India-capital-gains-exemption Income Tax Tribunal, Mumbai in case of Rajesh Keshav Pillai vs ITO [2011] 44 SOT 617 while deciding the issue the quantum of exemption u/s 54 held that in case there is sale of more than one residential house, the exemption will be available in relation to each set of sale and corresponding investment in the residential house
Fact of the Case
The assessee owned two flats being the flat Nos. 41 and 51 in Shikha Building, Pali Hill, Bandra (West). Both the flats had been purchased on 5-1-2001. The flat No. 41 was sold by the assessee on 16-6-2005 for a sum of Rs. 1,01,00,000 and the flat No. 51 had been sold on 29-4-2005 for a sum of Rs. 97,79,500. The assessee had thus earned income on account of long-term capital gain from sale of two flats in assessment year 2006-07. The indexed gain in respect of flat No. 41 was Rs. 88,55,558 whereas the indexed gain in respect of the flat No. 51 was Rs. 85,55,508. The assessee invested the gain on sale of flats in two different flats i.e., flat in Sai Dham at Govind Patil Road for Rs. 81,57,624 and flat at Girnar 55, Pali Hill for a sum of Rs. 95,71,364. The total investment in two flats was Rs. 1,77,28,988 which was more than the total index gain on sale of two flats of Rs. 1,74,17,617. The assessee, therefore, claimed the entire capital gain as exempt under the provisions of section 54.
Fact of the Case
The assessee owned two flats being the flat Nos. 41 and 51 in Shikha Building, Pali Hill, Bandra (West). Both the flats had been purchased on 5-1-2001. The flat No. 41 was sold by the assessee on 16-6-2005 for a sum of Rs. 1,01,00,000 and the flat No. 51 had been sold on 29-4-2005 for a sum of Rs. 97,79,500. The assessee had thus earned income on account of long-term capital gain from sale of two flats in assessment year 2006-07. The indexed gain in respect of flat No. 41 was Rs. 88,55,558 whereas the indexed gain in respect of the flat No. 51 was Rs. 85,55,508. The assessee invested the gain on sale of flats in two different flats i.e., flat in Sai Dham at Govind Patil Road for Rs. 81,57,624 and flat at Girnar 55, Pali Hill for a sum of Rs. 95,71,364. The total investment in two flats was Rs. 1,77,28,988 which was more than the total index gain on sale of two flats of Rs. 1,74,17,617. The assessee, therefore, claimed the entire capital gain as exempt under the provisions of section 54.
The Tribunal Held
We are in full agreement with the decision of the Special Bench that exemption in respect of sale of a residential house will be available only when there is corresponding investment in one residential house. But the exemption will be available in respect of sale of any number of residential houses if there are corresponding investments in residential house and all other conditions are fulfilled. Thus in case there is sale of more than one residential house, the exemption will be available in relation to each set of sale and corresponding investment in the residential house. However, we are unable to agree with the plea of the assessee that exemption has to be calculated considering the aggregate of capital gain and aggregate of investment in the residential houses. In case there are sales of more than one residential houses, in our view exemption has to be computed considering each set of sale of residential house and the corresponding investment in one residential house and the combination which is beneficial to the assessee has to be allowed. In this case the learned AR has submitted that indexed gain of Rs. 88,55,558 in respect of sale of flat No. 41 should be considered against the investment in flat at Girnar for Rs. 95,71,364 which is allowed and the investment being more entire indexed gain of Rs. 88,55,558 in respect of sale of flat No. 41 will be exempt. The indexed gain of Rs. 85,55,508 in respect of sale of flat No. 51 will have to be considered against the investment of Rs. 81,57,624 in the flat at Sai Dham. Since the investment is less than the capital gain, difference of Rs. 3,97,434 will have to be taxed. We hold accordingly.
In nutshell
- Exemption can be claimed for each house sold .
- Exemption u/s 54 can be claimed for each house sold with respect to investment made in another house.
- Exemption u/s 54 can not be claimed by aggregating the sale value and deducting the aggreagte of investment in houses.
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