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Income Tax Appellate Tribunal, DELHI BENCH : F : NEW DELHI
Before: SHRI R.K. PANDA & SHRI KULDIP SINGH
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER Assessment Year: 2012-13 Robin Singh Chauhan, Vs ACIT, 100/1, Gautam Nagar, Circle-29(1), New Delhi. New Delhi. PAN: AAEPC9857F (Appellant) (Respondent) Assessee by : Smt. Rano Jain, Advocate & Shri Venkatesh Chaurasia, CA Revenue by : Shri Atiq Ahmed, Sr. DR Date of Hearing : 28.10.2021 Date of Pronouncement : 18.11.2021 ORDER
PER R.K. PANDA, AM:
This appeal filed by the assessee is directed against the order dated 27th September, 2017 of the CIT(A)-10, New Delhi, relating to assessment years 2012- 13.
Facts of the case, in brief, in brief are that the assessee is an individual and derives income from long-term capital gain and other sources. He filed his return of income on 28th July, 2012 declaring the total income at Rs2,61,98,009/- which was processed u/s 143(1). Subsequently, the case was selected for compulsory scrutiny under CASS. During the course of assessment proceedings, the AO noted that the assessee has shown an income of Rs.2,46,33,865/- under the head ‘Long- term capital gain.’ The assessee has claimed deduction u/s 54 of the Act for an amount of Rs.2,05,71,400/- on account of investment in two properties. The calculation of the cost of acquisition of the new property as submitted by the assessee and reproduced by the AO is as under:-
The AO observed that the assessee has acquired two properties being Flat No.C47-B, First Floor, Gangotri Enclave, Alaknanda, New Delhi -19 at a price of Rs.2 crores in joint ownership with his father Shri I.S. Chauhan. Therefore, the share of the assessee is Rs.1 crore. The cost of this property along with stamp duty and court fee is evident from the sale deed dated 14th June, 2012. The assessee has also invested in another property being Flat No.83, Gautam Nagar, New Delhi in joint name through ‘Advance Receipt Cum Agreement to Sell And Purchase’ and claimed relief of Rs.41,50,000/- for acquisition of this property u/s 54 of the IT Act.
The AO analysed the provisions of section 54 and came to the conclusion that the expression “residential house” provides for exemption for acquisition of one house property. He, therefore, confronted the assessee regarding the claim of deduction u/s 54 of the Act. It was submitted by the assessee that the article ‘a’ is synonymous with ‘any’ and the article ‘a’ is not necessarily a singular term. Relying on various decisions, it was argued that the assessee is entitled to claim deduction u/s 54 in respect of two house properties.
4.1 However, the AO was not satisfied with the arguments advanced by the assessee. Relying on the decision of the Hon’ble Punjab & Haryana High Court in the case of Pawan Arya vs. CIT, reported in (2011) 49 DTR 123 (P&H) and distinguishing the decision of the Hon’ble Karnataka High Court in the case of CIT vs. D. Ananda Basappa, 309 ITR 329, the AO disallowed the claim of exemption u/s 54 in respect of the second house property for Rs.41,50,000/-. He accordingly made addition of Rs.41,50,000/- to the total income of the assessee.
The AO further noted that the assessee has incurred expenses of Rs.54,71,350/- on interior decoration. On being confronted by the AO, it was explained that the expenditure was incurred for making the house habitable and the expenses incurred for making the house habitable is an allowable deduction u/s 54 of the IT Act. The AO asked the assessee to produce the bills and vouchers to verify the huge expenses on interior decoration. Since the bills and vouchers so produced were not to his satisfaction and not verifiable due to the absence of any bill number, VAT amount, etc., the AO disallowed 25% of such expenses on account of the following:- (a) Expenses incurred on interior decoration, beyond that what is required to make the, house habitable may not be allowed to claim benefit of- deduction u/s 54; (b) The bills submitted to reflect the expenses on interior decoration do not contain bill no, VAT etc, and therefore are not foolproof.
He accordingly made addition of Rs.13,68,338/- being 25% of the expenses claimed. Thus, the AO determined the total income of the assessee at Rs.3,17,16,347/-.
In appeal, the ld. CIT(A) upheld the action of the AO. He held that the decision of the Hon’ble Karnataka High Court in the case of D. Ananda Basappa (supra) relied on by the ld. Counsel is distinguishable and not applicable to the facts of the present case since, in that case, the Hon’ble High Court had held that an assessee can build a residential house consisting of several independent units which cannot be an impediment to grant deduction u/s 54/54F of the Act. Therefore, from the said order, it cannot be concluded that the deduction u/s 54/54F can be allowed to the differently located properties as in the present case. Similarly, the disallowance of expenditure of Rs.13,67,338/- was also held by him to be justified for want of proper bills and vouchers.
Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:- “1) That the learned CIT (A) has erred on the facts and in law in disallowing the exemption of Long Term Capital Gain of Rs. 41,50,000/- in respect of investment in Flat no. 83, Gautam Nagar, New-Delhi 110019 in the joint name, u/s 54, ignoring the provisions of General Clauses Act, 1897 and in the circumstances, appropriate relief is prayed. 2) That the learned CIT (A) has erred in the facts and circumstances of the case that appellant has not submitted relevant bills & vouchers against the expenses on Interior Decoration and disallowed expenses to the extent of Rs. 13,68,340/- out of Rs. 54,73,350/- and the learned CIT(A) has also erred considering that the bills has already been submitted to the AO and no any sufficient opportunity has been given to assessee of being heard thereby ignoring the principles of natural justice. 3) That the appellant craves leave to add, alter and modify any of the grounds during the course of appellate proceedings.”
The ld. counsel for the assessee submitted that the main issues are regarding the disallowance of Rs.41,50,000/- on account of second residential house property purchased by the assessee and disallowance of 25% of expenses for making the house habitable. She submitted that the purchase of two residential houses are not in dispute. The dispute is only regarding the allowability of exemption claimed u/s 54 of the Act for two residential house properties. Referring to the decision of the Hon’ble Karnataka High Court in the case of Arun K. Thiagarajan vs. CIT, order dated 18th June, 2020, she submitted that the Hon’ble High Court in the said decision has held that for the purpose of allowing benefit of deduction u/s 54(1), the expression ‘residential house’ included within its ambit plural numbers as well and thus it cannot be construed as one residential house only. She submitted that in that case also the assessee had purchased two different properties at two different places and the AO denied the claim of exemption u/s 54 of the IT Act which was upheld by the CIT(A). The Tribunal dismissed the appeal filed by the assessee and the Hon’ble High Court has held that the amendment brought in Finance (No.2) Act, 2014 is prospective with effect from the assessment year 2015-16 and not retrospective. It was accordingly held that the assessee is entitled to benefit of exemption u/s 54(1) of the Act in respect of two different house properties located at two different places. Accordingly, she submitted that this is a covered matter in favour of the assessee. She also relied on the following decisions:- i) Tilokchand & Sons vs. ITO (2019) 105 taxman.com 151 (Mad); ii) CIT vs Khoobchand M Makhija (2014) 43 taxmann.com 143 (Kar); iii) G. Chinnadurai vs. ITO 74 taxmann.com 227 (Madras); iv) CIT VII Vs. Gita Duggal 52 taxmann.com.246 (SC) 2014; v) CIT Vs Gita Duggal [2013] 357 ITR 153 (Delhi); vi) CIT Vs. Khoobchand M Makhija (2014)43 taxmann.com 143 (Kar); vii) CIT Bangalore vs Smt. K.G. Rukiminiamma (2011) 196 taxman 87 (Kar) & viii) Sanjiv Ahuja vs. ITO, ITA 977/Del/2017, dt. 03.03.2021, Delhi ITAT
10. So far as the disallowance of Rs.13,68,340/- being 25% of the total expenses incurred by the assessee is concerned, she submitted that the assessee has produced all the relevant bills and vouchers before the AO as well as the CIT(A) and no specific defect was pointed out in any specific bill and, therefore, the ad hoc disallowance made by the AO and upheld by the CIT(A) is not justified.
11. The ld. DR, on the other hand, relied on the order of the AO and the CIT(A).
12. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the assessee, in the instant case, has claimed exemption u/s 54 of the Act on account of purchase of two different properties at two different locations and also claimed expenses of Rs.54,73,350/- for making the house habitable. We find, the AO restricted the claim of deduction u/s 54(1) to one property i.e., for Flat No.C47-B, First Floor, Gangotri Enclave, Alaknanda, New Delhi -19, but, denied the claim of deduction u/s 54 for the other property i.e., for Flat No.83, Gautam Nagar, New Delhi, amounting to Rs.41,50,000/-. The AO also disallowed an amount of Rs.13,68,338/- being 25% of the expenditure of Rs.54,73,350/- incurred for making the house habitable for want of proper bills and vouchers and being beyond what is required to make the house habitable. We find, the ld. CIT(A) upheld the action of the AO on both the counts.
So far as the first issue raised by the assessee in the grounds of appeal
is concerned, the same relates to the denial of exemption of long-term capital gain of Rs.41,50,000/- in respect of the second property i.e., Flat No.83, Gautam Nagar,
7. New Delhi u/s 54 of the IT Act, 1961. We find, the issue stands squarely covered in favour of the assessee by the decision of the Hon’ble Karnataka High Court in the case of Arun K. Thiagarajan (supra). In that case, the assessee had purchased two different properties at two different places i.e., one property at Koramangala and the other property at Domlur II Stage, Bangalore on 23rd September, 2002 and 23rd October, 2002, respectively. The AO denied the claim of exemption u/s 54 of the IT Act which was upheld by the CIT(A) and the Tribunal dismissed the appeal filed by the assessee. On further appeal by the assessee, the Hon’ble High Court held that the amendment brought in Finance (No.2) Act, 2014 is prospective w.e.f. AY 2015-16 and not retrospective. The relevant observations of the Hon’ble High Court reads as under:- “15. This Court as well as Madras and Delhi High Court have interpreted the expression 'a residential house' and have held that the aforesaid expression includes plural. The ratio of the decisions rendered by coordinate bench of this court are binding on us and we respectively agree with the view taken by this court while interpreting the expression 'a residential house'. Therefore, the contention of the revenue that the assessee is not entitled to benefit of exemption under Section 54(1) of the Act in the facts of the case does not deserve acceptance.”
14. We find, the Hon’ble Karnataka High Court in the case of CIT vs. Khoobchand M Makhija (supra) has held that acquisition of more than one residential house by assessee out of capital gains would not disentitle assessee from availing benefit conferred u/s 54 of the Act:-
“9. 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.
In the Strouds Judicial Dictionary of Words and Phrases dealing with this letter 'a', it is said 'a' is sometimes read as 'the'. 'a' may sometimes be read as 'some'. But, more frequently 'a' is the equivalent of 'any'. However, it is difficult to read 'a' as 'all'.
In the Concise Oxford Dictionary of Current English, dealing with the letter 'a' is stated that, 'a' sometimes called indefinite article, used with apparent plurals of number.”
Similar view has been taken in the various decisions relied on by the ld. Counsel. We, therefore, hold that the assessee, in the instant case, is entitled to deduction u/s 54 in respect of the second house property. The first issue raised in the grounds of appeal is accordingly allowed.
16. So far as the second issue is concerned, i.e., disallowance of Rs.13,68,340/- being 25% of the total expenses of Rs.54,37,350/- incurred by the assessee for making the house habitable, we find, the AO disallowed the same basically for two reasons i.e., (a) the expenses incurred on interior decoration, beyond that what is required to make the house habitable; and (b) The bills submitted do not reflect the bill no, VAT etc, and therefore are not foolproof. From the paper book filed before us, we find the assessee has furnished all the relevant bills and vouchers before the lower authorities and the lower authorities have neither pointed out any specific defect in any of the bill nor pointed out which expenditure is not relatable for making the house habitable and they have disallowed on a summary basis 25% of such expenses. This in our opinion is not justified especially in absence of any specific defect in any particular bill or which expenditure is not required for making the house habitable. In view of the matter, we are of the considered opinion that disallowance of 25% of the expenses towards interior decoration for making the house habitable is not justified. We, therefore, set aside the order of the CIT(A) and direct the AO to delete the addition by allowing the claim of exemption u/s 54(1) of the Act. The grounds raised by the assessee are accordingly allowed.