Case Law Details
Bela Sahni Vs DCIT (ITAT Delhi)
The Delhi ITAT allowed the appeal of the assessee and deleted disallowance of ₹91.48 lakh made towards exemption claimed u/s 54 in respect of investment in a second residential property. The assessee had invested capital gains arising from sale of ancestral property in two residential properties at Noida, including a property at Jaypee Greens Wishtown Klassic. The Assessing Officer denied exemption relating to the second property by applying the amendment introduced by the Finance Act, 2014 restricting deduction to “one residential house in India”.
The Tribunal held that the amendment effective from 01.04.2015 was prospective and could not be applied to AY 2013-14. Relying heavily on the Delhi High Court ruling in CIT vs. Gita Duggal and the Bombay High Court ruling in Krishnagopal B. Nangpal vs. DCIT, the ITAT reiterated that prior to the amendment, the expression “a residential house” in section 54 had to be interpreted liberally and could include multiple residential units. The Bench observed that taxation statutes must be interpreted in accordance with the law prevailing during the relevant assessment year and the subsequent restrictive amendment could not retrospectively curtail exemption otherwise available under the unamended provision. Accordingly, the Tribunal directed deletion of the entire disallowance and allowed exemption u/s 54 for the second residential house as well.
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal is directed against the order dated 16.12.2024 of Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as the “CIT (A)/NFAC”] passed u/s 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] wherein the disallowance of Rs.91,48,775/- on account of deduction claimed u/s 54F of the Act, by the Assessing Officer was confirmed and appeal was partly allowed by deleting the disallowance of Rs.22,00,000/- in respect of installation charges, commission/broker charges, civil work done by the assessee in the new residential house.
2. The facts in brief as culled out from the order of the authorities below are that the assessee is an individual, has filed return of income for AY 2013-14 on 18thJuly, 2013 declaring a total income of Rs.6,38,22,730/-. In this case information was received from ITO (I&CI)-3, New Delhi that during financial year 2012-13 and relevant to AY 2013-14, the assessee has purchased an immovable property bearing no. C-5, Sector-47, Noida for consideration of Rs. 3,60,00,000/- on 24.01.2013. It was further mentioned that the assessee got Rs. 12,67,00,000/- (one third share) from the sale proceeds of the ancestral property No. E-8, Defence Colony, New Delhi which was sold for Rs.37,01,00,000/-The sale proceeds of this ancestral property was invested by the assessee for purchase of two properties bearing no. C-5, Sector-47, Noida for Rs. 4,10,65,000/- and in another property as Wishtown Klassic, Jaypee Greens, Noida for Rs. 9 1,48,775/-.
3. Accordingly, the assessment was reopened u/s 147 of the Income Tax Act by following the due procedure of law and notice u/s 148 of the Act was issued on 31stMarch, 2021 and in reply to the said notice, the assessee filed return of income on 31.12.2021 declaring total income at Rs.6,38,22,728/-. Since the return was filed beyond the due date hence notice u/s 144 of the Act was issued and the return of income filed in response to notice u/s 148 was treated as ‘invalid’ and the proceedings were completed u/s 144 of the Act and the data furnished in return was taken for computation purpose. The assessee was requested to submit the details in respect of investment made u/s 54 of the Act and he has filed response dated 31.12.2021 stating that earlier to AY 2021-22 a individual counsel purchase more than one residential house and was entitled to claim exemptions u/s 54 of the Act. However, the said submissions did not favour with the AO in respect of deduction claimed u/s 54 which according to the AO is available only for one residential house in India. It was further observed that the assessee had purchased two properties and has claimed deduction u/s 54 of the Act for both the properties at Rs.5,02,13,775/-.
4. The ld. AO while taking notice of amendment in section 54 of the Act which came into effect from 1st April, 2015, has applied the said amendment to the case of the assessee stating that the assessee was entitled for investment in one residential house within India. Hence, the claim u/s 54F of the Act of the assessee was restricted to one residential property of higher value i.e., property no. C-5, Sector-47, Noida having total value at Rs. 3,60,00,000/- in accordance with assessee’s share. The claim by the assessee of exemption for commission/brokerage and other expenditure on the new house was also disallowed.
5. Aggrieved by the assessment order, the assessee filed an appeal before the ld. CIT(A) who has confirmed the disallowance of LTCG and exemption u/s 54 of the Act with respect to investment made in second property as Wishtown Klassic, Jaypee Greens, Noida for Rs. 91,48,775/-. However, the deduction claimed in respect of commission/broker charges along with the civil work charges to the tune of Rs.22,00,000/- was allowed.
6. Aggrieved by the impugned order so far as it is confirmed the disallowance with respect to second property, the assessee is in appeal before the Tribunal and raised the following grounds of appeal:
“Ground The Ld. A.O. disallowed the exemption u/s 54 on purchase of second residential house amounting to Rs.91,48,775/- In this matter we desire to submit that It was held by various courts of Law that prior to amendment brought in the Finance Act 2014 w.e.f. 01 .04.2015 assessee is eligible for claim of exemption u/s 54 in respect of investment in more than one residential houses. The amendment brought in the Finance Act, 2014 w.e.f. 01.04.2015 will not be applicable in AY 2013-14.”
7. We have heard the ld. DR as well as ld. AR.
8. The ld. AR at the very outset, pointed out that there is a delay of 4 months and 9 days in filing the appeal before the Tribunal and has sought condonation of delay by moving an application stating that in the given facts and circumstances the delay need to be condoned in the interest of justice and the appeal be considered on merits. The ld. DR has opposed the condonation of delay on the ground that the sufficient cause for condonation of delay has not been made out.
9. We have heard the rival submissions and the contents if delay condonation application are extracted below:
“1. That the appellant is a senior citizen, aged 75 years, and during the relevant period was suffering from age-related health complications, which significantly restricted her ability to take timely steps for filing the appeal.
2. That the order against which the present appeal is filed was passed on 16.12.2024 by the Deputy Commissioner of Income Tax, Circle 5(1)(1), Noida. The limitation period for filing the appeal expired on 14.02.2025.
3. That due to her advanced age, ongoing health concerns, and lack of immediate legal assistance, the appellant was unable to take prompt steps to file the appeal within the prescribed time. The delay in filing the appeal is approximately 4 months and 9 days, which is neither intentional nor deliberate but caused solely by circumstances beyond her control.
4. That the appellant, being a layperson in legal matters and relying on others for procedural compliance, was unaware of the strict statutory time limits. She could initiate action only upon receiving proper guidance and support at a later stage.
5. That it is a settled legal position that when sufficient and reasonable cause exists for the delay, and no mala fide is involved, delay may be condoned to enable adjudication of the matter on merits.
6. That the Hon’ble Supreme Court in various decisions has held that substantial justice should not be denied on account of a technical lapse, particularly when a senior citizen is involved and the delay is reasonably explained.”
We have noticed that revenue has not controverted the contents of the application by filing any rejoinder or reply and for that reasons the averments made in the application by the appellant who claimed to be a senior citizen and because of lack of immediate legal assistance she could not file appeal promptly, in our opinion the assessee/appellant has succeeded for making out a sufficient cause for condonation of delay and accordingly we are inclined to condone the delay in filing the appeal and proceed to decide the appeal on merits.
10. With regard to the ground raised in the appeal, the ld. AR has argued that that the ld. CIT(A) as well as AO has not considered the legal precedents brought to their notice on the issue and the ld. AO has wrongly applied the amendment in section 54 of the Act which came into effect from 1stApril, 2015 in relation to assessment year 2015-16 because the case of the assessee pertains to assessment year 2013-14 and hence the law applicable before 1st April, 2015 will be applied to the case of the assessee.
11. He has further argued that before this amendment, the investment was permissible in more than one house of the Long Term Capital Gain from the sale of immovable property. The ld. AR has relied various case laws discussed as under:
(i). In ITA No. 1237/2011 in the case of CIT v. Gita Duggal of the Hon’ble High Court of Delhi order dated 21.02.2013, where in it was held that the Tribunal expressed the view that the words “a residential house” appearing in section 54/54F of the Act cannot be construed to mean a single residential house since under section 13(2) of the General Clauses Act, a singular includes plural. Further a finding recorded in para 8 onwards is extracted as under:
“8. It is the correctness of the above view that is questioned by the revenue and it is contended that the interpretation placed by the Tribunal gives rise to a substantial question of law. The assessee strongly relies upon the judgment of the Karnataka High Court (supra) which, it is stated, has become final, the special leave petition filed by the revenue against the said decision having been dismissed by the Supreme Court as reported in the annual digest of Taxman publication. The judgment of the Karnataka High Court supports the contention of the assessee. An identical contention raised that Court was rejected in the following terms:
“A plain reading of the provision of section 54(1) of the Income-tax Act discloses that when an individual-assessee or Hindu undivided family-assessee sells a residential building or lands appurtenant thereto, he can invest capital gains for purchase of residential building to seek exemption of the capital gains tax. Section 13 of the General Clauses Act declares that whenever the singular is used for a word, it is permissible to include the plural.
The contention of the Revenue is that the phrase “a” residential house would mean one residential house and it does not appear to the correct understanding. The expression “a” residential house should be understood in a sense that building should be of residential in nature and “a” should not be understood to indicate a singular number. The combined reading of sections 54(1) and 54F of the Income-tax Act discloses that, a non residential building can be sold, the capital gain of which can be invested in a residential building to seek exemption of capital gain tax. However, the proviso to section 54 of the Income-tax Act, lays down that if the assessee has already one residential building, he is not entitled to exemption of capital gains tax, when he invests the capital gain in purchase of additional residential building
This judgment was followed by the same High Court in the decision in CIT Vs. Smt. KG Rukminiamma in ITA No.783/2008 dated 27.08.2010.
8. There could also be another angle. Section 54/54F uses the expression “a residential house”. The expression used is not “a residential unit”. This is a new concept introduced by the assessing officer into the section. Section 54/54F requires the assessee to acquire a “residential house” and so long as the assessee acquires a building, which may be constructed, for the sake of convenience, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the Section should be taken to have been satisfied. There is nothing in these sections which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use. If there is nothing in the section which requires that the residential house should be built in a particular manner, it seems to us that the income tax authorities cannot insist upon that requirement. A person may construct a house according to his plans and requirements. Most of the houses are constructed according to the needs and requirements and even compulsions. For instance, a person may construct a residential house in such a manner that he may use the ground floor for his own residence and let out the first floor having an independent entry so that his income is augmented. It is quite common to find such arrangements, particularly post-retirement. One may build a house consisting of four bedrooms (all in the same or different floors) in such a manner that an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out, He may even arrange for his children and family to stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. There may be several such considerations for a person while constructing a residential house. We are therefore, unable to see how or why the physical structuring of the new residential house, whether it is lateral or vertical, should come in the way of considering the building as a residential house. We do not think that the fact that the residential house consists of several independent units can be permitted to act as an impediment to the allowance of the deduction under Section 54/54F. It is neither expressly nor by necessary implication prohibited.
For the above reasons we are of the view that the Tribunal took the correct view. No substantial question of law arises for our consideration.
The appeal is accordingly dismissed with no order as to costs.”
It is to be noted that the SLP filed by the revenue against the order of CIT v. Gita Duggal (supra) was dismissed vide order dated 29.08.2014 in SLP Civil No. 4830/2014.
(ii). The Hon’ble Bombay High Court in the case of Krishnagopal B. Nangpal v. Dy. CIT in ITA No. 569 of 2003 order dated 22.07.2025 held in paras 17, 19 and 24 extracted below:
“17. Thus, the Madras High Court in Tilokchand & Sons(supra) has held that the word ‘a’ used in Section 54, prior to the amendment and substitution by the word ‘one’ with effect from 1st April 2015, itself means that there was provision in the unamended Section 54 to include plural units of residential houses, which is a reason why the amendment was necessary. The Madras High Court has also held that even if the multiple houses are purchased bearing different addresses, the same did not make any difference, so long as the same assessee has purchased the same out of sale consideration of the sold house.
19. Thus, the position appears to be fairly well settled that use of the words ‘a residential house’ in unamended Section 54 (1) of the Act would not mean a single residential house and the contemplated even multiple residential houses. The emphasis in the unamended Section 54 (1) of the Act is on residential nature of the property and the objective was never to restrict the number of residential houses purchased against capital gains. The words ‘a residential house’ were merely descriptive nature of the assets sold/purchased and not restrictive of the number of assets sold or purchased. The position got modified by the Legislature only w.e.f. 01 April 2015.
24. In view of the foregoing analysis, the Appeal is allowed. The substantial question of law formulated by this Court is answered in favour of the Assessee and against the Revenue. In the result, the order passed by the Assessing Officer and the ITAT, to the extent of deprivation of benefit of exemption under Section 54 (1) of the Act is hereby quashed and set aside and the Assessee is held entitled to the benefit of exemption under provisions of Section 54(1) of the Act against the entire capital gains of Rs.1,08,30,625/- arising out of sale of his flat in Mumbai, on account of utilization thereof towards purchase of seven row houses in Pune.”
(iii). The ld. DR while relying on the order of the lower authorities would submit that the ld. CIT(A) has rightly decided the case by rejecting the claim of LTCG as exemption u/s 54F with respect to second property purchased by the assessee. It is further submitted that the amendment in section 54F by Finance Act 2014 w.e.f. 01.04.2015 will be applicable retrospectively as it pertains to the interpretation of expression ‘that a residential house’, which stand substituted by word “constructed one residential in India”.
12. Respectfully following decisions of Hon’ble Delhi High Court in the case of CIT v. Gita Duggal (supra) wherein the SLP filed by the revenue against the said order has been dismissed by the Hon’ble Supreme Court and also the judgment of the Hon’ble Bombay High Court in the case of Krishnagopal B. Nangpal v. Dy. CIT (supra), we are unable to agree with the submission of the ld. DR because the taxation laws are to be interpreted liberally, hence the substitution of word ‘a residential house’ into, ‘constructed one residential in India’, cannot be applied retrospectively and the said situation in not applicable in the case of the assessee as it pertains to the pre-amendment period as the concerned year is AY 2013-14. For the above reasons we are of the concerned opinion that the ld. Assessing Officer has wrongly denied the exemptions claimed by the assessee with respect to the second residential house to the tune of Rs.91,45,775/- and the same has been wrongly, upheld by the ld. CIT(A) without any legal basis and for that reasons, the disallowance so made by the ld. Lower Authorities needs to be deleted and accordingly we allow the exemption claimed by the assessee with the regard to deduction claimed u/s 54 of the Act. The ground raised by the assessee is accordingly allowed. The disallowance of Rs. 91,45,775/- made by the AO is directed to be deleted.
13. The appeal of the assessee is accordingly allowed.
Order pronounced in the Open Court as on 15.05.2026
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