BHAGWAN SWAROOP AGARWAL,JAIPUR vs. ITO, JAIPUR

per section 54 house should be purchased by the assessee and it does not

stipulate that house should be purchased in the name of the assessee

only.

house the ld. AR of the assessee has relied upon by the decision of

Hon’ble Karnatka High Court in case of CDIT vs. D. Ananda Basappa 180

Taman 4 and submitted that the Hon’ble High Court has given

interpretation of the phrase “a” residential house does not means one

15 ITA 263/JP/14_ Sh. Bhagwan Swaroop Agarwal Vs. ITO

residential house and it should be understood in an sense of building

should be of residential in nature and “a” should not be understood to

indicate a singular number. The Hon’ble High Court has allowed the claim

u/s 54 in respect of two apartments purchased by the assessee in the said

case. He has also relied upon the decision of Hon’ble Karnatka High Court

CIT. vs. K.G. Rukminiamma 331 ITR 211 and submitted that the Hon’ble

High Court has taken a consistent view on this issue that a residential

house should not be taken as singular and more than one houses

constitute a residential house for the purpose of section 54.

purchased two houses in the name of wife and both are situated in

different areas and therefore, cannot constitute a residential house.

Further, the rental income from new house was offered in the name of the

wife and therefore, the assessee cannot take double benefit of not offering

the rental income of the houses in his name but also claiming the

exemption u/s 54 of the Act. He has also relied upon the decision of

Hon’ble jurisdictional High Court in case of Kalia vs. CIT 208 taxman and

submitted that the Hon’ble High Court has held that assessee would not be

entitled to get the exemption for the land purchased by him in the name of

his son and daughter in law. The Hon’ble High Court further observed that

the word assessee used in the Income Tax Act needs to be given a legal

16 ITA 263/JP/14_ Sh. Bhagwan Swaroop Agarwal Vs. ITO

interpretation and not a liberal interpretation. Applying the same ratio of

the jurisdictional High Court in case of the assessee the benefit of section

54 is not available to the assessee when the new houses were purchased

in the name of his wife and the income from the new house was offered in

the hand of the wife. The ld. DR has also relied upon the decision of

Hon’ble Punjab and Haryana High Court in case of Pawan Arya Vs. CIT

200 Taxman 66 and submitted that the Hon’ble High Court after

considering the decision of Hon’ble Karnatka High Court has held that the

exemption against the purchase of two flats situated at different location is

not available. He has also relied upon the decision of Mumbai Bench of the

Tribunal in case of Smt. Myrtle D. Souza Vs. ITO 53 SOT 236. In the

rejoinder the ld AR of the assessee has submitted that the decision of

Hon’ble jurisdictional High Court in case of Kalya vs. CIT (supra) is not

applicable in the facts of the assessee’s case as the said decision in

respect of the exemption u/s 54B and not in respect of the claim u/s 54

whereas the decision relied upon by the assessee are directly on section

54 of the Act.

on record. The first aspect of this issue is regarding the investment made

by the assessee in the new residential houses in the name of his wife and

claim of exemption under section 54 against the acquisition of these two

17 ITA 263/JP/14_ Sh. Bhagwan Swaroop Agarwal Vs. ITO

houses. As regards the houses purchased in the mane of wife there is no

embargo or legal impediment as held by the Hon’ble High Court in case of

CIT vs. V. Natarajan (supra), CIT vs. Kamal Wahal (supra) as well as CIT

vs. Ravinder Kumar Arora (supra). The Hon’ble High Court has gone even

to the extent that section 54 postulate purchase of new house by the

assessee and does not contemplate that the house shall be purchased in

the name of the assessee only. I further note that when the entire

purchase consideration has been flown from the proceeds of the sale of

the existing house of the assessee then the condition of investing the sale

proceeds in purchase of new house by the assessee is satisfied.

Therefore, following the decision of Hon’ble High Court as relied upon by

the assessee I hold that the mere fact of the assessee purchased of new

house in the name of his wife would not disentitle the assessee for

claiming the benefit u/s 54 when the other conditions as provided u/s 54

are satisfied. The decision of Hon’ble jurisdiction High Court in case of

kalya vs. CIT(supra) as relied upon by the ld. DR. is clearly in respect of

the claim u/s 54B wherein the assessee is required invest the proceeds in

the agricultural land. The Hon’ble High Court has denied the claim of the

assessee when the land was purchased by the assessee in the name of his

son and daughter and it is not a case of purchase of house in the name of

18 ITA 263/JP/14_ Sh. Bhagwan Swaroop Agarwal Vs. ITO

wife. Therefore the said decision of the Hon’ble jurisdictional High Court

will not help the case of the revenue.

houses. The ld. AR of the assessee has relied upon the various decisions

on the point that the exemptions u/s 54 is available even in case of more

than one house. I find that in case of CIT vs. D. Ananda Sabappa (supra)

the Hon’ble High has considered this issue in paras 7 and 8 as under:-

Thus, it is clear that the claim of the assessee was for purchase of

apartments situated side by side to make it one unit by opening door in

19 ITA 263/JP/14_ Sh. Bhagwan Swaroop Agarwal Vs. ITO

between two apartments. Therefore when more than one apartments are

so situated and contiguous that it can be used as one residential unit as

per the requirement of the assessee’s family and particularly the members

of HUF. Similarly in case of CIT vs. K.G. Rukminiamma (supra) the Hon’ble

High Court has again was dealing with a case when the assessee has

entered into development agreement for construction of the property and

under the said joint development agreement total 8 flats were to be

constructed out of which 4 flats was the share of the assesse and

remaining 4 flats was the share of the builder. Therefore, in those facts

when the assessee has received in consideration a built up area in the

building for which the claim u/s 54 was made which was allowed by the

Hon’ble High Court. In these cases the Hon’ble High Courts have taken a

view on the peculiar facts of the case where more than one houses/ flats

were acquired by the assessee because of the situation forced the

assessee to purchase more than one houses/ flats but all were situated in

the same building or at the same locality so as to meet the residential

requirement of the assessee. In the case in hand the assessee has

purchase two houses at two different localities which are far from each

other therefore, by any stretch of parameter these two houses cannot be

regarded contiguous being used as a single residential unit. Therefore the

decision as relied upon the ld. DR in case of Pawan Arya vs. CIT (supra) is

20 ITA 263/JP/14_ Sh. Bhagwan Swaroop Agarwal Vs. ITO

directly applicable to the case of the assessee. The Hon’ble High Court has

discussed the fact as well as the decision of Hon’ble karnatka High in case

of CIT vs. D. Ananda Basappa and held in para 2 to 4 as under:-

“2. Tine assessing authority gave exemption for capital gains to the extent of purchase of one residential flat. It was found in the inspection by the inspector that the residential flats were in occupation of two different tenants disclosing separate enjoyment. Therefore, it is held that s" 54(1) of the Income-tax Act does not permit exemption for the purchasers for more than one residential premises. The Commissioner of Income-tax confirmed the order of the assessing authority. The Tribunal, in appeal set aside the order of the Commissioner of Income-tax and held that the purchase of the two flats made by the assessee has to be treated as one single residential unit and that the assessee is entitled for fuIl exemption. 3. The following are the substantial questions of law framed for consideration : " (a) Whether the Tribunal was correct in holding that out of the sale proceeds of the property bearing No. 9, Brunton Road, Banga lore' owned by the assessee he could invest the same in two residential flats bearing No. G-01 and G-02, and, claim deduction in respect of both these flats in accordance with s. 54 read with s. 54F of the Act for the asst. yr. 1996-97? (b) whether the proviso to s. 54F of the Act, as it stood prior to the amendment brought about by the Finance Act, 2OOO, can be read to mean that for the asst. 5rr. 1996-97 the assessee would be entitled to relief in respect, of more than one dwelling unit for the purpose of claiming exemption under the head ' Capital Gains' ?" 4. In the provision of s. 54(1) of the Income-tax Act, the relevant portion is extracted herein for convenient reference : ,, subject to the provisions of sub-s. (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

21 ITA 263/JP/14_ Sh. Bhagwan Swaroop Agarwal Vs. ITO

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 deal with in accordance with the following provisions of this section”, that is to say.-

Following the decision of Hon’ble Punjab and Haryana High Court in case

of Pawan Arya Vs. CIT (supra) I hold that the assessee is entitled for the

claim of section 54 of the Act only in respect of one house at the choice of

the assessee.

interest u/s 48 of the Act as well as under 24(b) of the Act. The assessee

has raised an additional ground before the ld. CIT(A) regarding the

deduction of interest of Rs. 5,82,565/- paid on the loan facility as part of

the acquisition u/s 48 of the Act. The assessee has also claimed cost of the

deduction u/s 24(b) of the Act which was not allowed by the ld. CIT(A).

material on record. The ld. AR has contended that the ld. CIT(A) has

refused to admit the addition ground though the assessee did not raise

this ground before the AO however, when the interest paid on the bank

loan was not in dispute then the claim raised by the assessee before the

22 ITA 263/JP/14_ Sh. Bhagwan Swaroop Agarwal Vs. ITO

ld CIT(A) could have been admitted and decided on merits. He has also

submitted that similarly claim of deduction u/s 24(b) is an allowable claim

when loan was used for construction of the property . On the other hand,

the ld. DR vehemently object to the claim of the assessee and submitted

that the claims were raised before the ld. CIT(A) for the first time but it

requires the examination of facts and therefore cannot be admitted. He

has relied upon the order of the CIT(A).

material on record. This issue is directly connected with the claim of the

assessee regarding the loan availed by the assessee and his family

members are used for the purpose of construction of the house. I have

already set aside the issue of cost of construction of the house as well as

use of the barrowed fund for the purpose of construction of the house to

the record of AO. Therefore, this ground of the assessee’s appeal is

consequential to outcome of the issue already set aside to the record of

the assessing officer. Accordingly, in the facts and circumstances of the

case I set aside this issue to the record of the Assessing Officer for

consideration, exemption and adjudication along with the other issue

remitted to the record of the Assessing Officer.

In the result, the appeal of the assessee is partly allowed.

23 ITA 263/JP/14_ Sh. Bhagwan Swaroop Agarwal Vs. ITO Order pronounced in the open court on 31/10/2017.

Sd/- ¼ fot; iky jko ½ (VIJAY PAL RAO) U;kf;d lnL; @Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 31/10/2017 *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Shri Bhagwan Swaroop Agarwal, 1. B-76, Shiv Shakti Nagar, Jagatpura Road, Malviya Nagar, Jaipur. izR;Fkh@ The Respondent- The ITO, Ward 6(1), Jaipur. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 263/JP/14) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत