Sec. 54 exemption available even if capital gains arising from sale of multiple properties invested on 1 residential house
Vijay Kumar Wanchoo v. ITO –  124 taxmann.com 82 (Delhi – Trib.)
Assessee sold two residential flats and purchased one residential flat.
Assessee calculated gross amount of capital gain from the sale of two flats and claimed exemption under section 54 in respect of gross amount invested in one residential house.
Assessing Officer (AO) held that Section 54 makes it clear that exemption is available in respect sale of a residential house and purchase of a residential house.
As per the provisions of the said Section, there is no restriction on the sale of any number of houses, but, there must be a purchase of a corresponding house on which exemption under section 54 could be taken.
AO further noted that there must be a set of sale and purchase of one residential house to claim an exemption under section 54.
Therefore, the amount of capital gain in respect of the sale of one property can be treated as exempt against the purchase of one property.
However, no exemption can be allowed in respect of other property sold for which there was no corresponding purchase of the residential house.
On appeal, Delhi ITAT held that the requirement of section 54 is that the capital gain arising from the transfer of residential house should be invested in a residential house.
The requirement is that the investment should be in one residential house. There is no bar on investing the capital gain arising from the sale of more than one residential house in one residential house.
Thus, assessee was entitled to exemption under section 54 even if assessee invested capital gains