SAROJ RANI,UTTAR PRADESH V. INCOME TAX OFFICER, WARD 44(6), DELHI, DELHI

ITA 5472/DEL/2024

AI Insights

The case involves Saroj Rani, the assessee, who appealed against the order of the CIT(A)/NFAC, Delhi, which upheld the disallowance of a deduction of Rs.1,86,36,599 under section 54 of the Income Tax Act. The deduction was initially denied by the Assessing Officer on the grounds that the assessee had invested in multiple residential units, which was contrary to the interpretation of 'a residential house' post the amendment effective from 01.04.2015. The Tribunal, referencing decisions from the Hon'ble Delhi High Court, particularly the case of CIT vs Gita Duggal and Lata Goel, held that multiple residential units could be considered as a single residential house for the purposes of section 54/54F.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 716777 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2016-2017
• Appeal Filed On: 26-11-2024
• Other Referred Cases: CIT Vs. Gita Duggal, Pawan Arya Vs. CIT, Lata Goel Vs. CIT, Kamla Ajmera Vs. Pr. Commissioner of Income Tax, Gumanmal Jain Vs. Commissioner of Income-tax
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: SURESH GUPTA
• Keywords: Set aside; Salary income; Capital Gains
• Section: 54; 54F; 27

Judgement Text

"Page 1 of 10 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘G’ BENCH, NEW DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 5472/DEL/2024 [A.Y. 2016-17] Saroj Rani Vs. The I.T.O 44, Sports Villa, Ward – 44(6) Jay Pee Greens Delhi Uttar Pradesh PAN – AAOPR 2107 H (Applicant) (Respondent) Assessee By : Shri Suresh Gupta, CA Department By : Shri Manish Gupta, Sr. DR Date of Hearing : 04.08.2025 Date of Pronouncement : 19.08.2025 ORDER PER NAVEEN CHANDRA, A.M:- This appeal by the assessee is preferred against the order of CIT(A)/NFAC, Delhi dated 08.12.2023 for A.Y 2016-17. 2. The assessee has raised the solitary ground of appeal which is as under: Printed from counselvise.com ITA No. 5472/DEL/2024 [A.Y. 2016-17] Saroj Rani Vs.ITO Page 2 of 10 “On the facts and circumstances of the case, the Ld CIT(A) has erred both on facts and in law in upholding the disallowance of deduction of Rs.1,86,36,599/- u/s 54 of the IT Act on the ground that the assessee has made the investment in the multiple residential units ignoring the material and evidences showing that all the units were adjacent to each other and the above action is against the ratio of judgment in the case of Gita Duggal 257 CTR 208 (DEL).” 3. Briefly stated, the facts of the case are that the assessee is an individual and has declared income from salary, rental income and also income from long term capital gain on sale of immovable properties. The assessee e-filed her return of income on 20.07.2016 u/s 139(1) of Income-tax Act, 1961 [the Act, for short] for the year under consideration declaring total income of Rs.5,27,260/-. 4. Subsequently, the case of the assessee was selected for limited scrutiny under CASS for the reason \"Whether value of consideration for computation of capital gains has been correctly shown in the return of income and whether deduction from capital gains has been claimed correctly”. Accordingly, statutory notices were issued and served upon the assessee. The Assessing Officer completed assessment after allowing deduction of Rs. 36,54,821/- being cost of only one adjacent unit and Printed from counselvise.com ITA No. 5472/DEL/2024 [A.Y. 2016-17] Saroj Rani Vs.ITO Page 3 of 10 denied exemption of Rs. 1,86,36,599/- claimed by the assessee u/s 54 of the Act and added back to the returned income of the assessee. 5. Aggrieved, the assessee went in appeal before the ld. CIT(A) who dismissed the appeal of the assessee. 6. Aggrieved further, the assessee is in appeal before us. 7. Before us, the ld. counsel for the assessee vehemently relied upon the decision of the Hon'ble Apex Court in the case of CIT Vs. Gita Duggal reported in 228 Taxmann.com 62 which affirmed the order of the Hon'ble High Court of Delhi in 357 ITR 153. The ld. counsel for the assessee further submitted that the facts of the case relied upon by the Revenue in Pawan Arya Vs. CIT 2010 of the Hon'ble Punjab and Haryana High Court do not apply to the facts of the case in hand in as much as in that case, deduction u/s 54 and 54F was denied by the Hon'ble High Court for the reason that the flats were purchased in different localities. 8. The ld. counsel for the assessee continued by saying that in the case of the assessee, the assessee purchased seven flats in the same apartment on the same floor. The ld. counsel for the assessee relied upon the decision of the Jurisdictional High Court of Delhi in the case of Lata Goel ITA 127 /2025 & CM No. 25518/2025 order dated 30.04.2025. Printed from counselvise.com ITA No. 5472/DEL/2024 [A.Y. 2016-17] Saroj Rani Vs.ITO Page 4 of 10 9. Per contra, the ld. DR relied upon the orders of the authorities below and placed reliance on the decision of the Hon'ble Punjab and Haryana High Court in the case of Pawan Arya [supra]. 10. We have heard the rival submissions and have perused the relevant material on record. Brief facts of the instant appeal is part denial of deduction against long term capital gain u/s 54 of the Act from sale of residential house at Punjabi Bagh Delhi for sale consideration of Rs 2,70,60,000/-. The deduction claimed for Rs. 2,22,91,420/- was restricted to the extent of Rs 36,54,821/- and the balance deduction of Rs 1,86,36,599/-was denied as it pertained to investment in the more than one residential unit. 11. The deduction u/s 54 was claimed for investment of Rs 2,55,83,750/ in seven residential units on a single floor in the Units Nos 1001 to 1007 in a residential Complex 'Foreste' developed by the builder namely Aura Buildwell Pvt Ltd at Plot No SC-02B, Sector 27 Greater Noida (West). Neither the AO or the CIT(A) has raised dispute as to the eligibility of the assessee for the deduction u/s 54 of the Act except for the reason that the investment is made in seven residential units and both the AO and CIT(A) allowed the deduction to the extent of Printed from counselvise.com ITA No. 5472/DEL/2024 [A.Y. 2016-17] Saroj Rani Vs.ITO Page 5 of 10 investment in single residential unit by allocating total cost of seven units to each unit and thereafter allowed the cost of a single unit as deduction disallowing the balance claim. 12. We find that the Ld AO considered the investment in seven residential units of the same complex; each unit being adjacent to other units, with no outsider flat coming in between as investment in multiple houses and applied the amendment effective from 01.04.2015 to invoke the concept of \"one residential house\" instead of \"a residential house\". The AO and the CIT(A) held that the judgement of Hon'ble Delhi High Court in the case of CIT vs Gita Duggal 357 ITR 153(Del) was not applicable, post above amendment. 13. We find that the Hon'ble Delhi Court in the Lata Goel in ITA 127/225 vide its order dated 30.04.2025, referring its own decision in the case of Gita Duggal case [supra], had held that multiple residential units may be construed as a single residential house for the purposes of exemption u/s 54F of the Act and that the term ‘a residential house’ can be construed as ‘one residential house’. It would be pertinent to reproduce the relevant portion of the judgment of the Hon'ble Delhi Court in the case of Lata Goel which is as under: Printed from counselvise.com ITA No. 5472/DEL/2024 [A.Y. 2016-17] Saroj Rani Vs.ITO Page 6 of 10 22. It is also relevant to refer to the decision of the coordinate bench of th court in Commissioner of Income-tax v. Gita Duggal: 2013 SCC OnLineDel 752 where this court has held as under: - \"11. There could also be another angle. Section 54/54F uses the expression \"a residential house\". The expression used is not \"a residential unit\". This is a new concept introduced by the Assessing Officer into the section. Section 54/54F requires the assessee to acquire a \"residential house\" and so long as the assessee acquires a building, which may be constructed, for the sake of convenience, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the section should be taken to have been satisfied. There is nothing in these sections which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use. If there is nothing in the section which requires that the residential house should be built in a particular manner, it seems to us that the Income-tax authorities cannot insist upon that requirement. A person may construct a house according to his plans and requirements. Most of the houses are constructed according to the needs and requirements and even compulsions. For instance, a person may construct a residential house in such a manner that he may use the ground floor for his own residence and let out the first floor having an independent entry so that his income is augmented. Printed from counselvise.com ITA No. 5472/DEL/2024 [A.Y. 2016-17] Saroj Rani Vs.ITO Page 7 of 10 It is quite common to find such arrangements, particularly postretirement. One may build a house consisting of four bedrooms (all in the same or different floors) in such a manner that an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may even arrange for his children and family to stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. There may be several such considerations for a person while constructing a residential house. We are therefore, unable to see how or why the physical structuring of the new residential house, whether it is lateral or vertical, should come in the way of considering the building as a residential house. We do not think that the fact that the residential house consists of several independent units can be permitted to act as an impediment to the allowance of the deduction under section 54/54F. It is neither expressly nor by necessary implication prohibited.\" Emphasis supplied 23. This court in Mrs. Kamla Ajmera v. Pr. Commissioner of Income Tax: Neutral Citation No.: 2024:DHC:9342-DB, referred to the decision in CIT v. Geeta Duggal, (supra), and held that in certain circumstances, multiple residential units may be considered as a Printed from counselvise.com ITA No. 5472/DEL/2024 [A.Y. 2016-17] Saroj Rani Vs.ITO Page 8 of 10 single residential house for the purposes of exemption under Section 54F of the Act. The court observed as follows: - \"39. This assumes significance in the backdrop of our opinion that the word 'a' used in Section 54F of the Act denotes one singular residence, along with the caveat that in case the floors or houses are so constructed as to be used as one singular unit or capable of being used as such, they may fall within the definition of a residential house.\" 24. The Madras High Court also held a similar view in Commissioner of Income-tax v. Gumanmal Jain: 2017 SCC OnLine Mad 13653. 25. The aforesaid decisions were rendered in the context of construing an expression used whether the new asset purchased is 'a residential house' in Section 54 and 54F of the Act. However, the said decisions would be equally applicable for construing the term 'one residential house' as used in clause (i) of the proviso to Section 54F of the Act. We say so because in Pawan Arya v. Commissioner of Income Tax (supra) as well as in Commissioner of Income-tax v. Gita Duggal: (supra) and Mrs Kamla Ajmera v. Pr. Commissioner of Income Tax (supra), the term 'a residential house' has been construed to mean 'one residential house'. We find it difficult to accept that, in the given facts, different floors of a house are required to be considered as multiple residential houses. 26. In view of the above, we find no infirmity with the decision of the learned ITAT in holding that the Assessee could not be denied Printed from counselvise.com ITA No. 5472/DEL/2024 [A.Y. 2016-17] Saroj Rani Vs.ITO Page 9 of 10 the deduction under Section 54F of the Act on the ground that she holds more than one residential unit. 14. Considering the facts of the case in totality, in light of the decision of the Hon'ble Delhi Court [supra] where the term 'a residential house' has been construed to mean 'one residential house' and that different floors of the house do not mean multiple houses, we hold that “one residential house” in section 54/54F of the Act would encompass within its fold seven residential units on the same floor. Accordingly, we set aside the findings of the ld. CIT(A) and direct the Assessing Officer to delete the addition of Rs. 1,86,36,599- and allow exemption u/s 54 of the Act on the seven residential units as claimed by the assessee. Grounds raised by the assessee are allowed. 15. In the result, the appeal of the assessee in ITA No. 5472/DEL/2024 is allowed. The order is pronounced in the open court on 19.08.2025. Sd/- Sd/- [MADHUMITA ROY] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 19th AUGUST, 2025. Printed from counselvise.com ITA No. 5472/DEL/2024 [A.Y. 2016-17] Saroj Rani Vs.ITO Page 10 of 10 VL/ Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order . 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order Printed from counselvise.com "