ITO, Ward - 1 (3), V. Pawan Arya,

ITA 2416/DEL/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2131 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 17-12-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 27-06-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RANO JAINCA
• Assessee Lawyers: H K LAL
• Keywords: Deduction for capital gain
• Section: 64; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 2416/DEL/2008 ASSESSMENT YEAR : 2005-06 INCOME-TAX OFFICER, WARD 1(3), FARIDABAD. VS. SHRI PAWAN ARYA, H.NO.950, SEC.15, FARIDABAD. PAN : AENPA2388A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI H.K. LAL, SR. DR REVENUE BY : SMT.RANO JAIN,CA ORDER PER I.P. BANSAL, JUDICIAL MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST THE ORDER OF THE CIT (A) DATED 4 TH APRIL, 2008 FOR ASSESSMENT YEAR 2005-06. GROUNDS OF APPEAL READ AS UNDER:- 1. WHETHER THE LD. COMMISSIONER OF INCOME-TAX (APP EALS) WAS RIGHT IN LAW IN HOLDING THAT TO CLAIM THE DEDUC TION U/S 54, THERE IS NO BAR ON ACQUIRING MORE THAN ONE RESIDENT IAL HOUSE, WHICH ARE I.E., ONE BEING AT DELHI AND ANOTHER AT F ARIDABAD, DISREGARDING THE HONBLE BOMBAY HIGH COURTS DECIS ION IN K.C. KAUSHIK VS. P.B. RANE, FIFTH ITO, AND OTHERS 1 85 ITR 499 (BOM), IN WHICH IT WAS HELD THAT RELIEF IN RESP ECT OF THE CAPITAL GAIN HAS, OF COURSE, TO BE ADJUSTED AGAINST ONE OF THE HOUSES ONLY? 2. THAT THE APPELLANT CRAVES FOR THE PERMISSION TO ADD, DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIM E OF HEARING OF APPEAL. ITA NO.2416/DEL/2008 2 2. THE ASSESSEE HAS SOLD HIS FLAT AT PLOT NO.4, SEC TOR 7, DWARAKA FOR A SUM OF RS.20 LAC AGAINST WHICH EXEMPTION U/S 54 WAS CLA IMED FROM CAPITAL GAIN ON ACCOUNT OF PURCHASE OF TWO RESIDENTIAL HOUSES; ONE IS FOR A SUM OF RS.3,19,652/- PURCHASED ON 6 TH OCTOBER, 2004 FROM GULSHANE IQBAL CO-OP. GROUP HOU SING SOCIETY LTD., J-11, DILSHAD COLONY, DELHI AND THE S ECOND FOR THE CONSTRUCTION OF HOUSE NO.950, SEC.15, FARIDABAD, AMOUNTING TO RS.5, 80,000/-. ACCORDING TO THE AO, SET OFF OF CAPITAL GAIN COULD BE GIVEN AGAINST ONE RESIDENTIAL HOUSE ONLY AND HE RESTRICTED THE CAPITAL GAIN EXEMPTION TO THAT EX TENT AND BROUGHT THE CAPITAL GAIN TAXABLE AT A SUM OF RS.7,53,492/- AGAINST NIL CLAIMED BY THE ASSESSEE. THE CIT (A), RELYING ON THE DECISION OF BANGALORE ITAT IN THE CASE OF D. ANAND BASAPA VS. ITO (2004) 91 ITD 53 (BANG) HAS HELD THA T THE ASSESSEE COULD CLAIM BENEFIT OF DEDUCTION U/S 54 IN RESPECT OF BOTH THE RESIDENTIAL HOUSES AND HE HAS DIRECTED THE AO TO GRANT SUCH EXEMPTION AGAINST WHI CH THE REVENUE IS AGGRIEVED, HENCE, IN APPEAL. 3. LD. DR, AFTER NARRATING THE FACTS, RELIED UPON T HE DECISION OF SPECIAL BENCH IN THE CASE OF ITO VS. SUSHILA M. JHAVERI (2007) 10 7 ITD 327 (MUM) (SB) TO CONTEND THAT WHERE TWO FLATS ARE LOCATED AT DIFFERE NT LOCALITIES, THE ASSESSEE WAS ENTITLED TO EXEMPTION IN RESPECT OF INVESTMENT IN O NE HOUSE ONLY OF HER CHOICE AND AS THE AO HAS ALREADY ALLOWED EXEMPTION IN RESP ECT OF ONE HOUSE WHICH PERMITTED HIGHER EXEMPTION, THE ORDER OF THE CIT (A ) WAS TO BE REVERSED AND THAT OF AO WAS TO BE RESTORED. RELYING ON THE AFOREMENT IONED DECISION OF SPECIAL BENCH, IT WAS CONTENDED BY LD. DR THAT IT HAS NOW B EEN SET AT REST THAT THE ASSESSEE IS ENTITLED TO CLAIM EXEMPTION U/S 54 ONLY WITH RESPECT TO ONE RESIDENTIAL HOUSE. 4. ON THE OTHER HAND, LD. AR RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. D. ANAND BASAPA 3 09 ITR 329 (KAR) WHEREBY IT HAS BEEN HELD THAT ASSESSEE CAN CLAIM DEDUCTION IN RESPECT OF TWO RESIDENTIAL HOUSES. IT WAS SUBMITTED THAT THE DECISION OF BOMB AY HIGH COURT IN THE CASE OF K.C. KAUSHIK VS. P.B. RANE (SUPRA) RELIED UPON BY T HE REVENUE IN ITS GROUND HAS NO APPLICATION AS THE SAME RELATES TO THE CHOICE OF THE ASSESSEE TO AVAIL ITA NO.2416/DEL/2008 3 EXEMPTION. OUR ATTENTION WAS DRAWN TO CERTAIN OBSE RVATIONS OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. D. ANAN D BASAPA (SUPRA) AND THE SUBMISSION OF LD. AR AS FILED BEFORE US ARE AS UNDE R:- THE ONLY ISSUE IS WHETHER THE ASSESSEE CASE AVAIL EXEMPTION U/S 54 ON INVESTMENT IN TWO RESIDENTIAL HOUSES. THE ISSUE IN SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE JUDGMENT OF KARNATAKA HIGH COURT IN THE CASE OF CIT & ANOTHER VS. D. ANANDA BASAPPA, REPORTED AT 309 ITR 329, WHEREBY IT HAS BEEN HELD THAT A PLAIN READING OF THE PROVISION OF SECTION 54(1) OF THE INCOME TAX ACT DISCLOSES THAT WHEN AN INDIVIDUA L ASSESSEE OR HINDU UNDIVIDED FAMILY ASSESSEE SELLS A RESIDENTIA L BUILDING OR LANDS APPURTENANT THERETO, HE CAN INVEST CAPITAL GA INS FOR PURCHASE OF RESIDENTIAL BUILDING TO SEEK EXEMPTION OF THE CA PITAL GAINS TAX. SECTION 13 OF THE GENERAL CLAUSES ACT DECLARES THAT WHENEVER THE SINGULAR IS USED FOR A WORD, IT IS PERMISSIBLE TO I NCLUDE THE PLURAL. THE CONTENTION OF THE REVENUE IS THAT THE PHRASE A RESIDENTIAL HOUSE WOULD MEAN ONE RESIDENTIAL HOUSE AND IT DOES NOT APPEAR TO THE CORRECT UNDERSTANDING. THE EXPRESSION A RESID ENTIAL HOUSE SHOULD BE UNDERSTOOD IN A SENSE THAT BUILDING SHOUL D BE OF RESIDENTIAL IN NATURE AND A SHOULD NOT BE UNDERST OOD TO INDICATE A SINGULAR NUMBER. THE JUDGMENT RELIED ON BY THE DEPARTMENT, VIZ, K.C. KAUSHIK VS. P.B. RANA, FIFTH ITO & OSS 185 ITR 499(BOM) IS OF NO RELEVANCE IN THE PRESENT CASE, AS THE SAME RELATES TO THE CHO ICE OF ASSESSEE TO AVAIL EXEMPTION RELATED TO ONE OUT OF TWO FLATS PURCHASED & SOLD SUCCESSIVELY IN THE RELEVANT PERIOD. THE FACTS ARE ENTIRELY DIFFERENT FROM THE ISSUE INVOLVED IN THE PRESENT APPEAL. 5. THUS, IT WAS SUBMITTED BY LD. AR THAT THE ORDER OF THE CIT (A) SHOULD BE UPHELD AND THE DEPARTMENTAL APPEAL SHOULD BE DISMIS SED. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS 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, D ELHI AND THE OTHER IS IN FARIDABAD. THE ASSESSEE IN THE SPECIAL BENCH CASE HAD ALSO PURCHASED TWO RESIDENTIAL HOUSES AGAINST SALE CONSIDERATION OF RE SIDENTIAL FLAT AT GULISTAN SITUATED AT BHULABAI DESAI ROAD, MUMBAI. ONE RESI DENTIAL PROPERTY WAS AT ITA NO.2416/DEL/2008 4 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. THEREF ORE, THE DECISION OF SPECIAL BENCH IS FULLY APPLICABLE TO THE PRESENT CASE AND T HE ASSESSEE CAN AVAIL EXEMPTION U/S 54 IN RESPECT OF ONE RESIDENTIAL HOUS E 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 EXEMPT ION IN RESPECT OF TWO INDEPENDENT RESIDENTIAL HOUSES PURCHASED OUT OF SAL E 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 B Y LD. AR REGARDING THE CHOICE OF THE PROPERTY OR THE FACTUAL ASPECT OF THE MATTER. 7. SO AS IT RELATES TO THE DECISION RELIED UPON BY LD. AR OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. D ANAND BASAPA, I T MAY BE MENTIONED THAT THE SAID CASE CANNOT BE APPLIED TO THE CASE OF THE ASSE SSEE 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 CONSIDERAT ION 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 HONBLE HIGH C OURT 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 C OULD 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 H OLD THAT THE ASSESEE HAD NO INTENTION TO PURCHASE TWO FLATS AS ONE UNIT. FROM THESE OBSERVATIONS OF HONBLE HIGH COURT, IT IS CLEAR THAT WHILE RENDERING THE DE CISION 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 ITA NO.2416/DEL/2008 5 ONE AND, THUS, THAT CASE COULD NOT BE APPLIED TO TH E FACTS OF THE CASE OF THE ASSESSEE. WHILE HOLDING SO, REFERENCE CAN BE MADE TO THE FOLLOWING OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS. SUN ENGINEERING WORKS PVT. LTD. 64 TAXMAN 442 (SC):- IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OU T A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT, DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE 'LAW' DECLARED BY THIS COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS FROM THE JUDGMENT HAVE TO BE C ONSIDERED IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THIS C OURT. A DECISION OF THIS COURT TAKES ITS COLOUR FROM THE QUESTIONS I NVOLVED IN THE CASE IN WHICH IT IS RENDERED AND WHILE APPLYING THE DECI SION TO A LATTER CASE, THE COURTS MUST CAREFULLY TRY TO ASCERTAIN TH E TRUE PRINCIPLE LAID DOWN BY THE DECISION OF THIS COURT AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGMENT, DIVORCED FROM THE CONT EXT OF THE QUESTIONS UNDER CONSIDERATION BY THIS COURT, TO SUP PORT THEIR REASONINGS. IN H.H. MAHARAJADHIRAJA MADHAV RAO JIWAJI RAO SCINDIA BAHADUR V. UNION OF INDIA [1971] 3 SCR 9 THIS COURT CAUTIONED: 'IT IS NOT PROPER TO REGARD A WORD, A CLAUSE OR A SENTENCE OCCURRING IN A JUDGMENT OF THE SUPREME COURT, DIVORCED FROM ITS CONTEXT, AS CONTAINING A F ULL EXPOSITION OF THE LAW ON A QUESTION WHEN THE QUESTION DID NOT EVEN FALL TO BE ANSWERED IN THAT JUDGMENT.' 8. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL FIL ED BY THE REVENUE IS ALLOWED. 9. THE ORDER PRONOUNCED IN THE OPEN COURT ON 17.12. 2009. SD/- SD/- [SHAMIM YAHYA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 17.12.2009. DK ITA NO.2416/DEL/2008 6 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES