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A house divided by the draftsman
August, 18th 2007

Two issues come up routinely for debate in the context of housing-related tax benefits. Section 54 of the Income-Tax Act, 1961 spares long-term capital gains from transfer of a residential house from tax if at least such gains are ploughed back or rolled over into a residential house within the prescribed period. The use of singular has given rise to avoidable confusion.

Can one invest in more than one house so as to account for the entire long-term capital gain as being reinvested?

Why not, say those who are inclined to believe that in law a should always be taken to mean any. For good measure, logic and equity are on their side though it must be conceded that courts have made it clear that a fiscal law knows no equity.

Singular vs plural

Be that as it may, the point is if one has made a gain of, say, Rs 50 lakh and Parliament is prepared to leave him off the tax hook if he buys or constructs a house within the prescribed period for at least this amount, how does it matter whether he does so by investing in one house or more than one house, aver the singular-means-plural enthusiasts.

But sticklers for the letter of law think otherwise. To them, the letter of law is a holy-writ not to be trifled with or bent if the law says a house, there is no way one can impute plurality to it.

After all, it is one thing to say he means she and vice-versa but quite another to say that singular means plural and vice-versa.

The same issue bedevils Section 80C that gives deduction for repayment of the principal of housing loan among others the reference once again is to a residential house thus once again raising the singular-plural controversy.

But the controversy is not as intense here as it is in the context of Section 54 because the deduction under this section after all is subject to an overall cap of Rs 1 lakh subsuming not only the EMIs but also contribution to provident fund, life insurance premium etc.

Singular-means-plural enthusiasts aver once again with sound logic that when Parliament has sanctioned Rs 1 lakh, how does it matter whether you are repaying one housing loan or more than one housing loan.

Quaint legalese

Parliament ought to set the twin controversies at rest with the judiciary divided on the issue as discernible from the judgments given under Section 54. One wonders in this connection why we cannot emulate Britain and the US where simple English has come to replace archaic and quaint legalese in legislations.

After all, a law is for the citizen more than it is for the lawyers and judges. If the language of the law defies easy comprehension or is ambiguous, it obviously cannot endear itself to the lay folks, thus giving legitimacy and credence to the oft-quoted charge that all laws are conspiracies against the laity.

The Kelkar committee expressed itself against tax shelters that favour those with deep pockets but Section 54 and other tax shelters show no signs of withering away or being jettisoned. At any rate, an extant law must be as explicit and unambiguous as possible.

S. Murlidharan
(The author is a Delhi-based chartered accountant.)
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