Even if capital gains are invested in multiple residential homes, Section 54 exemption is still accessible
Fact and issue of the case
This appeal is filed by the assessee against the order dated 27.12.2016 of the ld. Commissioner of Income Tax (Appeals)-10 [(hereinafter referred to CIT (Appeals)] New Delhi, for assessment year 2009-10. 2. The assessee in the appeal has raised the following substantive grounds of appeal
On the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding “short term capital gain” arose on sale of residential property no G 27 Ground floor, Kalka Ji, Delhi instead of “Long term capital gain” as claimed by the Appellant
On the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding Rs.3,44,000 as cost of acquisition instead of cost of acquisition of Rs.16,75,000 claimed by the Appellant in computing capital gain on sale of residential property no G 27 Ground floor, Kalka Ji, Delhi
On the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding Rs.2,06,000 as cost of acquisition instead of cost of acquisition Rs.6,70,000 claimed by the Appellant in computing long term capital gain on sale of residential property no G 27 basement, Kalka Ji, Delhi
Brief facts of the case are that the assessee filed return declaring total income of Rs. 5,38,341/-, the assessee had shown income from business of Rs. 5,42,500/-, income from other sources of Rs. 1,450/- and LTCG of Rs. 29,28,945/- which was claimed as exempt income by the assessee u/s 54 of the Act. The return was processed u/s 143(1) of the Income Tax Act, 1961. The assessment proceedings have been initiated against the assessee and the claim of exemption u/s 54 of the Act has been denied by the AO in following manners
Claim of exemption u/s 54 of 1.T. Act The assessee has purchased three new properties as detailed below
The assessee has purchased three new properties as detailed below:
| S.No. | Description of Property | Date of Purchase | Purchase Amount |
| 1. | R-209, G.K-1, (1/2 share) | 02/07/2008 | 29,10,000/- (1/2 share of the assessee comes to Rs. 14,55,000/-) |
| 2. | S-505. G.K.-II, Basement | 02/07/2008 | 10,00,000/- |
| 3. | G-66B. First Floor, Kalkaji | 13/08/2008 | 20,00,000/- |
The assessee is not entitled for relief u/s 54 of 1.T. Act in respect of investment made by him in above three properties against long term capital gain. The assessee is entitled for exemption u/s 54 of the IUT Act against long term capital gain in respect of investment in one residential property. The assessee has acquired these properties in 3 different locations. The properties acquired are not adjacent and are not interconnected. The provisions of section 54 read as under
Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head Income from house property (hereafter in this section referred to as the original asset), and the assessee has within a period of (one year before or two years after the date on which the transfer took place purchased), or has within a period of three years after that date constructed, a residential house, then) instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say
If the amount of the capital gain (is greater than the cost of the residential house) so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil, or
If the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain
Observation of the court
Similarly in the decision of Hon’ble Karnataka High Court in the case of CIT vs. Khoobchand M. Makhija reported in (2014) 43 taxmann.com 143 (Karnataka), held that acquisition of more than one residential house by assessee out of capital gains would not dis-entitle assessee from availing benefit conferred u/s 54 of the Act
The word ‘a’ is not defined in the Act. When a word is not defined in the Act itself, it is permissible to refer to dictionaries to find out the general sense in which that word is understood in common parlance. However, in selecting one out of the various meanings of a word, regard must always be had to the context as it is a fundamental rule that the meanings of words and expressions used in an Act must take their colour from the context in which they appear. Therefore, when the context makes the meaning of a word quite clear, it becomes unnecessary to search for and select a particular meaning out of the diverse meanings a word is capable of, according to lexicographers. Dictionaries are not dictators of statutory construction where the benignant mood of a law, and more emphatically, the definition clause furnishes a different denotation. A statute cannot always be construed with the dictionary in one hand and the statute in the other
Regard must also be had to the scheme, context and to the legislative history. Words and expressions at times have a ‘technical’ or a ‘legal meaning’ and in that case they are understood in that sense. Judicial decisions expounding the meaning of words in construing statutes in pari materia will have more weight than the meaning furnished by dictionaries. (Principles of Statutory Interpretation by Justice G.P.Singh pages 279 and 280). It is in this background, it is necessary to understand the meaning of the word ‘a’ in the context in which it is used in the said Section
The words “a” or “an” and “the” are called Articles. They come before nouns. There are two Articles – a (or an) and the. “a” or “an” is called the Indefinite Article, because it usually leaves indefinite the person or thing spoken of “The” is called the Definite Article, because it normally points out some particular person or thing. The indefinite article is used before singular countable nouns
The definite article is used before singular countable nouns, plural countable nouns and uncountable nouns. The indefinite Article is used in two contexts, firstly, in its original numerical sense of one. Secondly, in the vague sense of a certain. It is also used in the sense of any, to single out an individual as the representative of a class. It is also used to make a common noun of a proper noun
Respectfully following the above ratio laid down by the High Courts, we are of the opinion that revenue/ department have erred in denying exemption claimed u/s 54 of the Act insofar as the basement floor is concerned. Therefore, we direct the AO to give the benefit of exemption u/s 54 of the Act in respect of Basement Floor is concerned. Accordingly Ground No. 3 of the Assessee is allowed
Appeal filed by the assessee is partly allowed. Order pronounced in the open court on : 05/04/2023
Conclusion
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from here
Anu-Gera-Vs-ITO-ITAT-Delhi-2
