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TMI Blog2010 (8) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the facts of the case are that the assessee owned two flats being the Flat No.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 A.Y.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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain". 2.1 The AO observed that phrase used in section 54(1) was "capital gain arises from tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment of Hon'ble Supreme Court in case of Prakash Nath Khanna (266 ITR 1) AO therefore held that the assessee was entitled to claim exemption under section 54 only in respect of sale of one flat and the corresponding investment in one flat. Exemption was thus allowed only in respect of indexed gain of Rs.88,55,558/- in respect of Flat No.41 with respect to the investment of Rs.95,71,364/- in Girnar flat. The investment being more than capital gain in respect of sale of flat No.41, the capital gain was exempted whereas the indexed gain of Rs.85,55,058/- in respect of Flat No.51 was held taxable. In appeal CIT(A) upheld the view taken by the AO aggrieved by which the assessee is in appeal before the Tribunal. 3. Before us the Learned AR for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 54 which is available in case the long term capital gain arising from sale of a residential house is invested either by way of purchase and construction of a residential house within the prescribed period. In this case the assessee had sold two flats during the year being the flat No.41 and 51 in Shikha building, Pali Hill, Bandra (W) resulting into indexed gain of Rs.88,55,558/- and Rs.85,55,058/- respectively. The capital gain had been invested by the assessee in a flat at Sai Dham for Rs.81,57,624/- and a flat at Girnar for Rs.95,71,364/-. The case of the assessee is that exemption under section 54 is available in respect of sale of any number of flats with corresponding investment in a residential house whereas the view take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a house or a part of house which is in occupation of the assessee or which could not be occupied by the assessee because of his employment/ business/ profession being carried on at some other place. Based on such provisions contained in section 23(2), income from any number of properties being residential houses which are self occupied will have to be treated as exempt. But a restriction has been placed in section 23(4) which provides that where the property referred to in sub section (2) consists of more than one residential houses exemption would be available only in respect of one house and other self occupied residential houses will be treated as let out. There is no such provision in section 54 to restrict the exemption of capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n more than one residential houses. It was held by the special bench that exemption will be available only when the investment was made in only one residential house. 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. H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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