2017 (8) TMI 22 - AT - Income Tax

Deduction under section 54 - investment in more than one property - Held that - It is apparent that assessee has purchased more than one house property and claimed deduction under section 54 of the income tax act with respect to 2 house properties. The Hon ble Delhi High Court in case of CIT versus Geeta Dugal 2013 (3) TMI 101 - DELHI HIGH COURT has already held that deduction under section 54 is available with respect to more than one properties and decided the issue wherein the properties were purchased by the assessee at two different places on in Jhor Bag and another at Sonipat Thus Assessee is entitled for deduction under section 54 of the act with respect to both the properties - Decided in favour of assessee.

Issues Involved:
1. Validity of the order passed by the CIT(A).
2. Restriction of exemption under Section 54 of the Income Tax Act.
3. Applicability of the amendment under Section 54 for exemption on multiple properties.
4. Levy of interest under Sections 234B and 234C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the Order Passed by the CIT(A):
The assessee challenged the order of the CIT(A) dated 21.03.2016, claiming that it was erroneous both in law and on facts. The Tribunal found that grounds 1 and 4 were general in nature and dismissed them without further analysis.

2. Restriction of Exemption Under Section 54 of the Income Tax Act:
The assessee sold a property and claimed exemption under Section 54 for the purchase of two properties. The Assessing Officer (AO) restricted the exemption to one property, citing the decision of the Punjab and Haryana High Court in Pavan Arya vs. CIT. The AO made an addition of ?6,582,423 due to disallowance of the deduction under Section 54. The CIT(A) upheld this decision.

3. Applicability of the Amendment Under Section 54 for Exemption on Multiple Properties:
The assessee argued that the amendment to Section 54, which restricts the exemption to one property, came into effect from AY 2015-16 and should not apply to AY 2013-14. The Tribunal considered the decision of the Delhi High Court in CIT vs. Geeta Duggal, which allowed exemption for multiple properties prior to the amendment. The Tribunal also referred to other judgments, including those from the Karnataka High Court and the Madras High Court, which supported the assessee's contention that the term "a residential house" could include multiple properties.

4. Levy of Interest Under Sections 234B and 234C of the Income Tax Act:
The CIT(A) confirmed the AO's action of levying interest under Sections 234B and 234C. However, since the main issue of exemption under Section 54 was decided in favor of the assessee, the Tribunal did not delve deeply into this matter.

Conclusion:
The Tribunal concluded that the assessee was entitled to the exemption under Section 54 for both properties, amounting to ?7,547,650, as claimed. The appeal was partly allowed, with grounds 2 and 3 being upheld in favor of the assessee. The order was pronounced in the open court on 10/04/2017.

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