Sh. Pawan Arya Vs CIT (Punjab and Haryana High Court)
Punjab and Haryana High Court has dismissed an appeal filed by assessee Sh. Pawan Arya, affirming the Income Tax Appellate Tribunal’s (ITAT) decision to deny him exemption under Section 54 of the Income Tax Act, 1961, for the acquisition of two independent residential houses. The court reiterated that the plain language of the statute grants exemption for only one residential house.
The assessee’s appeal stemmed from the assessment year 2005-06, where he claimed capital gains exemption on the sale of a flat, contending that he had acquired two new houses. The Assessing Officer (AO) initially allowed the exemption for one house but denied it for the second. The Commissioner of Income Tax (Appeals) [CIT(A)] subsequently allowed the assessee’s claim for both houses, relying on the Bangalore Bench of the ITAT’s decision in D. Anand Basappa Vs. ITO (2004) 91 ITD 53. However, the ITAT reversed the CIT(A)’s view, leading to the present appeal before the High Court.
The core of the dispute revolved around the interpretation of Section 54 of the Act, specifically whether the exemption could be claimed for the purchase of more than one residential house from the capital gains arising from the sale of an existing residential house.
