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| DATE: | April 5, 2011 (Date of publication) |
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| Click here to download the judgement (rajesh_pillai_multiple_house_54.pdf) |
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.
The decision of the tribunal, in my opinion, is based on true interpretation of the provisions of section 54 of I.T.Act 1961 and it will remove the confusion amongst the assessees. Unlike section 54F, there is no condition regarding ownership of number of residential house at the time of sale. Hence, it has been rightly held that exemption would be available in respect of each residential house sold. The decision of the special bench has been rightly distinguished.
verymuch reasonable.
I am in agreementwith the decision of the AT.
The decision on hand clears a large amount of confusion prevailing in respect of assessment LTCG and application of gain as provided u/s. 54 of the I.T. Act. Now the assessee can move forward confidently while planning disposal and acquisition of capital assets in India.
Clear interpretation & detailed analysis are the guiding factors of the judgement. Over the years no clear directions were available in spite of number of ITAT & High Court decisions.
This decision is an eye opener to all the people who wrongly believes that section 54 is applicable to only one residential house. It is not so. This section is applicable to sale of a residential house against purchase of a residential house. This is very clear from the decision that if a person has 3 residential houses all purchased by him more than 3 years back. And if he sales/transfers all the three houses and purchases 3 separate house each corresponding of more value one-to-one basis, then without clubbing all the three together, one has to correlate one house to that of the other and calculate the long term capital gains and if there is a no capital gains then he need not have to pay any LTCG tax on any of the three houses as no LTCG from the sale, so no tax. Landmark decision ……….