High Court allows Assessee-HUF's appeal for exemption under Section 54 with multiple house investments.

The High Court allowed the Assessee's appeal, holding that the Assessee-HUF was entitled to exemption under Section 54 for investments in multiple residential houses and the Capital Gains Account Scheme. The Court emphasized the legislative intent and judicial precedents supporting a broader interpretation of "a residential house" to include multiple houses, especially for HUFs, prior to the 2015 amendment. The Court set aside the Tribunal's order, answering the substantial questions of law in favor of the Assessee.

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Issues Involved:
1. Entitlement to exemption under Section 54 of the Income Tax Act for investment in more than one residential house.
2. Interpretation of the term "a residential house" in Section 54.
3. Denial of exemption under Section 54 for amounts deposited in the Capital Gains Account Scheme.

Issue-wise Detailed Analysis:

1. Entitlement to exemption under Section 54 of the Income Tax Act for investment in more than one residential house:
The Assessee, a Hindu Undivided Family (HUF), sold a residential house and claimed exemption under Section 54 of the Income Tax Act by investing in two residential houses and one plot of land. The Assessing Authority allowed the exemption only for one residential house, denying the benefit for the other investments. The CIT (Appeals) allowed the Assessee's claim for all investments, interpreting "a residential house" to include multiple houses. The Tribunal reversed this decision, restricting the exemption to one house. The High Court, relying on precedents from the Karnataka High Court in CIT Vs. Khoobchand M.Makhija and CIT Vs. D.Ananda Basappa, held that the term "a residential house" could include multiple houses, especially for an HUF, and allowed the Assessee's claim for all investments.

2. Interpretation of the term "a residential house" in Section 54:
The High Court examined the interpretation of "a residential house" in Section 54, noting that prior to the amendment by Finance (No.2) Act 2014, the term could be interpreted to include multiple houses due to Section 13 of the General Clauses Act, which states that singular includes plural. The Court referenced Karnataka High Court decisions that supported this interpretation. The amendment to Section 54, effective from 01.04.2015, which replaced "a residential house" with "one residential house," was intended to clarify the provision and apply prospectively, not retrospectively.

3. Denial of exemption under Section 54 for amounts deposited in the Capital Gains Account Scheme:
The Assessee also invested part of the capital gains in the Capital Gains Account Scheme. The Assessing Authority denied the exemption for this investment, but the CIT (Appeals) allowed it, and the Tribunal reversed this decision. The High Court upheld the CIT (Appeals)'s interpretation, allowing the exemption for the investment in the Capital Gains Account Scheme, as it complied with the conditions of Section 54.

Conclusion:
The High Court allowed the Assessee's appeal, holding that the Assessee-HUF was entitled to exemption under Section 54 for investments in multiple residential houses and the Capital Gains Account Scheme. The Court emphasized the legislative intent and judicial precedents supporting a broader interpretation of "a residential house" to include multiple houses, especially for HUFs, prior to the amendment effective from 01.04.2015. The substantial questions of law were answered in favor of the Assessee, and the Tribunal's order was set aside.

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