Can a taxpayer claim exemption under both Section 54 and Section 54F by investing in a single new house?
Section 54 of the Income Tax Act, 1961 gives relief when a residential house is sold and the capital gain is invested in another residential house, while Section 54F of the Act gives relief when any long-term asset other than a house (like land, shares, commercial property) is sold and the sale proceeds are invested in a residential house.
Can a taxpayer claim exemption under both Section 54 and Section 54F by investing in a single new house was the issue before Hyderabad ITAT in the case of Venkata Ramana Umareddy v. DCIT (ITA No. 552/Hyd/2012, A.Y. 2008–09, ITAT Hyderabad, order dated 18-01-2013). In this case, the assessee sold a house and a plot of land, earned about ₹93.25 lakh as long-term capital gains, and invested the entire amount in one new residential property.
The tax department argued that two separate houses were required to claim both exemptions, but the ITAT Hyderabad held that both sections work independently and do not mandate purchase of two houses. Since the full gains were reinvested in a single residential house, both exemptions were rightly allowed and the addition was deleted.
The copy of the order is as under:
