Commissioner of Incometax v. Gita Duggal

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The Tax Publishers2013 TaxPub(DT) 0960 (Del-HC) : (2013) 052 (I) ITCL 0537 : (2013) 357 ITR 0153 : (2013) 257 CTR 0208 : (2013) 214 TAXMAN 0051 : (2013) 084 DTR 0346 INCOME TAX ACT, 1961 --Capital gains--Exemption under section 54/54FInvestment in two residential units--Assessee disclosed capital gains or sale of house and from sale consideration cost of purchase and investment in REC Bonds were deducted. While completing assessment, assessing officer took view that on terms of agreement entered into with M/s T Ltd., cost of construction of building incurred by aforesaid company which was developer of property, would also be included in total sale consideration. Assessee by submitting that entire cost of construction was incurred by builder and even if it is considered as part of sale consideration, since it had been fully invested in residential house itself, same would be exempt under section 54. The assessing officer did not accept assessee's submission. He held that assessee was not eligible for the exemption under section 54. Dealing with claim for relief under section 54F, assessing officer held that exemption would be available only in respect of one unit, since two residential units were independent of each other and assessee could not therefore claim exemption on footing that both constituted a single residence. Commissioner (Appeals), however, allowed assessee's claim. Tribunal also upheld assessee's claim. *Held:* Was justified. Section 54/54F requires assessee to acquire a 'residential house' and so long as assessee acquires a building, which may be constructed, for 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, requirement of section should be taken to have been satisfied. Section 54/54F uses expression 'a residential house'. The expression used is not 'a residential unit'. This is a new concept introduced by assessing officer into section. Section 54/54F requires 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, requirement of section should be taken to have been satisfied. There is nothing in the section 54/54F which require residential house to be constructed in a particular manner. Only requirement is that it should be for 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 that 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. This court is therefore, unable to see how or why physical structuring of new residential house, whether it is lateral or vertical, should come in way of considering building as a residential house. Court does not think that fact that residential house consists of several independent units can be permitted to act as an impediment to the allowance of deduction under section 54/54F. It is neither expressly nor by necessary implication prohibited. For the above reasons, the Tribunal took the correct view. No substantial question of law arises for consideration. The appeal is accordingly dismissed. [Para 8] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 0960 (Del-HC) : (2013) 052 (I) ITCL 0537 : (2013) 357 ITR 0153 : (2013) 257 CTR 0208 : (2013) 214 TAXMAN 0051 : (2013) 084 DTR 0346

INCOME TAX ACT, 1961

--Capital gains--Exemption under section 54/54FInvestment in two residential units--Assessee disclosed capital gains or sale of house and from sale consideration cost of purchase and investment in REC Bonds were deducted. While completing assessment, assessing officer took view that on terms of agreement entered into with M/s T Ltd., cost of construction of building incurred by aforesaid company which was developer of property, would also be included in total sale consideration. Assessee by submitting that entire cost of construction was incurred by builder and even if it is considered as part of sale consideration, since it had been fully invested in residential house itself, same would be exempt under section 54. The assessing officer did not accept assessee's submission. He held that assessee was not eligible for the exemption under section 54. Dealing with claim for relief under section 54F, assessing officer held that exemption would be available only in respect of one unit, since two residential units were independent of each other and assessee could not therefore claim exemption on footing that both constituted a single residence. Commissioner (Appeals), however, allowed assessee's claim. Tribunal also upheld assessee's claim. Held: Was justified. Section 54/54F requires assessee to acquire a 'residential house' and so long as assessee acquires a building, which may be constructed, for 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, requirement of section should be taken to have been satisfied.

Section 54/54F uses expression 'a residential house'. The expression used is not 'a residential unit'. This is a new concept introduced by assessing officer into section. Section 54/54F requires 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, requirement of section should be taken to have been satisfied. There is nothing in the section 54/54F which require residential house to be constructed in a particular manner. Only requirement is that it should be for 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 that 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. This court is therefore, unable to see how or why physical structuring of new residential house, whether it is lateral or vertical, should come in way of considering building as a residential house. Court does not think that fact that residential house consists of several independent units can be permitted to act as an impediment to the allowance of deduction under section 54/54F. It is neither expressly nor by necessary implication prohibited. For the above reasons, the Tribunal took the correct view. No substantial question of law arises for consideration. The appeal is accordingly dismissed. [Para 8]