TaxTMI 
TaxTMI 
2019 (2) TMI 515
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....see that assessee has sold three flats i.e. flat No.701, 702 & 703 at Glen Eagle and claimed exemption under section 54 of the Act. The AO accordingly issued show cause notice dated 19.02.2014 which was replied by the assessee vide letter dated 28.02.2014 submitting therein that all the flats were located on the same floor when purchased and later on the same were combined and converted into one flat. The assessee submitted before the AO that due to legal formalities, these were purchased by three separate agreements and when sold the assessee entered into three agreements again. The assessee fully complied with all the conditions as envisaged in the section 54 of the Act. The AO rejected the submissions of the assessee on the ground that there were three separate agreements for purchase/sale for these flats and assessee was paying maintenance charges for each of the flat i.e. 701, 702 & 703. The AO further noticed that as per the provisions of section 540, the deduction under section 54 of the Act is allowable if the capital gain has arisen from transfer of long term capital asset being building or lands thereto being a residential house. However, in the present case the AO obs....
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....tual position has also been noticed that the Assessee alongwith his wife jointly owned bungalow. The bungalow was sold at Rs. 3/-crores. With this sum, they bought three flats, one in the Assessee's name, another in the name of Assesses and his wife and third in the name of the wife. The Assessee claimed deduction under section 54 on purchase of two flats in which he is either a sole owner or a joint owner. Though these flats were acquired under two distinct agreements and from different sellers, what has beer, noted by the Tribunal as also the Commissioner of Income Tax (Appeals) is that the map of the general layoutplan as well as internal layout plan in regard to flat Nos. 103 and 104 indicate that there is only one common kitchen for both the flats. The flats were constructed in such a way that adjacent units or flats can be combined into one. However, admitted fact is that the flats were converted into one unit and for the purpose of residence of the Assessee. It is in these circumstances, the Commissioner held that the acquisition of the flats may have been done independently but eventually they are a single unit and house for the purpose of residence. This factu....
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....new residential house, the claim of exemption cannot be denied if the other conditions of section 54 are fulfilled. This aspect had been examined by the Mumbai Bench of the Tribunal in Rajesh Keshav Pillai v, ITO (2011) 44 SOT 617 (Mum.) in which it has been held that exemption u/s 54 will be available in respect of transfer of any number of long term capital assets being residential houses if other conditions are fulfilled. No rulings have been brought on record by the Id. DR to show that the capital gain arising from sale of more than one residential houses cannot be invested in one residential house. The provisions of section 54 as pointed out earlier apply to transfer of any number of residential houses by the assessee provided the capital gain arising there from is invested in a residential house. The exemption u/s 54 is available if capital gain arising from transfer of a residential house is invested in a new residential house within the prescribed time limit. The relevant para are as under:- Having held that the two flats were two different residential houses, it is required to be examined whether the assessee is entitled for exemption u/s 54 of the Act in respect ....
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....if capital gain arising from transfer of a residential house is invested in a new residential house within the prescribed time limit. Thus there is an inbuilt restriction that capital gain arising from the sale of one residential house cannot be invested in more than one residential house. However, there is no restriction that capital gain arising from sale of more than one residential houses cannot be invested in one residential house. In case capital gain arising from sale of more than one residential houses is invested in one residential house, the condition that capital gain from sale of a residential house should be invested in a new residential house sets fulfilled in each case individually because the capital gain arising from sale of each residential house has been invested in a residential house. Therefore, even if two flats are sold in two different years and the capital gain of both the flats is invested in one residential house, exemption u/s 54 will be available in case of sale of each flat provided the time limit of construction or purchase of the new residential house is fulfilled in case of each flat sold." (emphasis supplied) 6. It is clear from discussion....