PRADEEP PARIKH, VIcE PRESIDENT: ORDER assessee is in appeal before us against order of learned CIT(A), dt. 31st March, 2007 for asst. yr. 2001-02. issue in this appeal relates to determination of capital gains at Rs. 12,52,276 and denying exemption under s. 54F of IT Act, 1961 ( Act ) to assessee. 2 . assessee individual declared total income of Rs. 2,84,762 which included income from salary, income from house property, capital gains and income from other sources. Under head "Capital gains" long-term loss of Rs. 80,931 was shown on sale of land and property constructed on said property. assessee owned piece of land with residential property constructed on it at Krishnanagar, Hyderabad. He entered into agreement with promoter/developer as per which promoter was to demolish existing structure and build new residential-cum-non-residential complex. As consideration, promoter was to give 43 per cent of built-up area to assessee in new complex and 57 per cent of built-up area was to be owned by promoter. cost of construction of 43 per cent of built-up area was to be consideration for assessee for transferring land and existing structure thereon. 3450 sq. ft. constituted 43 per cent of built-up area allotted to assessee. cost of construction was determined at Rs. 340 per sq. ft. Thus, assessee computed capital gains as follows : Rs. Sale consideration 11,73,000 (3450 sq. ft. X Rs. 340) Less : Indexed cost of acquisition (a) Market value of land as on 1st Rs. April, 1981 (for 354 sq. yds.) 35,931 (b) Cost of construction of building in Rs. Rs. 1987-88 12,18,000 12,53,931 Rs. (- Long-term loss ) 80,931 3 . However, AO did not agree with above computation on four counts. Firstly, he took land at 57 per cent of 500 sq. yds. which assessee owned instead of 354 sq. yds. which assessee had taken, but did n o t disturb rate adopted by assessee. Secondly, referring to agreement, AO held that existing structure was to be demolished and that what was transferred was land only and not superstructure. Therefore, he denied deduction on account of cost of construction incurred by assessee in 1987-88. Thirdly, he held that assessee received three parking lots in addition to 3,450 sq. ft. and hence its value has to be added as part of consideration. Lastly, assessee was reimbursed by promoter rental expenses he had to incur during construction period. Thus, AO computed capital gains afresh as follows : Sale value admitted by Rs. 11,73,000 assessee Rs. Add : (a) Value for car 90,000 parking Rs. 1,08,000 Rs. (b) Reimbursement of rent 18,000 Less: Indexed cost of Rs. land(283 sq. yds.) 12,81,000Rs. 28,724 Long-term capital gains Rs. 12,52,276 4 . Further, in his return of income, assessee had claimed deduction under s. 54 of Act. However, in course of assessment proceedings he put up alternate claim claiming exemption under s. 54F of Act. AO observed that assessee had acquired three flats on first floor and one flat on second floor. assessee occupied two flats on first floor and let out other two flats. Therefore, he held all four flats to be independent with separate kitchens and with no inter-connection and hence denied exemption under s. 54F of Act. 5 . In first appeal, CIT(A) observed that no doubt, old superstructure was handed over to developer, but it was no asset in his hands, rather liability as he had to incur some expenditure to remove same. Thus, he confirmed action of AO denying deduction on account of old superstructure. He also confirmed addition made on account of parking lots. addition of Rs. 18,000 made on account of rent reimbursement was not contested by assessee. assessee also agreed with views of AO with regard to denial of exemption under s. 54F. 6. learned counsel for assessee submitted that along with land, old house also got transferred. cost of construction of said house is nothing but cost of improvement of land which has to be reduced from total consideration. It was also contended that as building was in existence on date of agreement and hence that also got transferred. With regard to addition made on account of parking lots, it was contended that proportionate cost of construction was taken as consideration for transferring old asset which is deemed to be including parking area and hence, separate addition is not justified. With regard to exemption under s. 54/54F, assessee has made petition for admission of additional ground contending that exemption under either provision i.e. s. 54 or s. 54F be considered. As it is legal ground and goes towards ascertaining correct capital gains, we admit same. Further, assessee has also made petition for admission of additional evidence which are in form of three receipts from municipal corporation evidencing payment of property tax. This is to show that same number is allotted to flat on second floor and hence all flats constitute single unit of residence. Since evidence may behaving bearing on assessee s claim for exemption under s. 54/54F, we admit same. Thus, contending that it was single unit of residence, learned counsel submitted that exemption under s. 54/54F should not be denied. 7 . learned Departmental Representative supported order of lower authorities. His main emphasis was on fact that as per agreement, what was transferred was only land and not old house. To buttress this point, learned Departmental Representative took us through relevant clauses in agreement and pleaded that cost of old house cannot be reduced from consideration. On rest of issues, he relied on orders of lower authorities. 8 . We have duly considered rival contentions and material on record. Though main issue raised by assessee in his grounds of appeal is couched in general terms challenging determination of capital gains at Rs. 12,52,276, in reality, he has not objected to two aspects in computation. As is evident from computation of capital gains made by AO which is reproduced in para 3 above, besides disallowing cost of construction of superstructure, AO has made additions of Rs. 90,000 on account of car parking, Rs. 18,000 on account of reimbursement of rent and has reduced cost of land claimed by assessee. Out of these additions/disallowances, assessee has not challenged addition of Rs. 18,000 and has not argued about reduction in allowance of cost of land. Thus, issues before us for our consideration can be identified as follows : (a) disallowance of cost of superstructure; (b) denial of exemption under s. 54/54F; (c) addition of Rs. 90,000 on account of car parking. We take up each issue separately. first issue relates to allowance of cost of superstructure. Cost of superstructure 9 . stand of Revenue is that since superstructure was to be demolished by promoter, it cannot be said that existing house was also transferred and since only land was transferred, cost of house cannot be allowed as deduction. On other hand, stand of assessee is that as per agreement, both were to be transferred and in any case, building of house on land amounts to improvement of land and hence cost thereof should be allowed as deduction. In order to appreciate rival contentions, it would be necessary to refer to agreement entered into by contentions, it would be necessary to refer to agreement entered into by assessee with promoter. 10. assessee owns piece of land admeasuring 500 sq. yds. at Sri Krishnanagar, Hyderabad. assessee is absolute owner and possessor of t h e impugned land. It further mentions that assessee is desirous of developing said property and for purpose has approached promoter. In preamble itself it is declared that promoter shall demolish existing structure and construct thereon new complex. This will be at cost of promoter only. This clearly indicates that unless superstructure is also transferred, promoter cannot take possession and demolish same. view of CIT(A) that it is not asset but liability for promoter has no basis. In fact, it is more rhetoric than argument. He may demolish same but fact remains that transferor, i.e., assessee is parting away with his house along with land. question of not allowing cost of house would arise only if it is retained by assessee himself. This is not case in present transaction. What transferee does to that asset is not concern of transferor. It is also not case of Revenue that income generated, if any, from sale of scrap is appropriated by assessee. Even accepting for sake of argument that superstructure has no value for promoter, it cannot be denied that land below that structure is certainly of value and use to promoter. This is because, if he has to build new complex, he will have to make use of that land. Therefore, in order to use land which is beneath structure, he has to acquire structure also and then he may demolish it. Therefore, there is no gainsaying that superstructure is not transferred to promoter. Considering issue from view point of transferor, since he is parting with asset, for which he has incurred cost, that cost has to be allowed as deduction while computing capital gains. In light of foregoing discussion, we hold that superstructure is also transferred by assessee to promoter and cost of construction thereof may be allowed to assessee. Of course, cost will be as determined by AO i.e., Rs. 28,724. Exemption under s. 54/54F 1 1 . As mentioned earlier, in his return of income, assessee had claimed exemption under s. 54. However, in course of assessment proceedings, when AO refused to give deduction on account of cost of superstructure, assessee put forth claim for exemption under s. 54F. Above, we have held that there was transfer of house property along with land. In view of this decision of ours, we revive claim for exemption under s. 54 which also is claim of assessee by way of additional ground. 1 2 . Let us first consider some of cases referred to by learned counsel. In case of Shiv Narain Chaudhari vs. CWT 1977 CTR (All) 149 : (1977) 108 ITR 104 (All), assessee, HUF, claimed exemption under s. 5(1)(iv) of WT Act in respect of four different independent residential units in which were connected by common passage in building owned by them and bearing municipal door numbers 92 and 92A, Darbhanga Castle. part of that building was constructed in year 1960. building was extended in 1963. assessee owned another building in another locality bearing municipal door number 17/33, Mahatma Gandhi Marg, in occupation of assessee s family and exemption was claimed for that building also. WTO exempted only portion of house bearing door No. 92 and declined to exempt other portion bearing door No. 92A and building in Mahatma Gandhi Marg. Allahabad High Court held that house may consist of more than one self- contained dwelling units and that if there is unity of structure, mere fact that such self-contained dwelling units are occupied by different persons, will not make that house into several houses. Thus, Court granted exemption in respect of house properties bearing numbers 92 and 92A occupied as residences by different members of family as one house belonging to it but exemption was not granted in respect of house in Mahatma Gandhi Marg, In case of B.B. Sarkar vs. CIT (1982) 26 CTR (Cal) 13 : (1981) 132 ITR 150 (Cal), assessee sold house for Rs. 3,15,000. He purchased another house for Rs. 1,23,001 and invested further sum of Rs. 1,08,300 for construction of additional floor thereon. AO gave relief only in respect of Rs. 1,23,001 but not in respect of Rs. 1,08,300. Calcutta High Court held that it does not really matter whether new residential house is partly constructed or partly purchased and allowed relief in respect of both amounts. In case of K.G. Vyas vs. ITO (1986) 26 TTJ (Bom) 491 : (1986) 16 ITD 195 (Bom), assessee sold his residential flat of 1,200 sq. ft. and purchased four flats of total area of 2,000 sq. ft. in same building. Two of flats were contiguous flats on first floor and remaining two flats were on second and third floors respectively of same building. All four flats were purchased in name of assessee and also in name of one of his three sons and his wife. assessee and his ten family members were living together in all these four flats with common kitchen and common ration card. In computing capital gains assessee claimed deduction of purchase price of all four flats together which he contended must not be considered as four different house properties. However, AO allowed deduction in respect of only one of flats under s. 54. Mumbai Bench of Tribunal allowed deduction in respect of all four flats by observing that merely because assessee had purchased them jointly either in name of his wife or in names of his sons would not materially affect or alter factual position that he was owner of all four flats and that he was also living in them along with members of his family. fact that on future date assessee might divide these properties among members of his family was of no relevance. In this latter decision, Mumbai Bench followed decision of Gujarat High Court in CIT vs. Kodandas Chanchlomal (1985) 48 CTR (Guj) 346 : (1985) 155 ITR 273 (Guj). In this case, assessee constructed house which consisted of ground floor, first and second floor. assessee leased out ground floor and used first and second floors for his personal residence and claimed deduction under s. 54. Gujarat High Court, held that substantial portion of new house property was retained by assessee for his personal purposes, and since construction of new building was completed within statutory period conditions for grant of exemption were fulfilled and assessee was entitled to pro rata exemption under s. 54 of Act in respect of portion of property in his occupation. To same effect are decisions of Bangalore and Hyderabad Benches of Tribunal in case of D. Anand Basappa vs. ITO (2005) 92 TTJ (Bang) 597 : (2004) 91 ITD 53 (Bang) and in case of Smt. Hansa Bai Sanghi vs. ITO (2004) 84 TTJ (Hyd) 700 : (2004) 89 ITD 239 (Hyd). 13. From above decisions, it is clear that even if several self-contained independent dwelling units constitutes one house, it will be treated as one house only and not as several houses. Further, where several flats are purchased in same building and are contiguous to each other, they would be treated as one house and not as several houses. Whether one or more municipal numbers are given, it is of no consequence. purpose is to see whether assessee and his family are using those several dwelling units for their residence or not. However, where assessee, after acquiring new property has not put to use for his own residence but has let it out, it means that it was not meant for immediate residence. In present case, out of four flats acquired, two flats on first floor were occupied by assessee and remaining two were let out. Therefore, respectfully following judgment of Gujarat High Court in case of Kodandas (supra), we hold that assessee be given pro rata exemption in respect of two flats occupied by him. learned counsel had put up argument that if one room in house is let out, that one room does not become separate house. He had commended us to apply this analogy in respect of let out properties of assessee in present case. However, said argument cannot be applied here. In example given by learned counsel, room in house let out is not by itself self-contained dwelling unit. Even though let out, it remains integral part of house. On other hand, in case before us, all four are self-contained dwelling units and could have been considered as one house had all of them been occupied by assessee. Therefore, in terms of decision of Gujarat High Court cited supra, we hold that assessee be given exemption in respect of two flats only and not all four. He cannot have cake and eat it too. Addition of Rs. 90,000 on Car parking 14. agreement between parties specify that each apartment owner would be entitled to proportionate rights over land depending upon extent of flat area to total constructed area, excluding parking space, balconies and common areas. This only means that assessee as flat owner does not have proportionate right on parking space. However, Deed of Completion makes mention that promoter has constructed and provided eight car parking spaces, out of which three have been allotted to assessee and five have been retained by promoter himself. Deed further assessee and five have been retained by promoter himself. Deed further provides that promoter shall have no right whatsoever in regard to flats and parking space allotted to assessee. If both agreements are read together, it leads us to infer that assessee has been given exclusive right over three parking spaces and no extra charge has been levied for this by promoter. In other words, cost of constructing parking space allotted to assessee appears to be included in total cost of construction of flats. If this be case, then total sale consideration taken into account for computing capital gains includes cost of parking space as well. Therefore, in our view, separate addition on that account need not be made. Accordingly, we delete addition of Rs. 90,000. 15. In result, appeal of assessee is partly allowed. *** PRABHANDAM PRAKASH v. INCOME TAX OFFICER