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Judgment
PER MADHUMITA ROY, J. M.:
The instant appeal filed by the Revenue is directed against the order dated 29.05.2025 passed by the Ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of the Assessment Order dated 25.12.2019 passed by the Assessment Unit, Income-tax Department under Section 143(3) of the Act for Assessment Year 2017.
Having regard to the explanation given by the assessee in support of delay in filing the appeal for about 77 days which seems to be genuine, the delay is condoned.
The assessee was a school teacher and made investment in the house property out of the amount received from sale of another house property. The income was shown by the assessee under the head “Income from salary”, income from house property and income from other sources. The issue of investment of immovable property and exemption claimed under Section 54 of the Act were examined and verified wherefrom it appears that the residential property lying and situated at C-566, Saraswati Vihar, Delhi was sold for a total consideration of Rs. 3,36,60,000/- and the amount was further invested in D-627, Saraswati Vihar, Delhi and the assessee further claimed exemptions thereof. The assessee was having more than one property situated at different location and was earning income under the head house property from various house properties. Though the assessee has invested in another house property within the stipulated time but as per first proviso of Section 54F of the Act as she owns more than one residential house other than the new asset on the date of transfer of original asset exemption was not available under Section 54 of the Act for purchase of new house property and, therefore, exemption was disallowed to the tune of Rs. 2,52,32,567/- under Section 54F of the Act which was deleted by the First Appellate Authority, hence the instant appeal before us.
The Ld. CIT(A) while dealing with this issue observed as follows:
“6.Decision I have gone through the facts of the case. The grounds raised in appeal are all centred around the disallowance made in respect of the claim u/s 54 of the Act of Rs. 2,52,32,567/-.
Section 54 of the Act reads as follows:
54.(1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,-
(i)if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or
(ii)if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall notbe charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.
The conditions that need to be satisfied to avail the benefit of the said section are as follows:
-Asset must be classified as a long-term capital asset.
-The asset sold is a Residential House. Income from such a house should be chargeable as Income from House Property -The seller should purchase a residential house either one year before the date of sale/transfer or two years after the date of sale/transfer. In case the seller is constructing a house, the seller has an extended time, i.e., the seller will have to construct the residential house within three years from the date of sale/transfer. In case of compulsory acquisition, the period of acquisition or construction will be determined from the date of receipt of compensation (whether original or additional compensation)
-The new residential house should be in India. The seller cannot buy or purchase a residential house abroad and claim the exemption.
-The amount of exemption under Section 54 of the Income Tax Act for the long-term capital gains will be the lower of:
Long Term Capital gains arising on transfer of residential house, or
The investment made in purchase or construction of a new residential house property.The balance capital gains (If any) will be taxable.
From 1st April 2023 the capital gains tax exemption under Section 54 to 54F will be restricted to Rs.10 crore. Earlier, there was no threshold.
The above conditions are cumulative. Hence, even if one condition is not fulfilled, then the seller cannot avail the benefit of the exemption under Section 54.
With effect from Assessment Year 2O2O-21 corresponding to FY 2019-20, a capital gain exemption is available for purchase of two residential houses in India.
However, the exemption is subject to the capital gain not exceeding Rs 2 crore. Also, the exemption is available only once in the lifetime of the seller. However, the present case relates to AY 2017-18. As such, the subsequent amendments are not applicable.
On a plain reading of the provisions of the Act, it ls seen that the condition that one should not own more than one residential house at the time of sale of the original asset is not spelt out anywhere in section 54; the same is specifically spelt out in section 54F of the Act. The parliament, in its wisdom has made this enactment and no subsequent amendments have been made to Incorporate the condition in section 54 that one should not own more than one residential house at the time of sale of the original asset. That being so, there is no scope to import the said condition within the periphery of section 54 of the Act. The AO has not made a case that the basic conditions for availing deduction u/s 54 has not been satisfied. Her only objection is that the appellant owned more than one residential property, other than the new property, at the time of transfer of the original asset. The property transferred during the year being a residential house property, the applicable provision is section 54 of the Act and section 54F of the Act has no application. As such, the disallowance made by the AO in the spirit of section 54F cannot sustain. I direct the AO to delete the addition of Rs. 2,52,32,5671-.”
Heard the parties, perused the records.
It is not the case of the revenue that the conditions available under Section 54 of the Act has not been satisfied and only the assessee since having more than one residential property other than the new property at the time of transfer of original asset, the claim was rejected. However, the residential property was transferred during the year and the application of provision of Section 54 of the Act and Section 54F of the Act is thus, not applicable as considered by the Ld. CIT(A), in our considered opinion is found to be just and proper so as not to warrant interference.
In the result, appeal filed by the Revenue is hereby dismissed.