Deduction u/s 54

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2011-TIOL-01-HC-P&H-IT

IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH

ITA No.613 of 2010

SHRI PAWAN ARYA

Vs

COMMISSIONER OF INCOME TAX

Adarsh Kumar Goel and Ajay Kumar Mittal, JJ

Dated: December 13, 2010

Appellant Rep by: Mr. Akshay Bhan, Adv.
Respondent Rep by: None

Income Tax - Section 54 - Whether capital gains exemption u/s 54 can be availed even on purchase of two houses.

The assessee claimed exemption on capital gains on sale of flat on the ground of acquisition of two houses. The AO set off the capital gain against one of the houses but held the claim not to be admissible against second house. The CIT(A) upheld the claim of the assessee relying upon decision of Bangalore Bench of the Tribunal in D. Anand Basapa Vs. ITO. The said view was reversed by the Tribunal.

On appeal, the HC held that,

++ as regards claim for exemption against acquisition of two houses u/s 54, the same is not admissible in plain language of statute. In the judgment of Karnataka High Court in CIT v. D. Ananda Basappa, exemption against purchase of two flats was allowed having regard to the finding that both the flats could be treated to be one house as both had been combined to make one residential unit. The said judgment, thus, proceeds on a different factual situation;

++ the Counsel for the appellant wanted to raise certain other points which have neither been pleaded in the memo of appeal nor raised before the Tribunal. The same could not be allowed merely on the basis of oral submissions. No substantial question of law arises.

Assessee's Appeal dismissed

JUDGEMENT

Per: Adarsh Kumar Goel:

1. This appeal has been preferred by the assessee under Section 260-A of the Income Tax Act, 1961 (for short, "the Act") against the order of the Income Tax Appellate Tribunal, New Delhi dated 17.12.2009 in I.T.A. No.2416/Del/2008 for the assessment year 2005-06 proposing to raise following substantial questions of law:-

(i) "Whether in facts and circumstances of the case, the action of the authorities below in rejecting the claim of the assessee when all the conditions under section 54 of the Act have been fulfilled is legally sustainable in the eyes of law?

(ii) Whether in facts and circumstances of the case, the action of the authorities below in rejecting the claim of the assessee without their being any material evidence to rebut the claim of the assessee/appellant is legally sustainable in the eyes of law?

(iii) Whether in facts and circumstances of the case, the action of the authorities below in ignoring the ratio of the decision in the case of D. Anand Basapa v/s ITO (2004) 91 ITD 53 (Bang.) wherein the exemption u/s 54 of the Act was granted on the acquisition of two houses out of the proceeds of one residential house is legally sustainable in the eyes of law?

(iv) Whether in facts and circumstances of the case, the action of the authorities below, impugned orders Annexures A-1 and A-5 are legally sustainable in the eyes of law?

2. The assessee claimed exemption on capital gains on sale of flat on the ground of acquisition of two houses. The Assessing Officer set off the capital gain against one of the houses but held the claim not to be admissible against second house. However, the CIT(A) upheld the claim of the assessee relying upon decision of Bangalore Bench of the Tribunal in D. Anand Basapa Vs. ITO (2004) 91 ITD 53. The said view has been reversed by the Tribunal as follows:-

"6. We have carefully considered the rival submissions in the light of the material placed before us. The facts in the present case are clear. The assessee is claiming exemption in respect of two independent residential houses situated at different locations; one is in Dilshad Colony, Delhi and the other is in Faridabad. The assessee in the Special Bench case had also purchased two residential houses against sale consideration of residential flat at 'Gulistan' situated at Bhulabai Desai Road, Mumbai. One residential property was at Varun Apartments at Varsova and the other property was at Erlyn Apartments, Bandra and it was held by the Special bench in the aforementioned case i.e. ITO Vs. Ms. Sushila M. Jhaveri (supra) that the assessee is entitled to get exemption only in respect of one house of her choice. Therefore, the decision of Special Bench is fully applicable to the present case and the assessee can avail exemption u/s 54 in respect of one residential house only. The factual aspect has not been disputed by ld. AR. The only dispute before us is legal proposition that whether the assessee is entitled to get exemption in respect of two independent residential houses purchased out of sale consideration of another residential house. Therefore, the issue is decided in favour of the department and it is held that the assessee is entitled to get exemption u/s 54 in respect of one property only and no question has been raised by ld. AR regarding the choice of the property or the factual aspect of the matter.

7. So it relates to the decision relied upon by ld. AR of Hon'ble Karnataka High Court in the case of CIT Vs. D. Anand Basapa, it may be mentioned that the said case cannot be applied to the case of the assessee on the ground that in that case the two houses purchased by the assessee were not independent properties and a factual finding has been recorded that the two apartments which were claimed to be exempted against sale consideration were situated side by side and it was also stated by the builder in that case that he has effected modification of the flats to make it as one unit by opening the door in between two apartments. On these facts, the Hon'ble High Court has observed that the fact that at the time when Inspector inspected the premises, the flats were occupied by two different tenants is not the ground to hold that apartment is not one residential unit. The fact that the assessee could have purchased both the flats in one single sale deed or could be narrated the purchase of two premises as one unit in the sale deed is not the ground to hold that the assessee had no intention to purchase two flats as one unit. From these observations of Hon'ble High Court, it is clear that while rendering the decision they have kept in mind that the purchase of two flats in the same building which were united for living of the assessee by making necessary modifications made the residential unit as one and, thus, that case could not be applied to the facts of the case of the assessee........."

3. We have heard learned counsel for the appellant.

4. As regards claim for exemption against acquisition of two houses under Section 54 of the Act, the same is not admissible in plain language of statute. In the judgment of Karnataka High Court in CIT v. D. Ananda Basappa [2009] 309 ITR 329 (Kar), referred to in the impugned order, exemption against purchase of two flats was allowed having regard to the finding that both the flats could be treated to be one house as both had been combined to make one residential unit. The said judgment, thus, proceeds on a different fact situation.

5. Learned counsel for the appellant wanted to raise certain other points which have neither been pleaded in the memo of appeal nor raised before the Tribunal. The same could not be allowed merely on the basis of oral submissions.

6. No substantial question of law arises.

7. The appeal is dismissed.

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