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

The assessee has raised the solitary ground of appeal which is as under:

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.

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 Page 2 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.

Aggrieved, the assessee went in appeal before the ld. CIT(A) who dismissed the appeal of the assessee.

Aggrieved further, the assessee is in appeal before us.

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.

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.

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].

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.

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 Page 4 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.

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".

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:

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. is allowed.