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2020 Supreme(Kar) 1702
KARNATAKA HIGH COURT
Alok Aradhe, M. Nagaprasanna, JJ.
Navin Jolly C/o Navin Architect Private Limited – Appellant
Versus
Income-Tax Officer Ward 11(1), R.P. Bhavan – Respondent
Income Tax Appeal No. 320 of 2011
Decided on : 18-06-2020
A. Shankar, Advocate, M. Lava, Advocate, K.V. Aravind, Advocate
The court emphasized the liberal interpretation of tax provisions promoting growth and development, and the consideration of property usage in determining its residential or commercial nature.
Headnote:
Income Tax Act - Denial of exemption under Section 54F - Section 143(2), Section 260A, Section 54F, Section 54F(1), Section 54F(1)(a)(i), Section 54F(1)(b)
Fact of the Case:
The appellant, an individual and Director of a company, claimed exemption under Section 54F of the Income Tax Act for long-term capital gains from the sale of shares and the construction of a residential property. The assessing officer denied the exemption, stating that the appellant owned nine residential flats and was deriving income from them, making him ineligible for the exemption.
Finding of the Court:
The court held that the appellant's properties used for commercial purposes could not be treated as residential units and that the appellant was entitled to the exemption under Section 54F(1) as he owned two apartments in the same building, which should be treated as one residential unit.
Issues: The issues revolved around the interpretation of the term 'residential house' in Section 54F(1) and whether the appellant was eligible for the exemption under the given circumstances.
Ratio Decidendi: The court interpreted Section 54F(1) liberally, considering the usage of the property to determine its residential or commercial nature. It also held that the appellant owning two apartments in the same building should be treated as one residential unit, entitling him to the exemption.
Final Decision: The court quashed the denial of exemption under Section 54F(1) and allowed the appeal in favor of the appellant.
KARNATAKA HIGH COURT
DIVISION BENCH
NAVIN JOLLY C/O NAVIN ARCHITECT PRIVATE LIMITED — Appellant
Vs.
INCOME-TAX OFFICER WARD 11(1), R P BHAVAN — Respondent
( Before : Alok Aradhe and M. Nagaprasanna, JJ. )
Income Tax Appeal No. 320 of 2011
Decided on : 18-06-2020
Income Tax Act, 1961 - Section 143(2), Section 260A, Section 54F, Section 54F(1), Section 54F(1)(a)(i), Section 54F(1)(b)
Counsel for Appearing Parties
A. Shankar, Advocate, M. Lava, Advocate, K.V. Aravind, Advocate
Cases Referred
BAJAJ TEMPO LTD. VS. CIT, (1992) 196 ITR 188
C.H.KESAVA RAO VS. CIT, (1985) 156 ITR 369
CIT VS. SMT.SHYAMA DEVI DALMIA, (1992) 194 ITR 114
CIT VS. SRISAMBANDAM UDAYKUMAR, (2012) 345 ITR 389
CIT VS. STRAWBOARD MFg. CO. LTD., (1989) 177 ITR 431
FIRM GANGA RAM KISHORE CHAND VS. FIRM JAI RAM BHAGAT RAM, (1957) AIR(P&H) 293
GITA DUGGAL, (2013) 357 ITR 153
P.N.SHUKLA VS. CIT, (2005) 276 ITR 642
Final Result : Allowed
JUDGMENT/ORDER
Alok Aradhe, J. - 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 matter of the appeal pertains to the Assessment year 2006-07. The appeal was admitted by a bench of this Court vide order dated 06.06.2012 on the following substantial questions of law:
(i) Whether the tribunal is justified in law in confirming the denial of exemption claimed by the appellant under Section 54F of the Income-Tax Act, 1961, on the facts and circumstances of the case?
(ii) Whether the tribunal erred in law in interpreting the meaning of the word residential house used in Section 54F(1) proviso (a) (i) of the Income Tax Act?
(iii) Whether the authorities below are justified in law in holding that a property used for the commercial purpose, falls within the meaning of residential house as per the proviso (a) (i) to Section 54F(1) of the Act on the facts and circumstances of the case?
2. Facts leading to filing of this appeal briefly stated are that assessee is an individual and is Director of M/s Aburge India Property Services Pvt. Ltd., Bangalore. The assessee filed his return of income for Assessment year 2006-07 on 30.10.2006 declaring income of Rs.53,06,473/-. The return filed by the assessee was selected for scrutiny and notice under Section 143(2) of the Act was issued. The assessee stated that he had sold shares in the company viz., M/s Corporate Leisure Resorts and Hotels Pvt. Ltd., during financial year 2005-06 and derived long term capital gain of Rs.1,55,47,315/-. The appellant further declared that he had constructed a residential property during the year situate at 808/7 and 808/8 Kaikondanahalli, Sarjapur, Bangalore. The appellant claimed exemption under Section 54F of the Act to the extent of Rs.1,55,47,315/-. Before the assessing officer, the assessee agreed voluntarily to offer a sum of Rs.4,17,339/- for taxation.
3. The assessing officer vide order dated 31.12.2008 inter alia held that the assessee owns nine residential flats in his name and that he is deriving the income from the residential flats and declared the same under the head income from house property during Assessment year 2006-07 and is therefore, not eligible to claim exemption by invoking proviso (a)(i) and (b)to Section 54F (1). The assessing officer further recorded a finding that properties owned by the appellant are residential apartments. Accordingly, exemption under Section 54F of the Act was denied.
4. Being aggrieved, the assessee filed an appeal. The Commissioner of Income Tax (Appeals) by an order dated 31.05.2010 inter alia held that by virtue of clauses (a)(i) and (b) of proviso to Section 54F(1), the assessee is ineligible to claim exemption. It was further held that from perusal of the record, it is evident that out of nine properties two properties viz., Unit No.204 and 605 of Oxford Suites have got plan sanction of residential in nature and therefore, the claim of the assessee that the properties be not treated as residential houses cannot be
