D.b. Income Tax Appeal v. Pr. Commissioner Of Income Tax, Circle 3, Central Revenuebuilding Department Of Income Tax, Statue Circle, C-Scheme,Jaipur Raj

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 112/2018 Smt. Uma Kachhawa W/o Late Sh. Mool Singh Kachhawa, 1460,Khunteton Ka Rasta, Kishan Pol Bazar, Jaipur Raj ----Appellant Versus Pr. Commissioner Of Income Tax, Circle 3, Central RevenueBuilding Department Of Income Tax, Statue Circle, C-Scheme,Jaipur Raj ----Respondent For Appellant(s) For Respondent(s) : Mr. N.L. Agarwal : HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS 13/04/2018 Judgment By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasdismissed the appeal filed by the assessee-appellant herein andconfirmed the order passed by the CIT(A) which has partlyallowed the appeal preferred by the present appellant. Counsel for the appellant has framed following questions of law:- “i) Whether on the facts and circumstances of thecase, the ld. ITAT was correct in holding that the outof the sale proceeds of the property in Lal KothiJaipur owned by the Assessee she could invest thesame only in one residential property and cannotclaim deduction in respect of the both of theresidential property purchased by her in accordancewith Section 54 of the Income Tax Act, 1961 as itexisted prior to 01.04.2015 before its amendmentby Finance (No.2) Act 2014?case, the ld. ITAT was correct in holding that the outof the sale proceeds of the property in Lal KothiJaipur owned by the Assessee she could invest thesame only in one residential property and cannotclaim deduction in respect of the both of theresidential property purchased by her in accordancewith Section 54 of the Income Tax Act, 1961 as itexisted prior to 01.04.2015 before its amendmentby Finance (No.2) Act 2014? ii) Whether the ld. ITAT was justified under lawinterpreting the meaning of the phrase ‘a residentialhouse’ as one residential house ignoring theprovisions contained in clause 13 of the GeneralClauses Act it provides whenever the singular isused for a work it is permissible to include theplural?” The appellant has disposed of the property and purchasedtwo properties and the Tribunal while considering the matter hasobserved as under:- “5. The brief facts in a nutshell is that the assessee hassold a property of Rs. 50,00,000/- and the case wasreopened by issuing notice U/s 148 of the Act. Theassessment was finalized determining total income ofRs. 27,42,560/-. The ld CIT(A) has granted part relief tothe assessee. The claim of assessee U/s 54 of the Actwith regard to second house purchase at Rs. 7,25,630/-was not allowed. 6. Bench heard both the sides on this issue. The ITATMumbai Bench in the case of Smt. Syrtle D’Souza Vs.Income Tax Officer, Ward 19(3)(4), Mumbai (2012) 24taxmann.com 261 (Mum) has considered such issue anddecided as under: The appellant has disposed of the property and purchasedtwo properties and the Tribunal while considering the matter hasobserved as under:- “5. The brief facts in a nutshell is that the assessee hassold a property of Rs. 50,00,000/- and the case wasreopened by issuing notice U/s 148 of the Act. Theassessment was finalized determining total income ofRs. 27,42,560/-. The ld CIT(A) has granted part relief tothe assessee. The claim of assessee U/s 54 of the Actwith regard to second house purchase at Rs. 7,25,630/-was not allowed. 6. Bench heard both the sides on this issue. The ITATMumbai Bench in the case of Smt. Syrtle D’Souza Vs.Income Tax Officer, Ward 19(3)(4), Mumbai (2012) 24taxmann.com 261 (Mum) has considered such issue anddecided as under: “18. We have heard the rival submissions and perusedthe relevant material on record. The short controversy isas to whether exemption u/s 54 is available in respect ofone house or more than one house. In the present case,the assessee was allotted two flats on two differentstories which he claimed as eligible for exemption u/s54. Admittedly there is no unity of construction betweensuch flats. The Special Bench of the Tribunal in the caseof Sushila M. Jhaveri (supra) has categorically held thatthe exemption u/s 54 is available only in respect of onehouse and not more than one. It is true that the Hon'bleKarnataka High Court in the case of D. Ananda Basappa(supra) has entitled the assessee to exemption u/s 54 inrespect of two residential houses, however it is alsoequally true that the Hon'ble jurisdictional High Court inthe case of K.C. Kaushik (supra) and the Hon'ble Punjab& Haryana High Court in Pawan Arya (supra) have heldthe assessee to be entitled to exemption u/s 54 only inrespect of one residential house. The learned ARstrongly argued that the judgment in the case ofKarnataka High Court be followed in preference to thatof the special bench of the Tribunal and other HighCourts as noted above. A feeble unsuccessful attemptwas made to distinguish the judgment of the Hon'blejurisdictional High Court in the aforenoted case. In ourconsidered opinion this contention deserves the fate of dismissal at the very outset for the reason that in thecase of K. C. Kaushik (supra) it has been held that: "inthe absence of any provision to the contrary, in myjudgment, the petitioner is entitled to avail of the reliefin respect of the capital gain arising on the sale of hisflat in 1979 against the flat purchased in that year asalso against the flat purchased on July 26, 1980. It has,of course, to be adjusted against one of the flatsonly…………..I am inclined to hold that it is for thepetitioner to claim relief under this section against thepurchase of any one of the flats provided that the otherconditions mentioned in the section are satisfied". Acursory look at the mandate of the above judgmentfairly indicates that the exemption u/s 54 is availableonly in respect of one house and not more than onehouse. The judgment of the Hon'ble jurisdictional HighCourt which is binding on the Tribunal, can under nocircumstances, be ignored in preference to the judgmentof any other Hon'ble High Courts. It is relevant to notethat the decision of the Delhi Bench of the Tribunal inthe case of Gita Duggal {supra) is distinguishableinasmuch as in that case the assessee was allottedbasement and ground floor on which exemption wasgiven but the said benefit was denied on the first floorand second floor as they were let out. There was nodispute that all the basement, ground floor, first floorand second floor constituted one residential house, forwhich the Tribunal was pleased to decide the issue ofexemption in assessee's favour. The facts of the instantcase are different inasmuch as the assessee was allottedtwo flats on two different stories. It is not the case ofthe assessee that both the flats on different floors wereused as one residential house. Naturally it could nothave been so for the reason of these two flats situatedon different stories can not constitute one house.Respectfully following the judgment of the Hon'blejurisdictional High Court and the special bench in theabove referred cases, we hold that the learned CIT(A)was justified in restricting the benefit of exemption u/s54 only in respect of one flat. This ground is notallowed.” The Hon’ble Punjab & Haryana High Court in the case ofPawan Arya Vs CIT (2011) 11 taxmann.com 312 (P&H)has held as under: “As regard claim for exemption against acquisition oftwo houses under section 54, the same was notadmissible in plain language of statute. Thus, no substantial question of law arose from theTribunal’s order. In the result, the assessee’s appeal wasto be dismissed.” Considering the factual aspect of this case and the caselaws relied upon, this ground of assessee’s appeal isdismissed.” However, counsel for the appellant has relied upon thedecision in case of Gujarat University and another vs. Shri KrishnaRangnath Mudholkar and Ors.; AIR 1963 SC 703, wherein it hasbeen held as under:- The Hon’ble Punjab & Haryana High Court in the case ofPawan Arya Vs CIT (2011) 11 taxmann.com 312 (P&H)has held as under: “As regard claim for exemption against acquisition oftwo houses under section 54, the same was notadmissible in plain language of statute. Thus, no substantial question of law arose from theTribunal’s order. In the result, the assessee’s appeal wasto be dismissed.” Considering the factual aspect of this case and the caselaws relied upon, this ground of assessee’s appeal isdismissed.” However, counsel for the appellant has relied upon thedecision in case of Gujarat University and another vs. Shri KrishnaRangnath Mudholkar and Ors.; AIR 1963 SC 703, wherein it hasbeen held as under:- “14. By the first paragraph of clause (27) power isconferred to promote the development and use ofGujarati or Hindi or both as a medium ofinstruction. That clause is not in its expression,grammatically accurate. It should, if it had beendrafted in strict accordance with the rules ofgrammar, have stated that the University wasinvested with power to promote the use ofGujarati or Hindi or both as a medium or media ofinstruction and examination. The use of theexpression "promote" suggests that power wasconferred upon the University to encourage thestudy of Gujarati and Hindi and their use as mediaof instruction and examination : it does not implythat power was given to provide for exclusive useof Gujarati or Hindi or both as a medium or mediaof instruction and examination and that inferenceis strengthened by the indefinite article "a" beforethe expression "medium of instruction". The useof the expression "a medium of instruction"clearly suggests that Gujarati or Hindi was to beone of several media of instruction, and stepswere to be taken to encourage the developmentof Gujarati and Hindi and their use as media ofinstruction and examination. From the use of theexpression "promote" read in the context of theindefinite article "a" it is abundantly clear thatpower to impose Gujarati or Hindi as the mediumof instruction and examination to the exclusion ofother media was not entrusted to the University.It may be noticed that if the expression "promotethe use of Gujarati or Hindi as a medium ofinstruction and examination" was intended tomean "to promote the exclusive use of Hindi orGujarati", a similar interpretation would have tobe put on the use of the expression "to promotethe development of Gujarati and Hindi", therebyascribing to the Legislature an intention that noother languages beside Gujarati and Hindi were tobe developed. Use in the proviso of the definitearticle "the" in relation to English as medium ofinstruction further supports this view. When theLegislature enacted that English was to continueas the medium of instruction and examination incertain subjects it merely provided forcontinuance of an existing and accepted exclusive medium of instruction. It is common ground thatin the University of Bombay the exclusive mediumof instruction was English, in the various affiliatedcolleges in the region or area over which theGujarat University acquired authority. By theproviso to clause (27) of s. 4 in the subjects to beprescribed under the proviso the medium ofinstruction was to continue to remain English. Bythe operative part of clause (27) therefore theLegislature provided that use of Gujarati or Hindior both as a medium or media of instruction wasto be promoted thereby indicating that Gujarati orHindi or both was or were not to be the exclusivemedium or media but to be adopted in addition tothe accepted medium viz. English, for instructionand examination, whereas under the proviso inrespect of the subjects prescribed, English was tobe the only medium for the periods specifiedClause (28) which confers authority uponUniversity "to do all acts and things whetherincidental to the powers aforesaid or not as maybe requisite in order to further the objects of theUniversity and generally to cultivate and promotearts, science and other branches of learning andculture" confers additional powers which thoughnot necessarily incidental to the powers alreadyconferred by cls. (1) and (27) were intended to beexercised to further the object of the University.But if the object of the University as indicated byclause (27) was not to authorise the imposition ofGujarati or Hindi or both, as an exclusive mediumor media it would be straining the language ofclause (28) to interpret it as exhibiting anintention to confer upon the University by usingthe somewhat indefinite expression "requisite inorder to further the objects" power to provide forsuch an exclusive medium.” He has also relied upon the decision of Karnataka High Courtin case of Commissioner of Income Tax & Anr. vs. D. AnandaBasappa; (2009) 309 ITR 329 wherein the same question camefor consideration and it has been observed as under:- “6. A plain reading of the provision of Section54(1) of the Income Tax Act discloses that whenan individual-assesses or Hindu undivided family-assesses sells a residential building or landsappurtenant thereto, he can invest capital gainsfor purchase of residential building to seek exemption of the capital gains tax. Section 13 ofthe General Clauses Act declares that wheneverthe singular is used for a word, it is permissible toinclude the plural. 7. The contention of the Revenue is that thephrase "a" residential house would mean oneresidential house and it does not appear to thecorrect understanding. The expression "a"residential house should be understood in a sensethat building should be of residential in nature and"a" should not be understood to indicate a singularnumber. The combined reading of Sections 54(1)and 54F of the Income Tax Act discloses that, anon residential building can be sold, the capitalgain of which can be invested in a residentialbuilding to seek exemption of capital gain tax.However, the proviso to Section 54 of the IncomeTax Act, lays down that if the assessee has alreadyone residential building, he is not entitled toexemption of capital gains tax, when he investsthe capital gain in purchase of additionalresidentialbuilding. building. 8. When a Hindu undivided family's residentialhouse is sold, the capital gain should be investedfor the purchase of only one residential house isan incorrect proposition. After all, the Hinduundivided family property is held by the membersas joint tenants. The members keeping in view thefuture needs in event of separation, purchasemore than one residential building;, it cannot besaid that the benefit of exemption is to be deniedunder Section 54(1) of the Income Tax Act. building. 8. When a Hindu undivided family's residentialhouse is sold, the capital gain should be investedfor the purchase of only one residential house isan incorrect proposition. After all, the Hinduundivided family property is held by the membersas joint tenants. The members keeping in view thefuture needs in event of separation, purchasemore than one residential building;, it cannot besaid that the benefit of exemption is to be deniedunder Section 54(1) of the Income Tax Act. 9. On facts, it is shown by the assessee that theapartments are situated side by side. The builderhas also stated that he has effected modification ofthe flats to make it as one unit by opening thedoor in between two apartments. The fact that atthe time when the inspector inspected thepremises, the flats were occupied by two differenttenants is not the ground to hold that theapartment is not a one residential unit. The factthat the assessee could have purchased both theflats in one single sale deed or could have narratedthe purchase of two premises as one unit in thesale deed is not the ground to hold that theassessee had no intention to purchase the twoflats as one unit.” Counsel for the appellant contended that considering thematter that HUF has been granted benefit of the second house,the same benefit may also be granted to the appellant. We have heard counsel for the appellant. Before proceeding with the matter, it will not be out of placeto mention that the judgment which has been sought to be reliedupon in D. Ananda Basappa (supra) pertaining to HUF, here theappellant is not HUF. Apart from that the language was beneficiarylanguage for benefit of the public at large. The interpretation comeforward is that benefit of exemption under Section 54 of theIncome Tax Act cannot be construed very liberally. In our considered opinion, the view taken by the Tribunal isjust and proper. The assessee cannot get benefit of two residentialhouses and the view taken by the both the authorities is just andproper. No substantial question of law arises. Hence, the appeal stands dismissed. (VIJAY KUMAR VYAS),J (K.S.JHAVERI),J A.Sharma/52