ACIT , CIRCLE-1, FARIDABAD, FARIDABAD vs. RAHUL GARG, FARIDABAD

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ITA 7435/DEL/2025Status: DisposedITAT Delhi10 July 202626 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the assessee was not eligible for the Section 54F deduction. The reasoning was that the two properties, Plot F-8 and F-9, Sector 44, Noida, were treated as separate residential houses throughout the purchase process, evidenced by separate registered purchase deeds. The amalgamation of these properties occurred only on April 13, 2023, which was subsequent to the purchase deeds. The Tribunal found that the assessee's amalgamation application being accepted by the municipality/corporation after the purchase deeds further supported the view that these were initially separate properties. The Tribunal distinguished the present case from judicial precedents cited by the assessee, stating that those cases involved various units forming a single residential house or different floors in the same building, unlike the current situation of two distinct houses. The Tribunal also noted that the vendor for one plot was an individual and for the other, a company, which are different legal entities. Therefore, the Tribunal restored the Assessing Officer's disallowance of the Section 54F deduction. The Tribunal did not expressly leave any issue undecided.

What were the facts?

The assessee, Rahul Garg, an individual, earned long-term capital gains of Rs. 7,54,63,654/- from the sale of shares on April 4, 2022. For Assessment Year 2023, he claimed a deduction of Rs. 28,81,62,921/- under Section 54F of the Income Tax Act, 1961, by investing in two adjacent residential properties in Noida: Plot F-9, Sector 44, purchased on December 13, 2022, for Rs. 13,00,00,000/-, and Plot F-8, Sector 44, purchased on January 23, 2023, for Rs. 11,25,00,000/-. The Assessing Officer (AO) disallowed the claim, holding that the purchase of the second property within one year of the transfer of the original asset violated Proviso (a)(ii) to Section 54F(1). The Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC) reversed the AO's decision. The Revenue appealed this reversal to the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the purchase of two adjacent residential properties, subsequently amalgamated, can be considered as the purchase of 'one' residential house for the purpose of claiming deduction under Section 54F of the Income Tax Act, 1961, when the second property was purchased within one year of the transfer of the original asset, thereby attracting the prohibition in Proviso (a)(ii) to Section 54F(1)? Assessee's Contention: The assessee argued that the two adjacent properties were purchased with the intent to amalgamate them into a single residential house to accommodate his family's needs. He submitted that initial payments were made simultaneously, and the properties were effectively owned by the same person. The assessee relied on judicial precedents that interpreted 'one residential house' purposively. Revenue's Contention: The Revenue contended that the two properties were independent residential assets purchased on different dates. It argued that the vendor for one property was an individual (Smt. Seema Sharma) and for the other, a company (M/s Spoorty Developers (P) Ltd.) through its director, and these are distinct legal entities. The Revenue asserted that the subsequent amalgamation did not alter the fact that two separate purchases occurred, violating the statutory amendment effective from April 1, 2015, which disallows deduction if another residential house is purchased within one year of the original asset's transfer.

Which sections of the Income-tax Act were involved?

Section 54F,Section 143(3),Section 45,Section 139(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI

Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL

For Appellant: Adv. Sh. Sumit Jain, FCA, Ms. Uma Upadhyay, CA
For Respondent: Ms. Amish S Gupt, CIT DR
Hearing: 13.04.2026Pronounced: 10.07.2026

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No. 7435/Del/2025 Assessment Year: 2023 Assistant Commissioner of Income Vs Rahul Garg Tax, Circle-1 House No. 1619, Sector 7E, Income Tax Office, New CGO Faridabad- 121006 Complex, Block-B, NH-IV, NIT, Haryana Faridabad- 121001 Haryana (APPELLANT) (RESPONDENT) PAN No.AFYPG6497G Assessee by: Sh. Ved Jain, Adv. Sh. Sumit Jain, FCA Ms. Uma Upadhyay, CA Revenue by : Ms. Amish S Gupt, CIT DR Date of Hearing: 13.04.2026 Date of Pronouncement: 10.07.2026 ORDER This Revenue’s appeal for Assessment Year 2023 arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (for short, ‘CIT(A)/NFAC’), Delhi’s DIN & order No. ITBA/NFAC/S/250/2025-26/1080902901(1), dated 19.09.2025, involving proceedings u/s 143(3) of the Income Tax Act, 1961; hereinafter referred to as, “the Act”.

Heard both the parties. Case file perused.

2.

Coming to the Revenue’s sole substantive grievance canvassed in the instant appeal that the learned CIT(A)/NFAC has erred in law and on facts in reversing the Assessing Officer’s

2 action disallowing the assessee’s section 54F claim of Rs. 28.81 Crores in assessment order dated 25.03.2025, we note that the lower appellate discussion under challenge to this effect; reads as under:

This is what leaves the Revenue aggrieved.

3.

Both the parties vehemently reiterate their respective stands against and in support of the correctness of the CIT(A) above extracted detailed

23 discussion. Suffice to say, there is hardly any dispute on facts that this assessee; an individual, had admittedly derived long term capital gains amounting to Rs. 7,54,63,654/- from sale of shares on 04.04.2022. There is further no quarrel between the parties that he thereafter made the twin investments in the very much adjacent house properties at Plot No. 8 & 9, Block-F, Sector-44, Noida, involving as many vendors M/s Spoorty Developers (P) Ltd. through its authorized director Smt. Seema Sharma and she herself as an individual on 13.12.2022 & 23.01.2023 for the former and 13.12.2022 qua the latter house, respectively, as tabulated in Para 5.6 hereinabove. It was in this factual backdrop that the learned assessing authority considered the aforesaid twin houses as separate ones to quote section 54F(1)(a & b) r.w. Proviso (a)(ii) thereto that even if the assessee had got the aforesaid residential properties subsequently amalgated on 13.04.2023, his section 54F deduction claim herein could not be accepted in light of the statutory amendment vide Finance Act, 2014 with effect from 01.04.2015. The same admittedly stands reversed in the CIT(A) detailed lower appellate discussion under challenge.

4.

It is in this factual backdrop that we are required to adjudicate the Revenue’s aforesaid sole substantive issue i.e. the assessee’s eligibility to claim the impugned section 54F deduction. Mr. Ved Jain has filed the assessee’s very elaborate submissions inter alia highlighting the entire factual backdrop that the learned CIT(A) detailed discussion has rightly held him eligible for the impugned deduction. The same fails to evoke our concurrence. We are of the considered view that given the fact that the

24 aforesaid twin properties had all along been treated as separate residential houses leading to their amalgamation subsequent to the assessee’s as many registered purchased deeds, both of them could not be treated as “one” residential house since going against the aforesaid statutory amendment. We are further of the considered view that given the fact the assessee got his amalgamation application accepted by the concerned municipality/corporation subsequent to his purchase deeds itself forms the sufficient material to hold both these houses properties as separate ones all along.

5.

Learned CIT(DR) further seeks to buttress the point that as against the assessee’s case, the vendor herein Smt. Seema Sharmad does not happen to be the owner of both these properties as regarding plot/house no. 8, she had appeared as the authorized director of the company/owner of M/s Spoorty Developers (P) Ltd.(supra). Her case therefore is that both this company as well as the authorized director do not form the different legal entities persons i.e. an individual and a corporate one going by Salomon v Salomon & Co Ltd [1897] AC 22 (House of Lords). The assessee could hardly dispute that be under the Income Tax Act or in the Company Law, such an individual and a company in which he or she is the Director, form different persons only.

6.

Mr. Ved Jain lastly places reliance on various judicial precedents quoted in the CIT(A)’s order (supra). We are of the considered view that none of them gets attracted in the assessee’s case as the facts therein are

25 found to be entirely different since involving various units forming the single residential house or different floors in the same residential house; as the case may be, whereas we have already discussed the entire factual matrix at length that these are two houses which got subsequently amalgamated on 13.04.2023 only. We thus conclude in this factual backdrop that the learned CIT(A) has erred in law and on facts in treating the assessee’s residential house property plot No. 8, Block-F, Sector-44, Noida purchased on 23.01.2023 as eligible for section 54F deduction and the Assessing Officer’s assessment findings to this extent are hereby restored in very terms. Necessary computation shall follow as per law.

No other ground or argument has been pressed before us.

7.

This Revenue’s appeal is partly allowed in above terms.

Order Pronounced in the Open Court on 10.07.2026.

Sd/- Sd/- (MANISH AGARWAL) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 10.07.2026 *Pooja Mittal, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR

26 Date 1. Date of dictation of Tribunal Order 09.07.2026 2. Date on which the typed draft Tribunal Order is placed before the Dictating Member 3. Date of 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.PS/PS 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. PS/PS 7. Date on which the final Tribunal Order is uploaded by the Sr. PS/PS on Official Website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing of the disposed off 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 to the Assistant Registrar for endorsement of the order 12. Date of dispatch of the order 13. 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 dispatch section 16. Date of dispatch of the order

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