COMMISSIONER OF INCOME -TAX Vs. SYED ALI ADIL

JUDGEMENT

(1.) This appeal is filed under Section 260A of the Income Tax Act, 1961 (for short 'the Act') by the Revenue challenging the order dated 09-09-2011 in I.T.A. No. 284/Hyd/2011 of the Income Tax Appellate Tribunal, Hyderabad Bench "B", Hyderabad. The respondent is an individual assessee. He filed his return of income for the assessment year 2007-08 on 31-08-2007 with the Assistant Commissioner of Income Tax, Circle-VI (1), Hyderabad admitting therein a net income of Rs. 43,97,840/-. The said return was processed under Section 143 (1) of the Act on 24-02-2009. Meanwhile, the case was taken up for scrutiny by issuing notice dt. 25-08-2008 under Section 143 (2) of the Act. A notice dt. 15-06-2009 under Section 142 (1) was issued calling for various details.

(2.) Before the assessing officer, the assessee offered under the head, long term capital gains, a sum of Rs. 41.00 lakhs contending that he had inherited an ancestral house property which was sold during the year under consideration and the resultant long term capital gains were offered from sale of the said house; that he had taken the sale consideration of Rs. 1,99,50,000/- for arriving at the capital gains even though the sale deed mentioned the sale consideration as Rs. 2,66,00,000/-; that out of the sale consideration he had purchased two flats in May Fair Apartment, Banjara Hills, Hyderabad and he is entitled to claim deduction/exemption under Section 54 of the Act for an amount of Rs. 93,80,192/- and that in view of the decision in CIT Vs. Ananda Basappa, 2009 309 ITR 329, even though Section 54 mentions that the proceeds should be invested in "a residential house", it being a beneficial provision, it should be construed liberally and the deduction cannot be restricted to only one residential house and it should be extended to the purchase of two adjacent residential flats.

(3.) The assessing officer by order dt. 25-08-2009 held that the assessee is not entitled to claim exemption in respect of Rs. 93,80,192/- but only to the extent of Rs. 45,52,860/- comprising of consideration of Rs. 42,36,000/- and a stamp duty of Rs. 3,16,860/- utilized for investment on one of the flats by the assessee on the ground that the inspection report of the I.T.I. deputed by the assessing officer showed that what was purchased were two residential units separated by a strong wall; that they were purchased from two different vendors under two separate sale deeds and as such the deduction under Section 54 has to be restricted to only one flat.