It exemption u/s 54. having more than one house

Sir,

The assessee had three houses. he sold one of them during the AY 2009-2010. He had purchased another residential house and claimed exemption u/s54. The ITO rejects the claim stating that, the assessee should not have more than one house at the time of sale. Though we made repeated requests that this restriction is imposed only in section 54F and not in 54. The ITO rejects the view. He is of the opinion that only a residential house sold and a residential house should be bought. The word A means only one house and not more than one house at that time of sale.He claims that the assessee had more than one house at the time of sale, this exemption u/s 54 is not applicable?

Is there any case law on this subject?

Pls help

sathya

Rajesh Keshav Pillai vs. ITO (ITAT Mumbai)

S. 54 Relief available to multiple sales & purchases of residential houses

The assessee sold two separate flats and earned long-term capital gains of Rs. 1.74 crores. The assessee bought two different flats for a consideration of Rs. 1.77 crores and claimed that the LTCG of Rs. 1.74 crores was exempt u/s 54. The AO & CIT (A) followed the judgement of the Special Bench in ITO vs. Sushila Jhaveri 292 ITR (AT) 1 and held that the benefit of s. 54 was available in respect of only one flat and not two flats. On appeal to the Tribunal, HELD allowing the appeal:

(i) Though s. 54 refers to capital gains arising from “transfer of a residential house”, it does not provide that the exemption is available only in relation to one house. If an assessee has sold multiple houses, then the exemption u/s 54 is available in respect of all houses if the other conditions are fulfilled;

(ii) The decision of the Special Bench in ITO vs. Sushila Jhaveri 292 ITR (AT) 1 is distinguishable. There the issue was whether if one house is sold and the proceeds are invested in several houses, the exemption u/s 54 is available and it was held that the exemption was available only for one house. But, if more than one house is sold and more than one house is bought, a corresponding exemption u/s 54 is available;

(iii) However, the exemption is not available on an aggregate basis but has to be computed considering each sale and the corresponding purchase adopting a combination beneficial to the assessee.

Note: The same view has been taken in Humayun S. Rangila vs. ITO (included in the file). See also K. G. Rukminiamma 331 ITR 211 (Kar) where four flats purchased in one building were held to be eligible for s. 54 exemption