2011 (2) TMI 1579 - AT - Income Tax

Summary

Issues involved: Disallowance of claim u/s 54 of the Income-tax Act 1961.

Summary:
The assessee had sold three residential flats and invested the capital gain in purchase of three residential flats in the same building. The AO allowed exemption only in respect of sale of one flat and the corresponding investment in one flat. The CIT(A) upheld the view taken by the AO. The assessee argued that exemption under section 54 can be allowed if capital gain arising from more than two residential houses is invested in one residential house. The dispute was regarding exemption of capital gain under section 54 arising from sale of more than one residential house.

The Appellate Tribunal held that the section 54 exempts capital gain arising from sale of a long term capital asset being a residential house and therefore it will apply to sale of any residential house provided other conditions are fulfilled. The Tribunal also ruled that the capital gains arising from sale of more than one residential house will be eligible for exemption under section 54 if gains from both the houses are invested in the same residential house. The decision was pronounced in favor of the assessee, setting aside the order of CIT(A) and allowing the appeal of the assessee.