Section 54F exemption extends to multiple residential units for pre-amendment years, denying relief merely on that basis is unsustainable.

For assessment years before the Finance Act, 2014 amendment effective from 01.04.2015, the expression "a residential house" in section 54F of the Income-tax Act, 1961 was construed to include multiple residential units. Accordingly, exemption could not be denied merely because the assessee's capital gains were invested in constructing a residential building with more than one unit. The Tribunal held that the pre-amendment provision covered such investment and that the denial of exemption was unsustainable. The assessee was therefore entitled to the section 54F exemption.

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Issues: Whether exemption under section 54F of the Income-tax Act, 1961 could be denied on the ground that the assessee constructed multiple residential units instead of one residential house.

Analysis: The assessee's capital gains were invested in construction of a residential building comprising multiple units. The denial of exemption was based on the view that the expression "a residential house" permitted only one unit. The Tribunal noted that the controversy was covered by the legal position that prevailed prior to the amendment made by the Finance Act, 2014, which substituted the relevant words in section 54F with effect from 01.04.2015. On that basis, the pre-amendment provision was treated as extending the benefit to multiple residential units, and the cited coordinate bench decision was distinguished on facts.

Conclusion: The assessee was entitled to exemption under section 54F of the Income-tax Act, 1961, and the denial of the claim was not sustainable.

Ratio Decidendi: For assessment years prior to the amendment effective from 01.04.2015, the expression "a residential house" in section 54F of the Income-tax Act, 1961 includes multiple residential units, so exemption cannot be denied merely because the investment resulted in more than one unit.

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