The Delhi bench of the Income Tax Appellate Tribunal (ITAT), while considering an appeal regarding claim of capital gain exemption under section 54 of the Income Tax Act, 1961 wherein the assessee invested in two properties, held that the second property, being in a different location, the amount of repayment of loan borrowed for acquisitionis not eligible under the provision.
Theassessee, Mr. Sumeet Dhiman filed his income tax return claiming exemption towards purchase of two properties. The Assessing Officer noted that the assessee had claimed deduction u/s 54 of the IT Act with respect to investment in two different houses i.e. purchase of new residential house located at Flat No. C-1103, AKME RAGGA and repayment of housing loan borrowed forpurchase of property located at PTS-01-0802, EMMAR PALM TERRACES which were located at two different locations. After considering the facts of the case, the Assessing Officer held that the assessee was eligible for deduction u/s 54 with respect to only one of the aforesaid properties and accordingly limited the deduction claimed by the assessee u/s 54 to Rs. 49,14,447/-.
After hearing parties from both sides, a bench of Dr. B. R. R. Kumar, Accountant Member and Sh. Yogesh Kumar Us, Judicial Member observed that the assessee has admittedly claimed deduction u/s 54 of the IT Act with respect to two different houses i.e. purchase of a new house and for repayment of loan borrowed for acquisition of another house which is situated not only in different building but also in a different area.
Analysing the provisions of section 54, the Tribunal observed that “if an assessee being an individual or Hindu undivided family, the capital gain arises from the transfer of long term capital asset being building or lands appurtenant thereto and being a residential house the income of which is chargeable under the head of “income from house property”. But the said capital gain not liable to be taxed if the same has been invested in a new residential house which has been either purchase or constructed within the relevant period of time as prescribed by the section 54 of the Act. In case the assessee fails or commit a default in nesting the same, then there is a mechanism inbuilt in section 54 which safeguard the interest of revenue according to which if the capital gain were not invested within the due date as mentioned u/s 139(1) of the Act aforesaid person, then such capital gain required to be deposited with the separate bank account called a capital gain account scheme. There is another safeguard as prescribed by the provision of section 54 of the Act which provides that, if there is a proportionate amount of capital gain is invested in purchase or construction of a new residential house, then only the pro- rata deduction is available to the assessee.”
“The assessee can take shelter and claim deduction u/s 54 only when the assessee invests the long term capital gain in purchase or construction of a single residential house. The words ‘a one residential’ mentioned in Section 54 of the Act is refers to only a one house which can be purchased or constructed to the amount of capital gain. The word ‘a residential house’ cannot be read or interpreted as ‘more than one house’ in the present case, wherein both the houses situated in separate buildings and in different places,” the Tribunal said.
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