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2022 (7) TMI 492 - AT - Income TaxDeduction u/s 54 - assessee has sold residential property and earned capital gain and the assessee has claimed deduction u/s 54 with respect to investment in two different houses i.e. purchase of a new house and for repayment of loan borrowed for acquisition of another house - whether the assessee was eligible for deduction u/s 54 with respect to investment in two residential house property? - HELD THAT:- As per Section 54 if an assessee being an individual or Hindu undivided family, the capital gain arises from the transfer of long term capital asset being building or lands appurtenant thereto and being a residential house the income of which is chargeable under the head of “income from house property”. But the said capital gain not liable to be taxed if the same has been invested in a new residential house which has been either purchase or constructed within the relevant period of time as prescribed by the section 54. In case the assessee fails or commit a default in nesting the same, then there is a mechanism inbuilt in section 54 which safeguard the interest of revenue according to which if the capital gain were not invested within the due date as mentioned u/s 139(1) aforesaid person, then such capital gain required to be deposited with the separate bank account called a capital gain account scheme. There is another safeguard as prescribed by the provision of section 54 which provides that, if there is a proportionate amount of capital gain is invested in purchase or construction of a new residential house, then only the pro- rata deduction is available to the assessee. In the present case, admittedly assessee has used with the long term capital gain for purchase of a new residential house and also used for repayment of a housing loan which is borrowed on a property located. Thus, the assessee has invested a capital gain in purchase of two residential houses. The assessee can take shelter and claim deduction u/s 54 only when the assessee invests the long term capital gain in purchase or construction of a single residential house. The words ‘a one residential’ mentioned in Section 54 of the Act is refers to only a one house which can be purchased or constructed to the amount of capital gain. The word ‘a residential house’ cannot be read or interpreted as ‘more than one house’ in the present case, wherein both the houses situated in separate buildings and in different places. The Hon’ble Court’s opinion is that, the physical structure of a new residential house whether it is literal or vertical, should not come in the way of considering the building as a residential house and there can be several independent units can be permitted in a single building for allowance of the deduction u/s 54/54F. But in the present case, the assessee has admittedly claimed deduction u/s 54 with respect to two different houses i.e. purchase of a new house and for repayment of loan borrowed for acquisition of another house which is situated not only in different building but also in a different area. Therefore, the judgment relied by the Ld. Counsel for the assessee is not applicable to the present case. Appeal of assessee dismissed.
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