Tribunal permits exemption for multiple houses under section 54.

The Tribunal ruled in favor of the assessee, allowing the claim for exemption under section 54 for both residential houses. The Tribunal held that the term "a" should not be equated to "one," based on precedents from the Karnataka and Andhra Pradesh High Courts. The Tribunal emphasized the broader interpretation of the term "a residential house" and rejected the restrictive interpretation by the Departmental Authorities. The appeal was allowed in favor of the assessee, affirming the entitlement to claim exemption for investments in multiple residential houses under section 54 of the Income Tax Act, 1961.

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Issues:
Interpretation of the word "a" in section 54 of the Income Tax Act, 1961 for claiming exemption under capital gain.

Analysis:
The appeal concerned the interpretation of the word "a" in section 54 of the Income Tax Act, 1961, specifically regarding the eligibility of the assessee to claim exemption under this provision. The assessee had sold two residential flats and reinvested the proceeds in two new flats, claiming exemption under section 54 for both properties. However, the Assessing Officer and the learned Commissioner (Appeals) limited the exemption to one residential house based on the interpretation of the word "a" as "one." The dispute revolved around whether "a" should be construed as singular or plural in the context of the provision.

Upon reviewing the arguments and relevant case laws, the Tribunal analyzed the legislative intent behind section 54 and the judicial interpretations of the term "a residential house." The Hon'ble Karnataka High Court in previous cases had held that "a" should not be equated to "one" and that an assessee could claim exemption for multiple residential houses under section 54. The Tribunal also cited the decision of the Hon'ble Andhra Pradesh High Court, which disapproved a Special Bench decision restricting the exemption to one house.

Furthermore, the Tribunal noted that an amendment to section 54, replacing "a" with "one," effective from April 1, 2015, supported the assessee's position that prior to the amendment, the provision did not limit the exemption to one residential house. Therefore, considering the precedents set by the Karnataka and Andhra Pradesh High Courts, the Tribunal ruled in favor of the assessee, allowing the claim for exemption under section 54 for both residential houses.

In conclusion, the Tribunal held that the assessee was entitled to claim exemption under section 54 for the investment made in more than one residential house, rejecting the restrictive interpretation of "a" as "one" by the Departmental Authorities. The appeal was allowed in favor of the assessee, emphasizing the broader interpretation of the term "a residential house" in the context of section 54 of the Income Tax Act, 1961.

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