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July 21, 2022

Deduction on two houses located in different areas is not available u/s 54

by CA Shivam Jaiswal in Income Tax

Deduction on two houses located in different areas is not available u/s 54

Facts and Issues of the case

The return declaring income of Rs. 94,64,206/- was filed on 31/07/2014. The Assessing Officer noted that during the under consideration, the appellant had sold a residential property for an amount of Rs. 1,10,00,000/- on which the assessee had earned capital gain amounting to Rs. 76,64,058/-. The Assessing Officer further noted that the assessee had claimed deduction u/s 54 of the IT Act with respect to investment in two different houses i.e. purchase of new residential house located at Flat No. C-1103, AKME RAGGA and repayment of housing loan borrowed for purchase of property located at PTS-01-0802, EMMAR PALM TERRACES which were located at two different locations. After considering the facts of the case, the Assessing Officer held that the assessee was eligible for deduction u/s 54 with respect to only one of the aforesaid properties and accordingly limited the deduction claimed by the assessee u/s 54 to Rs. 49,14,447/-. The balance amount of capital gain amounting to rs. 27,49,611/- was held to be taxable  in the hands of the assessee.

  As against the assessment order dated 22/12/2016, the assessee has filed the appeal before the Ld. CIT(A). The Ld. CIT(A) has dismissed the appeal by confirming the addition made by the assessee.

Observations by the Court

The court has heard the parties, perused the material on record and gave our thoughtful consideration. It is not in dispute that the assessee has sold residential property and earned capital gain and the assessee has claimed deduction u/s 54 of the Act with respect to investment in two different houses

i.e. purchase of a new house and for repayment of loan borrowed for acquisition of another house.  Thus,  the  question  arises  for  consideration  is  that  whether the assessee was eligible for deduction u/s 54 with respect to investment in two residential house property..

In the present case, admittedly assessee has used with the long term capital gain for purchase of a new residential house at Flat No. C-1103 AKME RAGGA and also used for repayment of a housing loan which is borrowed on a property located at PTS-01-0802 EMMAR PALM TERRACES. Thus, the assessee has invested a capital gain in purchase of two residential houses.

The assessee can take shelter and claim deduction u/s 54 only when the assessee invests the long term capital gain in purchase or construction of a single residential house.  The words ‘a one residential’ mentioned in Section 54 of the Act is refers to only a one house which can be purchased or constructed to the amount of capital gain. The word ‘a residential house’ cannot be read or interpreted as ‘more than one house’ in the present case, wherein both the houses situated in separate buildings and in different places.

The Assessing Officer and the Ld.CIT(A) have elaborately discussed the facts and also applied the settled principles of law on the issue involved and passed well reasoned order which requires no interference from this Tribunal. Therefore, we do not find merit in the grounds of appeal of the assessee.

Conclusion

Deduction can be claimed u/s 54 only when long term capital gain is invested in purchase or construction of a single residential house.

Sumeet-Dhiman-Vs-ACIT-ITAT-Delhi

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