IN THE INCOME TAX APPELLATE TRIBUNAL
SPECIAL BENCH
I BENCH, MUKMBAI
BEFORE SHRI G.E. VEERABHADRAPPA, VP, SHRI K.C. SINGHAL, JM
AND DR. O.K. NARAYANAN, AM
I.T.A NO.2865/Mum/2002
Assessment Year : 1995-96

For Revenue         :               Mr. Bharat Bhushan and
                                                Mr. Aditya Vikram
For Assessee        :               Mr. Firoz B. Andhyarujina

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. (Para 11) 

O    R    D    E    R  

PER SINGHAL, J.M. 

The Honble President, Income Tax Appellate Tribunal, has constituted this Bench to decide this appeal as well as to adjudicate the following 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 located in the same building / compound / city?

At the outset, we would like to point out the reasons for constituting this Bench.  This appeal came up before the Division Bench.  The Revenue contended that exemption under sections 54/54F of the Income Tax Act, 1961 (Act) would be available only in respect of investment made in one residential house.  Reliance was placed on the judgment of the Honble Jurisdictional High Court in the case of K.C. Kaushik Vs P.B. Rane, 185 ITR 499 (Bom.).  On the other hand, the assessee contended that the exemption under the aforesaid sections would be available even if investment is made in the two house properties though distantly located from each other Reliance was placed on the following decisions of the Tribunal.

(i)Ratanchand Murarka Vs JCIT, A.Y 1996-97, ITA No.4485/M/1999 dated 12.9.2001;

(ii)ITO Vs Shri Daulat Lutharia, ITA No.9639/B/1989 dated 16.5.1996;

(iii)ITO Vs Shri Bhupendra Patel, ITA No.70/M/1995 dated 24.4.2002;

(iv)Fulwanti C. Rathod Vs ITO, ITA No.1092/M/1995 dated 3.5.2002;

(v)ITO Vs Nansi Kriti S., ITA No.2954/M1995 dated 28.5.2005;

(vi) Shri Himmatlal H. Sheth Vs ITO, ITA No.6761/M/2002 dated 15.2.2005;

(vii)DCIT Vs Mohanlal K. Zaveri, ITA No.2747/M/1998 dated 15.12.2005.

The Division Bench also noticed that Mumbai Bench of the Tribunal in the case of Ratanchand Murarka (supra) had also considered the decision of the Honble Bombay High Court in the case of K.C. Kaushik (supra) and distinguished the same and thereby held that exemption under sections 54 / 54F was available in respect of investments made in two house properties even if they were distantly located from each other.  The Division Bench also found that contrary opinion has also been expressed by other benches of the Tribunal in the case of Krishangopal Nagpal, 82 TTJ 481, as well as in the case of Mrs. Gulshanbanoo R. Mukhi, 83 ITD 649, even after considering the earlier decision of the Tribunal in the case of Ratanchand Murarka (supra).  Since inconsistent views were expressed by the different benches, the Division Bench referred the matter to the Honble President, ITAT, v/s 255(3) of the Act for constituting the Special Bench to adjudicate the aforesaid question.  The Honble President, ITAT, was pleased to constitute this bench to decide this appeal including the question mentioned in Para-1 above.

2.The question referred is an abstract question without reference to the facts of the case.  Since the Honble President, ITAT, has also directed to dispose off the appeal, it would be appropriate to refer to the facts of the present case.  The assessee and her husband were co-owners of a residential flat at Gulistan situated at Bhulabhai Desai Road, Mumbai, having 50% share each.  In the year under consideration, the said flat was sold for a total consideration of Rs.3.03 crores on 12.8.1984.  The share of the assessee in the sale consideration of Rs.3.03 crores on 12.8.1984.  The share of the assessee in the sale consideration amounted to Rs.1.515 crores.  The assessee re-invested the sale proceeds in purchase of share in these two flats were purchased by the husband of the assessee.  The assessee claimed exemption u/s 54 of Rs.76.44 lacs against long term capital gain arising from the sale of her share in the residential flat at Bhulabhai Desai Road, Mumbai.  However, the assessing officer was of the view that exemption was available only in respect of investment in one residential house.  Accordingly, he restricted the exemption to Rs.47.79 lacs being the investment in the flat at Erlyn Apartment, Bandra.  In taking this view, the assessing officer relied on the judgment of the Jurisdictional High Court in the case of K.C. Kaushik (supra).  On appeal, the learned CIT(A), following the order of the Tribunal in the case of Ratanchand Murarka (supra), held that exemption was available in respect to investment made in both the flats.  Aggrieved by the same, the Revenue is in appeal before Tribunal.

3.Both the parties have been heard at length.  At the outset, the learned Sr. D.R drew our attention to the question referred to point out that this bench is concerned with a situation where investment is made by the assessee in two residential houses independently located at different places either in the same building or in the city.  Therefore, those decisions of the Tribunal would not be applicable where the investments had been made in two flats adjacent to each other intended to be used as one residential house having same kitchen and common passage.  Accordingly, the decisions of the Tribunal at sr. nos.(ii) to (vii) in the list mentioned in the earlier paragraph would not be relevant in adjudicating the question referred before this bench in as much as in all those cases, the flats purchased were either adjacent to each other intended to be used as one residential house having same kitchen and common passage.  Accordingly, the decisions of the Tribunal at sr. nos.(ii) to (vii) in the list mentioned in the earlier paragraph would not be relevant in adjudicating the question referred before this bench in as much as in all those cases, the flats purchased were either adjacent to each other or on two floors having common staircase.  Proceeding further, it was submitted that the language of the provisions of sections 54 / 54F is plain and unambiguous since the word a means only one.  Even if the word a means any, it does not mean many.  According to him, the word any would mean one out of many.  Thus, he pressed into service the cardinal rule of interpretation that where language of a statute is unambiguous, then its plain and natural meaning should be applied.  If so construed, then a residential house would only mean one residential house.  In support of his contention, he relied on the decision of the Tribunal in the case of Mrs. Gulshanbanoo R. Mukhi (supra) as well as another decision in the case of Krishangopal Nagpal (supra), wherein it has been held that exemption is available only in respect of investment in one residential house.

4.On the other hand, the learned sr. counsel, Mr. Firoz B. Andhyarujina, appearing on behalf of the assessee has supported the order of the learned CIT(A) by raising various submissions mentioned hereafter and relying on various decisions of the Tribunal including the one in the case of Ratanchand Murarka (supra).  Firstly, it was submitted by him that the judgment of the Honble Bombay High Court in the case of K.C. Kaushik (supra) cannot be applied to the present case since the question considered by the Honble Bombay High Court was entirely different.  He drew our attention to the facts in the case of K.C. Kaushik (supra), wherein the assessee had sold his flat for Rs.1.25 lacs on 24.10.1979 and on the same day purchased another flat at Khar, Bombay, for a some of Rs.1.11 lacs.  He resided in that flat from October 1979 to July 1980 and thereafter sold the same on 26.7.1980 for a sum of Rs.1.20 lacs and purchased another flat on the same date at Santacruz, Bombay for Rs.1.20 lacs.  It was claimed by the assessee that the capital gain arising on the sale of his flat on 24.10.1979 was not taxable as he had invested more than the capital gain in the purchase of flat at Santacruz on 26.7.1980 and on the same day purchased another flat at Khar, Bombay, for a some of Rs.1.11 lacs.  He resided in that flat from October 1979 to July 1980 and thereafter sold the same on 26.7.1980 for a sum of Rs.1.20 lacs and purchased another flat on the same date at Santacruz, Bombay for Rs.1.20 lacs.  It was claimed by the assessee that the capital gain arising on the sale of his flat on 24.10.1979 was not taxable as he had invested more than the capital gain in the purchase of flat at Santacruz on 26.7.1980.  The assessing officer partly accepted the claim by holding that the surplus invested in the purchase of a flat at Khar and not in the purchase of a flat at Santacruz was eligible for exemption.  Thus, the exemption was allowed with reference tot eh investment in the flat at Khar and consequently, the profit arising from the sale of flat at Khar was held to be taxable as short term capital gain.  The matter reached the High Court before whom the following two questions had arisen for consideration.

1.Whether, the Petitioner had a choice to choose the property against which the capital gain which had arisen on the transfer of a capital asset are to be adjusted? and

2.Whether, the property purchased but not actually used for residence for three years fulfills the requirement of section 54(1) of the Income Tax Act 1961 were raised before the CIT.

In view of the above questions, the learned sr. counsel for the assessee vehemently submitted that the questions for consideration before the High Court entirely different from the question to be adjudicated by the Special Bench.  Therefore, the decision of the Honble Bombay High Court should be understood in the context of the questions referred.  According to him, it was with reference to question no.1 that the Honble High Court held that if the assessee purchased two house properties within one year of the sale of his house, the assessee has choice to claim exemption u/s 54 of the Act against the purchase of any one of the properties.  Thus, according to him, the said decision is quite distinguishable and cannot be applied to the present case.

5.Coming to the decision of the Tribunal in the case of Mrs. Gulshanbanoo R.Mukhi (supra), it has been pointed out by him that the Bench relied on the principles of interpretation to the effect that if the language employed by the legislature is plain and simple and does not create any ambiguity, then its plain and natural meaning has to be applied.  According to the said Bench, the plain and natural meaning has to be applied.  According to the said Bench, the plain and natural meaning of the word a residential house meant one residential house only.  Had the legislature intended to give exemption for more than one residential house, then it could have used the words residential house or houses.  The learned counsel for the assessee has assailed the said order of the Tribunal by submitting that expression a residential house is not unambiguous in as much as the word a is an indefinite word as held by the Honble Bombay High Court in the case of Mohammadali Tajbhoy Vs Commissioner of Excess Profit Tax, 20 ITR 274, wherein the expression a decision in section 10-A(3) of the Excess Profit Tax Act was held to mean any decision which in turn could mean more than one decision.  In view of the same, the High Court held that Excess Profit Tax Officer was competent to pass both the orders.  On the basis of this decision, it was contended that the word a would include more than one and consequently, the decision of the Tribunal in the case of Mrs. Gulshanbanoo R. Mukhi, cannot be said to have laid down the correct law.

6.Proceeding further, it was submitted that the expression a residential house should be understood with reference to the object of the legislature as held by the Tribunal in the case of Ratanchand Murarka (supra).  According to him, the object is to reinvest the capital gain/sale consideration in any residential house and the same cannot be restricted to one house only.  Had the legislature intended to restrict the investment in one house, it could do so by employing the expression one residential house.  He invited our attention to the provisions of Section 5(1)(iv) of the Wealth Tax Act, 1956, where the legislature has used the expression one residential house.  In support of his submission, he relied on the commentary of Pithisaria & Chaturvedi, Page-2883 and the decisions of the Tribunal namely Ratanchand Murarka (supra), Dr. Anand Basappa, 91 ITD 53 (Bangalore) and other decisions referred to before the Division Bench mentioned earlier.  He also referred to the decision of the Honble Gujarat High Court in the case of Natu Hansraj, 105 ITR 43 to contend that if substantial compliance is made, then exemption cannot be denied.  He referred to the decision of Honble Allahabad High Court to submit that there is a distinction between the provision of Section 5(1)(iv) of the Wealth Tax Act, 1956 and the provisions of section 54/54F of the Act in as much as the legislature used the word one in Wealth Tax Act, 1956, while used the word a in sections 54/54F of the Act.  According to him, if the legislature intended to restrict the exemption to investment in one residential house, it could easily use the words one residential house in sections 54/54F.  He also referred to the decision of the Honble Supreme Court in the case of T.N. Arvind Reddy, 120 ITR 46, to contend that the Apex Court allowed exemption u/s 54 even where house was purchased by different deeds.  Reference was made to the decision of the Honble Calcutta High Court to submit that expression was allowed even where assessee purchased a house and made further investment in construction of additional floor thereon.  Lastly, it was contended that as compared to the word a, the word the is definite word.  If the legislature had intended to restrict the exemption to one residential house, it could use the word the instead of a.  It was vehemently contended that the word a has been used to stress the nature of house i.e., residential.  Alternatively, it was suggested that legislature could use the word unit instead of house if it had intended to allow exemption in respect of one house.  Finally, he concluded his arguments by submitting that word a should be construed with reference to the object of the legislature which according to him is to re-invest the amount of capital gain / sale consideration in the residential properties irrespective of their locations.

7.Rival submissions have been considered carefully.  The real controversy is about the true meaning of the expression a residential house used by the legislature in sections 54 and 54F of the Act.  According to the Revenue, it means, one residential house while, according to the assessee, the word a means any which in turn means one or more than one.  There cannot be dispute to the cardinal rule of interpretation that where the language used by the legislature is plain, simple and unambiguous, then the plain and natural meaning of the words used should be applied in construing the provisions of a statute and, therefore, the Courts should not look into the intention of the legislature.  It is also equally true that where the language is ambiguous than the Courts can have recourse to the aids to the interpretation to unearth the intention of the legislature in enacting such provisions.  Reference can be made to decision of the Honble Supreme Court in the case of Keshavji Raoji & Co. Vs CIT, 183 ITR 1.  The relevant observations are quoted below:

As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible.  The supposed intention of the legislature cannot then be appealed to whittle down the statutory language which is otherwise unambiguous.  If the intendment is not in the words, it is nowhere else.  The need for interpretation arises when the words used in the statute are, on their own terms, ambivalent and do not manifest the intention of the legislature.

It is, therefore, necessary to see whether there is any ambiguity about the word a.

8.According to the Illustrated Oxford Dictionary, it means:

1.One, some, any (when referring to something for the first time in a text or conversation), 2. One like, 3. one single (not a thing or sight), 4.the same (all of a size), 5.in, to, or far each (twice a year, seven a side).

As per Websters Encyclopedic Unabridged Dictionary, it means:

Indefinite article 1. not any particular or certain one of a class or group; a man, a chemical, a horse, 2.another typically representing; 3. one; a certain; a particular: one at a time; two of a kind, 4. (used before plural, noun that are preceded by a quantifier singular in term): a hundred men; a dozen times, 5. indefinitely or non-specifically: a great many years: a few stars, 6. any; a single: not a one; 7. (when stressed) each, every, per: ten cents a dance, three time a day.

As per judicial dictionary by K.J. Aiyer (8^th Edition), it means

Sometimes, a is reads as the, sometimes as some but more frequently as any.  Similar meaning is given by the Law Lexicon.

Perusal of the above clearly shows that the word a is ambiguous as it has no definite meaning.  Various meanings are given to the word a.  It not only means one or any but it has various other meanings depending upon the context in which it is to be used.  Therefore, the cardinal principle of interpretation cannot be applied and consequently, the intention of legislature has to be discovered by resorting to the aids to the interpretation.  One of the rules of interpretation is to find out the context in which such word is used by the legislature.

Before coming to the context in which word a is used in section 54/54F, we would like to mention that much emphasis was made on the word any.  It has been contended that the word a means any which in turn means many or more than one.  This appears to be partially true.  As per various dictionary meanings, it also includes one or one out of many.  According to Law Lexicon, the word any may have several meanings according to the circumstances.  It may mean all, each, some or one or more out of several.  It further says that it is not confined to a plural sense.  According to illustrated Oxford Dictionary as well as Websters Encyclopedic unabridged dictionary also, the word any has various meanings including one.  This clearly shows that the word any does not always mean more than one.  It may also be used to denote one.  So, both the words a as well as any are ambiguous and, therefore, the meaning of these words has to be seen with reference to the context in which these words are used.

Let us, therefore, consider the scheme of the exemption under Chapter IV-E relating to the capital gains.  Section 45 which is charging section uses the expression transfer of a capital asset.  Here the word a means every since capital gain of each capital asset has to be computed depending upon the period of holding.  Exemption from the levy of capital gain tax is provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F and 54H as is apparent from section 45 itself.  The relevant portion of these sections are being extracted below:

54.Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the 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 Income from house property (hereafter in this section 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 date constructed, a residential house, then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say ..

54B [Subject to the provisions of sub-section (2), where the capital gain arises] from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his for agricultural purposes [(hereinafter referred to as the original asset)], and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say

54D [Subject to the provisions of sub-section (2), where the capital gain arises] from the transfer by way of compulsory acquisition under any law of a capital asset, being land or building or any right in land or building, forming part of an industrial undertaking belonging to the assessee which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee for the purposes of the business of the said undertaking [(hereafter in this section referred to as the original asset)], and the assessee has within a period of three years after that date purchased any other land or building or any right in any other land or building or constructed any other building  for the purposes of shifting or re-establishing the said undertaking or setting up another industrial undertaking, then, instead of the capital gain being charged to income-tax as the income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say .

54EA. (1)Where the capital gain arises from the transfer of a long-term capital asset [before the 1^st day of April, 2000] (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of the net consideration in any of the [bonds, debentures, shares of a public company or units of any mutual fund referred to in clause (23D) of section 10,] specified by the Board in this behalf by notification in the Official Gazette (such assets hereafter in this section referred to as the [specified securities]), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say .

54EB. (1) Where the capital gain arises from the transfer of a long-term capital asset [before the 1^st day of April, 2000] (the capital asset so transferred being hereafter in this section referred to as the original asset), and the assessee has, at any time within a period of six months after the date of such transfer invested the whole or any part of capital gains, in any of the assets specified by the Board in this behalf by notification in the Official Gazette (such assets hereafter in this section referred to as the long-term specified assets), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say ..

54E. (1) Where the capital gain arises from the transfer of a [long-term capital asset] [before the 1^st day of April, 1992], (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, within a period of six months after the date of such transfer, invested or deposited the [whole or any part of the net consideration] in any specified asset (such specified asset being hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say.

54F. (1) [Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section 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 date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say

Perusal of the above provisions clearly reveals that the legislature has used the words a and any with reference to investment of capital gain / sale consideration in certain asset or assets.  The legislature was not oblivious regarding the meaning of these two words.  The word any has been used by the legislature in sections 54B, 54D, 54E, 54EA, and 54EB while the word a has been used in sections 54 and 54F of the Act.  This clearly shows that the legislature intended different meanings to be given to these two words.  A close reading of these sections shows that legislature intended to allow exemption in respect of investment in more than one asset by using the word any.  Section 54E allows exemption in respect of investment in any specified asset.  Explanation 1 to sections 54E defines the specified asset.  It includes various assets in which investment can be made by the assessee who are eligible for exemption u/s 54E.  There is nothing to indicate that investment is restricted to any of the specified assets.  Had the legislature intended to restrict investment in any one of the specified assets, it would have used the words in any one of the specified assets instead of in any specified asset.  This clearly shows that the word any has been used where the legislature intended investment in more than one asset.  Similarly, in section 54EB, the legislature has used the words in any of the assets specified by the Board.  Similar is the position in section 54EA.  Section 54B and section 54D also used the word any other land and any other land and building respectively.  The expression any other land is an expression of widest amplitude and, therefore, its meaning cannot be restricted to any one piece of land.  On the other hand, the legislature has used the word a in sections 54 and 54F.  Had the legislature intended for investment in more than one asset, it could have easily used the words in any residential house.  Superfluous words are not used by the legislature.  Different words a and any have been deliberately used by the legislature to convey different meanings.  Therefore, in our humble view, the legislature used the word a where it intended investment in one residential house only and used the word any where it intended investment in one or more assets.

9.Having held that intention of the legislature was to allow exemption u/s 54 and 54F in respect of investment in one single residential house, it is not necessary for us to deal with the other submissions of the learned sr. counsel for the assessee since they loses their significance in view of the above finding..

10.However, we are in agreement with certain decisions of the Tribunal relied on by the learned counsel for the assessee wherein exemption was allowed in respect of investments in two adjacent or contiguous units converted into one residential house by having common passage / stair case, common kitchen, etc. intended to be used as singly house for the residence of the family.  As already observed, the intention of the legislature is that investment should be made in one residential house.  So long as the house purchased is one even after conversion, the exemption would be available.  On the other hand, if the investment is made in two independent residential houses, even located in the same complex, then, in our opinion, exemption cannot be allowed for investment in both the houses.  However, the choice would be with assessee to avail exemption in respect of any one house as held by the Honble Bombay High Court in the case of K.C. Kaushik (supra).  The view taken by us in this para is also justified by the decision of the Honble Calcutta High Court in the case of B.B. Sarkar Vs CIT, 132 ITR 150, wherein purchase of ground floor of a house and thereafter construction of first floor was held to be an investment in one house only.  Their Lordships at Page 156 observed as under:

If a floor is constructed to the new house or if it is renovated it remains a house and this will not be two houses.

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.

12.Coming to the facts of the present case, we find that investment was made in two flats located at different localities in Mumbai.  Accordingly, the assessee was entitled to exemption in respect of investment in one house only of her choice.  The assessing officer has already allowed exemption in respect of house which permitted higher deduction.  Therefore, on the basis of opinion expressed by us, we reverse the order of the learned CIT(A) on this issue and restore the order of assessing officer.

13.The next issue relates to the disallowance of Rs.1,51,500/- being brokerage paid in computing the capital gain.  The Assessing Officer disallowed the claim merely on the ground that assessee failed to produce the proof of payment.  The Xerox copy of the brokerage bill was not considered as an evidence.  On appeal, the assessee produced proof of payment along with bank statement of assessee.  In view of such evidence, the Learned CIT (Appeals) allowed the claim of assessee.  Aggrieved by the same, the revenue is in appeal before the tribunal on this issue.

14.After hearing both the parties, we dont find any infirmity in the order of the Learned CIT (Appeals).  The Assessing Officer has not disputed the allowability of the claim of assessee.  The claim had been disallowed on the ground that assessee failed to produce the proof of payment.  The Learned CIT (Appeals) has allowed the claim after considering the proof of payment.  It is also not the case of revenue that provisions of rule 46A had been violated by the Learned CIT (Appeals).  Thus no interference is called for.

15.In the result, appeal is partly allowed.

Pronounced on 17^th April 2007.