Mrs. Khorshed Noshir Bharucha, Lido Towers, 7th Floor, Juhu Road, Juhu Village, Santacruz (W) MUMBAI-400 054. Vs. Asst. C.I.T. 19(2) Piramal Chambers, Lalbaug, MUMBAI-400 012
February, 16th 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "A" MUMBAI
[^ . , Ú¢ /
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT /AND
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SHRI RAJENDRA, ACCOUNTANT MEMBER
. / ITA No. 863/Mum/2012
[ [ /Assessment Year 2008-09
Mrs. Khorshed Noshir Asst. C.I.T. 19(2)
Bharucha, Piramal Chambers,
Lido Towers, 7th Floor, Vs. Lalbaug,
Juhu Road, Juhu Village, MUMBAI-400 012.
PAN: ALWPB 5627 K
( /Appellant) (× / Respondent)
/ Appellant by : Shri Yogesh A. Thar
× /Respondent by : Shri Manoj Kumar
Date of Hearing : 11-02-2013
Date of Pronouncement : 15-02-2013
/ O R D E R
PER RAJENDRA, A.M.
Following Grounds of Appeal have been filed by the appellant against the
Order dt. 02-11-2011 of the CIT(A)-30, Mumbai :
1. In the facts and circumstances of the case, the Ld. C.I.T. (Appeals), erred in
disallowing the exemption of Long Term Capital Gains u/s. 54F of the I. T. Act, 1961
for one residential flat out of 2 adjacent flats used as one residential unit.
2. That the Ld. C.I.T. (Appeals), erred in not considering the decision of Jurisdictional
Tribunal, "ITO v/s. Ms. Sushila M. Jhaveri (2007) 292 ITR (AT) 1 [Mumbai] [SB]"
i.e. Judgment of Special bench of Mumbai Tribunal constituted to decide the Appeal
as well as to adjudicate the question of law:
`Whether, the phrase `a residential house' used in sub-section (1) of Section 54 and
54F means one residential house or more than one residential house independently
2 ITA No. 863/Mum/2012
Mrs. Khorshed Noshir Bharucha
located in the same building/compound/city ?"
3. That as per the judgment of the Special Bench as stated above the assessee's case
squarely covers the issue and the exemption should be available, whereas the Ld.
C.I.T. (Appeals) has erred in law as well as on facts by not allowing the
exemption for both the adjacent residential flats. It is clearly stated in the order
of the Judgment of Special bench of Mumbai Tribunal at point no.11 that
"In view of the above discussion, it is held that exemption under Section 54 and 54F
of the Act would be allowable in respect of one residential house only. If the Assessee
has purchased more than one residential house, then the choice would be with
assessee to avail the exemption in respect of either of the houses provided the other
conditions are fulfilled. However, where more than one `unit are purchased which
are adjacent to each are converted into one house for the purpose of residence by
having common kitchen, etc.. then it would be a case of investment in one residential
house and consequently, the assessee would be entitled to exemption."
4. That the Ld. C.I.T. (Appeals), erred in not considering the actual facts of the case
and stated that there are separate kitchen in both the houses, but the fact of the
matter is that as there are two flats having a common passage, there is bound to
be one extra "kitchen space" in one of the Flat, which is used as a store house
and only one kitchen is used as a "kitchen" and the Assessee is the only person
staying in the full house and thus there is only one family having a common
5. The Appellants craves leave to add, alter or delete any portion of this appeal
before the final hearing by the bench on the basis of equity, good conscience and
2. Assessee, an individual, filed her return of income on 12-07-2008 declaring
total income at Rs. 2.07 Crores. Assessment was finalised by the Assessing Officer
(AO) u/s. 143(3) of the Income Tax Act, 1961 (Act) on 30-12-2010 determining
income of the assessee at Rs. 3.38 Crores.
3. The only issue involved in the case under consideration is whether the AO and
the First Appellate Authority (FAA) were justified in allowing exemption of Long
Term Capital Gain (LTCG) u/s. 54 of the Act in respect of one residential flat only as
opposite to the claim of the appellant of exemption of two adjacent flats.
Briefly stated facts of the case are that during the year, the appellant had sold
the tenancy rights for a consideration of Rs. 5.49 Crores and had offered LTCG on the
said transaction as under:
Sale proceeds Rs. 5,49,00,000
Less: Expenses on sale Rs. 35,00,000
Less: Invested in residential flat Rs. 3,09,80,000
Long Term Capital Gain Rs. 2,00,42,000
3 ITA No. 863/Mum/2012
Mrs. Khorshed Noshir Bharucha
4. After going through the details filed by the assessee, AO that appellant had
claimed exemption in respect of investment in two residential flats-Flat Nos.701&
702 in Lido Towers, Santacruz, Mumbai. During the assessment proceedings, AO
asked the assessee as why exemption should not be restricted to one flat? The
assessee made an application u/s. 144A of the Act and in response to the same, Ward
Inspector was deputed by the AO to verify the factual position. After considering the
report of the Inspector, AO held that though both the flats were adjacent, both of them
had different entry doors, that the assessee had entered into two different agreements
to purchase the said flats, that the joining of the flats was subsequent act. He restricted
the exemption available u/s. 54F of the Act to one flat only.
5. Assessee preferred an appeal before the FAA. After considering the
submissions of the assessee, FAA held that the report of the inspector clearly
established that the flats were having separate kitchens in both the houses, that the
two flats were original built as two separate units, that inspector's report nowhere
stated that the two houses were being used as a single residential unit, that just
because the two flats had been joined together did not mean that both the flats were
used as one residential unit, that both the flats were having separate electrical meters.
Confirming the order of the AO, FAA dismissed the appeal filed by the assessee.
6. Before us, Authorised Representative (AR) submitted that flats were being
used as one residential unit, that flats had the common-passage, the flats were
registered in the name of the assessee. In Flat No. 701, kitchen was not working, that
in Flat No. 702, kitchen had of all the equipments. He relied upon the case of Ms.
Sushila M. Jhaveri delivered by the ITAT Special Bench, Mumbai [292 ITR (AT 1)].
He further held that case under consideration was directly covered by the said
judgments. Departmental Representative(DR) relied upon the orders of the Revenue
7. We have heard the rival submissions and perused the material put before us.
We find that issue has been decided by the Special Bench in the case of Sushila M.
Jhaveri (supra). In para 11 of the order, Tribunal has held as under:
11. In view of the above discussion, it is held that exemption under Sections 54 and
54F of the Act would be allowable in respect of one residential house only. If the
assessee has purchased more than one residential house, then the choice would be
with assessee to avail the exemption in respect of either of the houses provided the
other conditions are fulfilled. However, where more than one unit are purchased
which are adjacent to each other and are converted into one house for the purpose of
residence by having common passage, common kitchen, etc., then, it would be a case
of investment in one residential house and consequently, the assessee would be
entitled to exemption.
If the facts of the case under consideration are compared with the case of Sushila M.
Jhaveri (supra), it becomes clear that same as identical. In both the cases, two adjacent
flats were purchased and later on same were converted into one single residential unit.
Exemption u/s.54F is available to the assessee, who invest sale proceeds of sale
residential unit in another unit. In the case under consideration, both the flats were on
one floor only and no other dwelling unit there was there on that floor. Builder had
constructed two units, but the assessee converted them in one unit only. Besides,
same was used as single unit, as evident from the report of the Inspector. On the spot
4 ITA No. 863/Mum/2012
Mrs. Khorshed Noshir Bharucha
inspection report submitted by him clearly prove that there was common passage and
only one kitchen was functional with all appliances. There is no doubt that assessee
had purchased two flats and later on converted them into one unit for the purpose of
residence. Therefore, in our opinion she is entitle to claim exemption u/s. 54 of the
Act. She cannot be denied the benefit of the provisions of the section only on the basis
that initially there were two units.
8. Considering the above facts and respectfully following the decision of Sushila
M. Jhaveri (supra), we decide Grounds of Appeal Nos. 1 to 5 in favour of the
As a result, appeal filed by the assessee stands allowed.
Order pronounced in the open court on 15th February, 2013
Û 15 , 2013
(. / D. MANMOHAN) (Û] / RAJENDRA)
Ú¢ /VICE PRESIDENT / ACCOUNTANT MEMBER
/Copy of the Order forwarded to :
3. The concerned CIT (A)
4. The concerned CIT
5. DR "A" Bench, ITAT, Mumbai
6. Guard File
× //True Copy//
/ BY ORDER,
/ Dy./Asst. Registrar
, / ITAT, Mumbai