one residential house isan incorrect proposition. After all, the Hinduundivided family property is held by the membersas joint tenants. The members keeping in view thefuture needs in event of separation, purchase morethan one residential building;, it cannot be saidthat the benefit of exemption is to be deniedunder Section 54(1) of the Income-tax Act. 8. On facts, it is shown by the assessee that theapartments are situated side by side. The builderhas also stated that he has effected modificationof the flats to make it as one unit by opening thedoor in between two apartments. The fact that atthe time when the inspector inspected thepremises, the flats were occupied by two different https://hcservices.ecourts.gov.in/hcservices/ tenants is not the ground to hold that theapartment is not a one residential unit. The factthat the assessee could have purchased both theflats in one single sale deed or could havenarrated the purchase of two premises as one unitin the sale deed is not the ground to hold thatthe assessee had no intention to purchase the twoflats as one unit. 9. For the reasons and discussion made above, thesubstantial questions of law are answered infavour of the assessee. The appeal is dismissed." 11. The said Judgment was affirmed by the Hon'ble SupremeCourt with the dimissal of the Revenue's Special Leave Petitionin S.L.P.(C)No.20867 of 2009 in CIT Vs.D.Ananda Basappareported in (2010) 320 ITR (ST) 19. 12. The learned counsel for the Assessee, therefore,submitted that the learned Tribunal has erred in setting asidethe order passed by the CIT (Appeals) and restoring the orderpassed by the Assessing Authority and only giving a partialrelief under Section 54 (1) of the Act for the investment in oneresidential house only. 13. Per contra, Ms.Premalatha, learned counsel for theRevenue submitted that a word 'a' employed under Section 54 ofthe Act cannot be read to mean plural or multiple residentialhouses and, therefore, the Assessing Authority was justified inallowing the deduction under Section 54 (1) of the Act only tothe extent of purchase of one of the residential houses whichwas purchased for the higher value of Rs.43,45,000/- out ofthree purchases. She submitted that the amendment by Finance(No.2) Act 2014 with effect from 01.04.2015 to substitute thewords 'one' in place of 'a' in Section 54 and 54F is onlyclarificatory in nature and, therefore, it would apply to thepresent AY-2005-2006 also. She relied upon the decision of thePunjab and Haryana High Court in the case of Pawan AryaVs.Commissioner of Income Tax reported in [2011] 11 taxmann.com312, wherein the Division Bench of Punjab and Haryana HighCourt, after referring the decision of the Karnataka High Courtin the case of CIT vs. D.Anand Basappa (supra) held that whilethe Tribunal had not allowed the said benefit of Section 54 ofthe Act in respect of purchase of more than one residentialhouse, no Substantial Questions of Law arose for considerationby the High Court. The Division Bench of Punjab and HaryanaHigh Court sought to distinguish the Karnatanka High Courtjudgment and held that both the flats were and could be treatedas one house, as both had been combined to make one residential house. The learned counsel for the Revenue submitted that inthe present case, where the three purchases in question wereadmittedly purchased by the Assessee are at different addressesin the same City of Madurai, the benefit of Section 54 cannot beextended to the purchase value of all the three properties inquestion. She submitted that the Assessee's Appeal deserves tobe dismissed and the Substantial Questions of Law shall beanswered in favour of the Revenue. 14. We have heard the learned counsel at length and perusedthe decisions relied by them at the bar. house. The learned counsel for the Revenue submitted that inthe present case, where the three purchases in question wereadmittedly purchased by the Assessee are at different addressesin the same City of Madurai, the benefit of Section 54 cannot beextended to the purchase value of all the three properties inquestion. She submitted that the Assessee's Appeal deserves tobe dismissed and the Substantial Questions of Law shall beanswered in favour of the Revenue. 14. We have heard the learned counsel at length and perusedthe decisions relied by them at the bar. 15. Section 54 of the Act, to its relevant extent, isquoted below for ready reference:"Profit on sale of property used for residence.54. [(1)] Subject to the provisions of sub-section(2), where, in the case of an assessee being anindividual or a Hindu undivided family], thecapital gain arises from the transfer of a long-term capital asset, being buildings or landsappurtenant thereto, and being a residentialhouse, the income of which is chargeable under thehead “Income from house property” (hereafter inthis section referred to as the original asset),and the assessee has within a period of one yearbefore or two years after the date on which thetransfer took place purchased, or has within aperiod of three years after that date[constructed, one residential house in India,then], instead of the capital gain being chargedto income-tax as income of the previous year inwhich the transfer took place, it shall be dealtwith in accordance with the following provisionsof thissection, that is to say,—(i) if the amount of the capital gain is greaterthan the cost of theresidential house so purchased or constructed(hereafter in thissection referred to as the new asset)], thedifference between theamount of the capital gain and the cost of the newasset shall becharged under section 45 as the income of theprevious year; and for the purpose of computing inrespect of the new asset any capital gain arisingfrom its transfer within a period of three yearsof its purchase or construction, as the case maybe, the cost shall be nil; or(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, thecapital gain shall not be charged under section45; and for the purpose of computing in respect ofthe new asset any capital gain arising from itstransfer within a period of three years of itspurchase or construction, as the case may be, thecost shall be reduced by the amount of the capitalgain."[Prior to amendment by Finance Act 2014 w.e.f. 01.04.2015amendment, the aforesaid words in brackets read like this.'Contructed, a residential house] 16. We are conscious of the fact that the questions posedfor our consideration have to be answered in the context of anAssessee which is a HUF, which has a special character. It isonly by deeming fiction of law that a HUF, is treated as aseparate assessable entity by including the same in thedefinition of the word 'person' under Section 2 (31) of theAct. The definition of the word "Assessee" under Section 2(7)of the Act means a 'person' by whom any tax or sum of money ispayable under the Act. Thus, the HUF is also a 'person' and aseparate assessable entity under the Income Tax Act, 1961. 16. We are conscious of the fact that the questions posedfor our consideration have to be answered in the context of anAssessee which is a HUF, which has a special character. It isonly by deeming fiction of law that a HUF, is treated as aseparate assessable entity by including the same in thedefinition of the word 'person' under Section 2 (31) of theAct. The definition of the word "Assessee" under Section 2(7)of the Act means a 'person' by whom any tax or sum of money ispayable under the Act. Thus, the HUF is also a 'person' and aseparate assessable entity under the Income Tax Act, 1961. 17. The purpose of Section 54 appears to allow a deductionto an Assessee, being an individual or HUF, to the extent ofinvestment made in residential house as against the CapitalGains accruing on the sale of original residential house or soldcapital asset. The word 'a' has been used in the saidprovisions of Section 54 (1) of the Act at more than one placeand such word 'a' was not replaced by way of amendment byFinance (No.2) Act 2014 with effect from 01.04.2015 at all suchplaces in the said provision. In the first part of Section (1)of the Act, the words 'being a Residential House' coupled withthe words 'Buildings or Lands" (plural) appurtenant purchasedthereto both clearly indicate the plural sense. The sale beingof a residential house does not necessarily restrict the meaningof 'a' to one. If the capital gains arise out of sale of pluralof Captial Assets also, including the residential house, itwould give rise to taxable capital gains. There is no reasonto restrict the benefit of deduction upon investment inresidential houses even though such units of residential housesare plural, which is not always so. The word 'a' wouldnormally mean one. But it can in some circumstances includewithin its ambit and scope plural number also. It may be two orthree or even more. The very need to amend the later part ofSection 54(1) seems to have been to restrict such plurality tobe included in word 'a' by inserting word "one residentialhouse" with effect from 01.04.2015. https://hcservices.ecourts.gov.in/hcservices/ notes along with the Finance Bill by which the said amendmentwas incorporated in Section 54, which is quoted below for readyreference: "20.Capital gains exemption in case of investmentin a residential house property 20.1.The provisions contained in sub-section (1)of Section 54 of the Income Tax Act, before itsamendment by the Act, inter alia, provided thatwhere capital gain arises from the transfer oflong-term capital asset, being buildings or landappurtenant thereto, and being a residentialhouse, and the assessee within a period of oneyear before or two years after the date oftransfer, purchases, or within a period of threeyears after the date of transfer constructs, aresidential house, then, the amount of capitalgains to the extent invested in the newresidential house is not chargeable to tax undersection 45 of the Income-tax Act. 20.2. The provisions contained in sub-section(1)of section 54F of the Income-tax Act, before itsamendment by Act, inter-alia, provided that wherecapital tains arises from transfer of a long-termcapital asset, not being a residential house, andthe assessee within a period of one year before ortwo years after the date of transfer, purchases,or within a period of three years after the dateof transfer constructs, a residential house, then,the portion of capital gains in the ratio of costof new asset to the net consideration received ontransfer is not chargeable to tax. 20.2. The provisions contained in sub-section(1)of section 54F of the Income-tax Act, before itsamendment by Act, inter-alia, provided that wherecapital tains arises from transfer of a long-termcapital asset, not being a residential house, andthe assessee within a period of one year before ortwo years after the date of transfer, purchases,or within a period of three years after the dateof transfer constructs, a residential house, then,the portion of capital gains in the ratio of costof new asset to the net consideration received ontransfer is not chargeable to tax. 20.3.Certain courts had interpreted that theexemption is also available if investment is madein more than one residential house. The benefitwas intended for investment in one residentialhouse within India. Accordingly, sub-section (1)of Section 54 of the Income-tax Act has beenamended to provide that the rollover relief underthe said section is available if the investment ismade in one residential house situated in India. 20.4.Similarly, sub-section (1) of Section 54F ofthe Income-tax Act has been amended to providethat the exemption is available if the investmentis made in one residential house situated in India. from 1st April, 2015 and will accordingly apply inrelation to assessment year 2015-16 and subsequentassessment years." 19. A closer and bare reading of the aforesaid ExplanatoryNotes to the provisions of the said Act, clearly shows that thesaid amendment was intended to be specifically applied onlyprospectively with effect from A.Y.2015-2016. It took note ofthe judicial precedents for the period prior to 01.04.2015,giving a different and contra interpretation. Therefore thisamendment cannot be held to be mere clarificatory so as to beapplied retrospectively for A.Y.2005-2006 in the present case. 20. We have discussed about the two decisions from theKarnataka High Court, which, in our opinion, dealt with similarcontroversy as is raised before us herein. The only differencewhich we find is that the purchase of the residential houses inthe present case is at different address in the same city ofMadurai. In D.Ananda Basappa case stated (supra), two flats inquestion were admitedly adjacent to each other and which werejoined to become one residential house. In the case ofKhoobchand M.Makhija (supra), two door nos are given viz., 623and 729, but the complete addresses and even the name of thecity is not clear in the facts narrated in the said Judgment.But in our considered opinion, the difference of location of thenewly purchased residential house(s) will not alter the positionfor interpretation of the word 'a residential house' to theeffect that it may include more than one or plural residentialhouses, as held by Karnataka High Court, with which werespectfully agree. The location of the newly purchasedhouses by the same assessee viz., HUF out of sale considerationreceived on the sale of original capital Asset or a residentialhouse in the given circumstances of availability of suchresidential houses as per the requirement of the HUF will notalter the position of interpretation. 21. In our understanding, if the word 'a' as employedunder Section 54 prior to its amendment and substitution by thewords 'one' with effect from 01.04.2015 could not include pluralunits of residential houses, there was no need to amend the saidprovisions by Finance Act No.2 of 2014 with effect from01.04.2015 which the Legislature specifically made it clear tooperate only prospectively from A.Y.2015-2016. Once we can holdthat the word 'a' employed can include plural residential housesalso in Section 54 prior to its amendment such interpretationswill not change merely because the purchase of new assets inthe form of residential houses is at different addresses whichwould depend upon the facts and circumstances of each case. Solong as the same Assessee (HUF) purchased one or moreresidential houses out of the sale consideration for which thecapital gain tax liability is in question in its own name, the same Assessee should be held entitled to the benefit ofdeduction under Section 54 of the Act, subject to the purchaseor construction being within the stipulated time limit inrespect of the plural number of residential houses also. Thesaid provision also envisages an investment in the prescribedsecurities which to some extent the present Assessee also madeand even that was held entitled to deduction from Capital Gainstax liability by the authorities below. If that be so, theAssessee-HUF in the present case, in our opinion, complied withthe conditions of Section 54 of the Act in its true letter andspirit and, therefore was entitled to the deduction underSection 54 of the Act for the entire investment in theproperties and securities. Therefore, in our opinion, Judgmentrendered by the Karnataka High Court in CIT Vs.D.Ananda Basappa((2009) 309 ITR 329 (Karn)) & Khoobchand M.Makhija (supra) citedat bar by the learned counsel for the Assessee apply on allfours to the facts of the present case. 22.The decision of Punjab and Haryana High Court reliedupon by the learned counsel for the Revenue, in which theDivision Bench of the said Court finding a distinction withD.Ananda Basapaa's case (supra) on facts, without expressingcontrary opinion in detail, held that no Substantial Questionsof Law arose, renders little help to the arguments advanced bythe learned counsel for the Revenue. 23. Therefore, we are of the considered opinion that thepresent Appeal filed by the Assessee deserves to be allowed andthe same is accordingly allowed and the questions of law framedabove are aswered in favour of the Assessee and as against theRevenue. No order as to costs.Sd/-Assistant Registrar(CCC) //True copy// Sub Assistant Registrar arr To 1. The Assistant Registrar Income Tax Appellate Tribunal, Chennai 'B' Bench, Chennai. 2. The Income Tax Officer Ward II(4), Madurai-2. Ward II(4), Madurai-2. 3. The Commissioner of Income Tax (Appeals)-I, Madurai. Madurai. +1cc to Mr.TN.Sethuraman, Advocate SR.No.24112 +1cc to Mr.S.Premalatha, Advocate SR.No.24127 T.C.(A).No.771 of 2009 MR(CO)GMY(07/05/2019)