SMT UMA KACHHAWA V. PR COMMISSIONER OF INCOME TAX

ITA/112/2018

AI Insights

The case involves Smt. Uma Kachhawa, who appealed against the decision of the Income Tax Appellate Tribunal (ITAT), which had dismissed her appeal regarding the exemption claim under Section 54 of the Income Tax Act, 1961. The appellant had sold a property and purchased two new residential properties, claiming exemption for both under Section 54. However, the ITAT and the lower authorities held that the exemption is applicable only to one residential property. The appellant argued that the purchase of two properties should be considered as one for the purpose of the exemption, referencing a decision favorable to Hindu Undivided Families (HUF) in a similar context. The court, however, found no substantial question of law arising from the Tribunal's order and dismissed the appeal.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 762426 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 13-04-2018
• Assessment Year: misc
• Other Referred Cases: Smt. Syrtle D'Souza Vs. Income Tax Officer, Ward 19(3)(4), Mumbai, Sushila M. Jhaveri, D. Ananda Basappa, K.C. Kaushik, Pawan Arya Vs CIT, Gita Duggal
• Laws Referred To: Income Tax Act, 1961, Finance (No.2) Act 2014, General Clauses Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: N L AGARWAL
• Keywords: Capital gains tax; Exemption; Income tax appeal; Residential property; Section 54
• Section: 148; 54

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 112/2018 Smt. Uma Kachhawa W/o Late Sh. Mool Singh Kachhawa, 1460, Khunteton Ka Rasta, Kishan Pol Bazar, Jaipur Raj ----Appellant Versus Pr. Commissioner Of Income Tax, Circle 3, Central Revenue Building Department Of Income Tax, Statue Circle, C-Scheme, Jaipur Raj ----Respondent For Appellant(s) : Mr. N.L. Agarwal For Respondent(s) : HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 13/04/2018 By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal filed by the assessee-appellant herein and confirmed the order passed by the CIT(A) which has partly allowed the appeal preferred by the present appellant. Counsel for the appellant has framed following questions of law:- “i) Whether on the facts and circumstances of the case, the ld. ITAT was correct in holding that the out of the sale proceeds of the property in Lal Kothi Jaipur owned by the Assessee she could invest the same only in one residential property and cannot claim deduction in respect of the both of the residential property purchased by her in accordance with Section 54 of the Income Tax Act, 1961 as it existed prior to 01.04.2015 before its amendment by Finance (No.2) Act 2014? (2 of 7) [ITA-112/2018] ii) Whether the ld. ITAT was justified under law interpreting the meaning of the phrase ‘a residential house’ as one residential house ignoring the provisions contained in clause 13 of the General Clauses Act it provides whenever the singular is used for a work it is permissible to include the plural?” The appellant has disposed of the property and purchased two properties and the Tribunal while considering the matter has observed as under:- “5. The brief facts in a nutshell is that the assessee has sold a property of Rs. 50,00,000/- and the case was reopened by issuing notice U/s 148 of the Act. The assessment was finalized determining total income of Rs. 27,42,560/-. The ld CIT(A) has granted part relief to the assessee. The claim of assessee U/s 54 of the Act with regard to second house purchase at Rs. 7,25,630/- was not allowed. 6. Bench heard both the sides on this issue. The ITAT Mumbai Bench in the case of Smt. Syrtle D’Souza Vs. Income Tax Officer, Ward 19(3)(4), Mumbai (2012) 24 taxmann.com 261 (Mum) has considered such issue and decided as under: “18. We have heard the rival submissions and perused the relevant material on record. The short controversy is as to whether exemption u/s 54 is available in respect of one house or more than one house. In the present case, the assessee was allotted two flats on two different stories which he claimed as eligible for exemption u/s 54. Admittedly there is no unity of construction between such flats. The Special Bench of the Tribunal in the case of Sushila M. Jhaveri (supra) has categorically held that the exemption u/s 54 is available only in respect of one house and not more than one. It is true that the Hon'ble Karnataka High Court in the case of D. Ananda Basappa (supra) has entitled the assessee to exemption u/s 54 in respect of two residential houses, however it is also equally true that the Hon'ble jurisdictional High Court in the case of K.C. Kaushik (supra) and the Hon'ble Punjab & Haryana High Court in Pawan Arya (supra) have held the assessee to be entitled to exemption u/s 54 only in respect of one residential house. The learned AR strongly argued that the judgment in the case of Karnataka High Court be followed in preference to that of the special bench of the Tribunal and other High Courts as noted above. A feeble unsuccessful attempt was made to distinguish the judgment of the Hon'ble jurisdictional High Court in the aforenoted case. In our considered opinion this contention deserves the fate of (3 of 7) [ITA-112/2018] dismissal at the very outset for the reason that in the case of K. C. Kaushik (supra) it has been held that: \"in the absence of any provision to the contrary, in my judgment, the petitioner is entitled to avail of the relief in respect of the capital gain arising on the sale of his flat in 1979 against the flat purchased in that year as also against the flat purchased on July 26, 1980. It has, of course, to be adjusted against one of the flats only…………..I am inclined to hold that it is for the petitioner to claim relief under this section against the purchase of any one of the flats provided that the other conditions mentioned in the section are satisfied\". A cursory look at the mandate of the above judgment fairly indicates that the exemption u/s 54 is available only in respect of one house and not more than one house. The judgment of the Hon'ble jurisdictional High Court which is binding on the Tribunal, can under no circumstances, be ignored in preference to the judgment of any other Hon'ble High Courts. It is relevant to note that the decision of the Delhi Bench of the Tribunal in the case of Gita Duggal {supra) is distinguishable inasmuch as in that case the assessee was allotted basement and ground floor on which exemption was given but the said benefit was denied on the first floor and second floor as they were let out. There was no dispute that all the basement, ground floor , first floor and second floor constituted one residential house, for which the Tribunal was pleased to decide the issue of exemption in assessee's favour. The facts of the instant case are different inasmuch as the assessee was allotted two flats on two different stories. It is not the case of the assessee that both the flats on different floors were used as one residential house. Naturally it could not have been so for the reason of these two flats situated on different stories can not constitute one house. Respectfully following the judgment of the Hon'ble jurisdictional High Court and the special bench in the above referred cases, we hold that the learned CIT(A) was justified in restricting the benefit of exemption u/s 54 only in respect of one flat. This ground is not allowed.” The Hon’ble Punjab & Haryana High Court in the case of Pawan Arya Vs CIT (2011) 11 taxmann.com 312 (P&H) has held as under: “As regard claim for exemption against acquisition of two houses under section 54, the same was not admissible in plain language of statute. Thus, no substantial question of law arose from the Tribunal’s order. In the result, the assessee’s appeal was to be dismissed.” Considering the factual aspect of this case and the case laws relied upon, this ground of assessee’s appeal is dismissed.” (4 of 7) [ITA-112/2018] However, counsel for the appellant has relied upon the decision in case of Gujarat University and another vs. Shri Krishna Rangnath Mudholkar and Ors.; AIR 1963 SC 703, wherein it has been held as under:- “14. By the first paragraph of clause (27) power is conferred to promote the development and use of Gujarati or Hindi or both as a medium of instruction. That clause is not in its expression, grammatically accurate. It should, if it had been drafted in strict accordance with the rules of grammar, have stated that the University was invested with power to promote the use of Gujarati or Hindi or both as a medium or media of instruction and examination. The use of the expression \"promote\" suggests that power was conferred upon the University to encourage the study of Gujarati and Hindi and their use as media of instruction and examination : it does not imply that power was given to provide for exclusive use of Gujarati or Hindi or both as a medium or media of instruction and examination and that inference is strengthened by the indefinite article \"a\" before the expression \"medium of instruction\". The use of the expression \"a medium of instruction\" clearly suggests that Gujarati or Hindi was to be one of several media of instruction, and steps were to be taken to encourage the development of Gujarati and Hindi and their use as media of instruction and examination. From the use of the expression \"promote\" read in the context of the indefinite article \"a\" it is abundantly clear that power to impose Gujarati or Hindi as the medium of instruction and examination to the exclusion of other media was not entrusted to the University. It may be noticed that if the expression \"promote the use of Gujarati or Hindi as a medium of instruction and examination\" was intended to mean \"to promote the exclusive use of Hindi or Gujarati\", a similar interpretation would have to be put on the use of the expression \"to promote the development of Gujarati and Hindi\", thereby ascribing to the Legislature an intention that no other languages beside Gujarati and Hindi were to be developed. Use in the proviso of the definite article \"the\" in relation to English as medium of instruction further supports this view. When the Legislature enacted that English was to continue as the medium of instruction and examination in certain subjects it merely provided for continuance of an existing and accepted exclusive (5 of 7) [ITA-112/2018] medium of instruction. It is common ground that in the University of Bombay the exclusive medium of instruction was English, in the various affiliated colleges in the region or area over which the Gujarat University acquired authority. By the proviso to clause (27) of s. 4 in the subjects to be prescribed under the proviso the medium of instruction was to continue to remain English. By the operative part of clause (27) therefore the Legislature provided that use of Gujarati or Hindi or both as a medium or media of instruction was to be promoted thereby indicating that Gujarati or Hindi or both was or were not to be the exclusive medium or media but to be adopted in addition to the accepted medium viz. English, for instruction and examination, whereas under the proviso in respect of the subjects prescribed, English was to be the only medium for the periods specified Clause (28) which confers authority upon University \"to do all acts and things whether incidental to the powers aforesaid or not as may be requisite in order to further the objects of the University and generally to cultivate and promote arts, science and other branches of learning and culture\" confers additional powers which though not necessarily incidental to the powers already conferred by cls. (1) and (27) were intended to be exercised to further the object of the University. But if the object of the University as indicated by clause (27) was not to authorise the imposition of Gujarati or Hindi or both, as an exclusive medium or media it would be straining the language of clause (28) to interpret it as exhibiting an intention to confer upon the University by using the somewhat indefinite expression \"requisite in order to further the objects\" power to provide for such an exclusive medium.” He has also relied upon the decision of Karnataka High Court in case of Commissioner of Income Tax & Anr. vs. D. Ananda Basappa; (2009) 309 ITR 329 wherein the same question came for consideration and it has been observed as under:- “6. A plain reading of the provision of Section 54(1) of the Income Tax Act discloses that when an individual-assesses or Hindu undivided family- assesses sells a residential building or lands appurtenant thereto, he can invest capital gains for purchase of residential building to seek (6 of 7) [ITA-112/2018] exemption of the capital gains tax. Section 13 of the General Clauses Act declares that whenever the singular is used for a word, it is permissible to include the plural. 7. 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\" residential house should be understood in a sense that building should be of residential in nature and \"a\" should not be understood to indicate a singular number. The combined reading of Sections 54(1) and 54F of the Income Tax Act discloses that, a non residential building can be sold, the capital gain of which can be invested in a residential building to seek exemption of capital gain tax. However, the proviso to Section 54 of the Income Tax Act, lays down that if the assessee has already one residential building, he is not entitled to exemption of capital gains tax, when he invests the capital gain in purchase of additional residential building. 8. When a Hindu undivided family's residential house is sold, the capital gain should be invested for the purchase of only one residential house is an incorrect proposition. After all, the Hindu undivided family property is held by the members as joint tenants. The members keeping in view the future needs in event of separation, purchase more than one residential building;, it cannot be said that the benefit of exemption is to be denied under Section 54(1) of the Income Tax Act. 9. On facts, it is shown by the assessee that the apartments are situated side by side. The builder has also stated that he has effected modification of the flats to make it as one unit by opening the door in between two apartments. The fact that at the time when the inspector inspected the premises, the flats were occupied by two different tenants is not the ground to hold that the apartment is not a one residential unit. The fact that the assessee could have purchased both the flats in one single sale deed or could have 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 the two flats as one unit.” (7 of 7) [ITA-112/2018] Counsel for the appellant contended that considering the matter that HUF has been granted benefit of the second house, the same benefit may also be granted to the appellant. We have heard counsel for the appellant. Before proceeding with the matter, it will not be out of place to mention that the judgment which has been sought to be relied upon in D. Ananda Basappa (supra) pertaining to HUF, here the appellant is not HUF. Apart from that the language was beneficiary language for benefit of the public at large. The interpretation come forward is that benefit of exemption under Section 54 of the Income Tax Act cannot be construed very liberally. In our considered opinion, the view taken by the Tribunal is just and proper. The assessee cannot get benefit of two residential houses and the view taken by the both the authorities is just and proper. No substantial question of law arises. Hence, the appeal stands dismissed. (VIJAY KUMAR VYAS),J (K.S.JHAVERI),J A.Sharma/52 "