Exemption u/s 54 - income tax

Yes, he can buy two properties but it should be in same complex. As there is case law on which litigation is going on and the assessee is not allowed exemption for the other property. Hope this helps you.

Dear Arpita,

1. According to me, the condition of having only one flat is in 54F...and not in 54..

here you can have multiple flats as well.

2.it can be anywhere in India. not necessarily the same city.

- Ankit

as per Mrs. Gulshanbanoo R. Mukhi v. Joint CIT, (2002) 83 ITD 649 (Mum-Trib), it was held that the statute unambiguously provides for deduction u/s.54 for one residential house only. Hence, acquisition of more than one residential house by the assessee will not entitle the as-sessee to claim deduction u/s.54 for all such residential houses so acquired by him. The assessee has to claim deduction u/s.54 only in respect of one house and not more than one house.

As per "Pawan Arya v CIT", exemption is available in respect of purchase/construction of one house only. The assessee is not entitled to exemption in respect of two independent residential houses. 

IF THE ACQUISITION IS OF RESIDENTIAL UNITS (MORE THAN ONE) SITUATED SIDE BY SIDE AND A DOOR IS FIXED IN-BETWEEN THESE UNITS AND THE POSSIBILITY OF USING THE UNITS AS A SINGLE RESIDENTIAL UNIT, THE ELIGIBILITY REQUIREMENTS ARE SATISFIED.
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In ITO v. Ms. Sushila M.Jhaveri [2000] the taxpayer acquired two adjoining flats and by removing the intermediate walls with a common kitchen it was used as one residential house. Since both the units were combined and made into one unit, investment in two flats was held as eligible for exemption under section 54.
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In CIT v. D. Ananda Basappa [2009] the taxpayer transferred a residential building and invested the long-term capital gain in acquisition of two residential flats situated side by side by means of two separate registered sale deeds and claimed exemption for both the residential units acquired. Both the units were in the occupation of two different tenants. The Court held that the apartments were situated side by side and the builder had made necessary modifications to make them one unit by fixing opening door in between those two apartments. The mere fact that when the Inspector visited the premises they were occupied by two different tenants was not a ground to hold that the apartments were not one residential unit. The aspect of one registered sale deed or more than one deed could not be determinative of the building being considered as one residential unit or otherwise.
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In CIT v. Smt.Jyothi K.Mehta [2011] the taxpayer sold a residential house and acquired two flats and claimed exemption under sections 54 and 54F of the Act. The Assessing Officer held that the taxpayer was already owner of a residential flat at Bombay and she had purchased two flats out of the sale proceeds. Hence, the taxpayer was not entitled to claim exemption from the capital gains. The Commissioner (Appeals) factually found that the two flats were utilized as a common residence and, hence, the taxpayer was eligible for exemption under section 54.
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In CIT v. Smt.K.G.Rukminiamma [2011] it was held that the expression 'a residential house' used in section 54 does not convey the intention of the Legislature to mean a single residential house as eligible for exemption. If that was the intention, the Legislature might very well have used the word 'one' instead of 'a residential house'.

IF THE RESIDENTIAL UNITS ARE LOCATED AT DIFFERENT PLACES, THE TAXPAYER IS ELIGIBLE FOR EXEMPTION ONLY FOR THE AMOUNT INVESTED IN ONE RESIDENTIAL UNIT AS THEY WERE NOT ADJOINING AND COULD NOT BE TREATED AS ONE UNIT.
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In Dy. CIT v. Ranjit Vithaldas Lokupavan [2008] the taxpayer reinvested the capital gain in two different places. The taxpayer claimed that, though the flats were located at different places, a common kitchen and common prayer place were held for being treated as single unit. The Tribunal rejected the taxpayer's claim for the reason that they were not contiguous and could not be treated as one unit. In result, the taxpayer became eligible for exemption only for the amount invested in one residential unit.

Inputs from Article by CA. V.K. SUBRAMANI

Agreed with deepak, evn if 2 or more residential units are bought but they are adjacent & are intended to be used as 1,the Assessee can avail the exemption. In any other case, the Assessee cannot.

@ arpita....The exemption under sec.54 can be availed  on the first house property only...

If the assessee had already claimed such dedn. in a previous assessment year , then he cannot claim any dedn. in the current assessment year....

If the assessee's current residential house property is sold , then the sec.54 can be claimed only when a new house property is purchased out of the proceeds of the house thus sold...

Originally posted by : Vandana Mulchandani
	Yes, he can buy two properties but it should be in same complex. As there is case law on which litigation is going on and the assessee is not allowed exemption for the other property. Hope this helps you.

Agreed.

I think he can buy 2 houses. As Deepak said it is better to convert 2 house in one single unit if they are side by side & take benefit of sec 54 taking base of Smt.K.G.Rukminiamma