Delhi HC Upholds Denial Of Capital Gain Exemption For Property Described In Sale Deed As “Makaan” But Having Brick-Kiln Construction

Section 54F offers exemption from long-term capital gain tax on the sale of non-residential assets when the gains are reinvested in a new residential property within a specified timeframe.

A division bench of Justices Vibhu Bakhru and Swarana Kanta Sharma said it is unable to render the factual findings of the Tribunal as perverse.

“The AO had, on inspection, found that there was brick-kiln on the property in question. Photographs of the same were placed on record and have been reproduced by the learned ITAT in the impugned order,” the bench noted in its order.

The Appellant-assessee had sold certain lands and sought capital gain exemption under Section 54F against investment made in a new property (makaan), jointly with two others.

The Assessing Officer had reported a brick-kiln on the new property and on the basis of this evidence, the ITAT had concluded that the Assessee's investment was not in a residential house.

The Assessee on the other hand claimed a residential house with a covered area of 500 sq. ft. was existing on the new property and was described in the registered sale deed as “makaan”. He submitted that the brick kiln was not in his portion of the property but on the portion of the land which falls to the share of the other co-owners.

He further produced a lease deed whereby the alleged residential house had been leased to a tenant.

The High Court noted that the ITAT had concluded that the word “makaan” used in the registry was not in a reference to a residential house.

“This view is supported by the fact that a brick-kiln and sheds had been constructed on the land in question and the registered sale deed does not mention any other structure on the new property, other than a 'makaan'. The contention that the brick-kiln and the built up share has fallen to the shares of other co-owners and, therefore, is not required to be considered, overlooks this point,” High Court said.

It also noted that the sale deed did not mention any structure other than a “makaan” yet, a brick kiln stood on the new property.

“The learned ITAT noticed that the sale deed of the new property did not refer to the structure as rihayasi makaan, which would be a literal translation of “a residential house”. Therefore, concluded that the reference to a makaan in the registered deed was not a residential house. The learned ITAT also found that the new property was described in the revenue records as agricultural land and the registration fee was paid on the said basis…The finding of the learned ITAT in the given facts, cannot be held to be perverse,“ High Court held and dismissed the plea.

Appearance: Advocates Gajendra Maheshwari, P. Sinha and Sonakshi Sobhi for Appellant; SSC Vipul Agrawal for Revenue

Case title: Himanshu Garg v. Assistant Commissioner Of Income Tax, Circle-36 (1)

Citation: 2024 LiveLaw (Del) 1265

Case no.: ITA 548/2024