Investments Made Beyond ITR Due Date: ITAT Allows S. 54 Exemption for Investment in Multiple Residential Properties

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that for assessment years prior to the 2015 amendment, the benefit of Section 54 of the Income Tax Act cannot be restricted to investment in only one residential property. The bench of C.N. Prasad (Judicial Member) has ruled that the term “a residential house” used in the provision should not be interpreted narrowly as a single house and may include multiple residential properties. The Tribunal delivered the decision while allowing the appeal filed against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2012-13. The dispute primarily concerned the denial of a portion of the capital gains exemption claimed under Section 54 on the ground that the assessee had invested in more than one residential property. During the assessment proceedings, the Assessing Officer allowed the exemption under Section 54 only partially. The deduction was restricted to ₹33.61 lakh against the assessee’s claim of ₹64.23 lakh, thereby disallowing ₹30.62 lakh. The disallowance was made primarily on two grounds: The assessee had invested capital gains in more than one residential property, and therefore exemption was allowed only for one property. Part of the investment was made after the due date of filing the income tax return and had not been deposited in the Capital Gains Account Scheme, which the department considered mandatory for claiming exemption. Consequently, the investment made in a residential property located in Kolkata was not considered eligible for exemption, while only the investment in a flat at Supertech was partly allowed. After hearing the parties and examining the legal position, the Tribunal found merit in the arguments advanced by the assessee. The Tribunal observed that various High Courts and tribunals have consistently interpreted the expression “a residential house” appearing in Section 54 to include more than one residential house. It referred to judicial precedents where courts held that the indefinite article “a” cannot always be read as singular in statutory interpretation. In particular, the Tribunal relied on the Delhi High Court ruling in CIT v. Gita Duggal, where it was held that the legislature did not intend to restrict the exemption strictly to a single residential unit. Courts had interpreted the phrase in the broader context of the provision and the General Clauses Act, under which singular expressions may include the plural unless the context requires otherwise. The Tribunal also referred to decisions of the Karnataka High Court and other judicial precedents that adopted a similar interpretation. The Tribunal noted that the Finance Act, 2014 amended Section 54 by replacing the phrase “a residential house” with “one residential house in India.” However, the amendment became effective only from 1 April 2015, applicable from Assessment Year 2015-16 onwards. Since the case before the Tribunal pertained to Assessment Year 2012-13, the amendment had no retrospective effect. Therefore, the earlier interpretation allowing exemption for investment in multiple residential properties would apply. The Tribunal further addressed the issue of investments made after the due date for filing the income tax return. It observed that several judicial decisions have held that exemption under Section 54 cannot be denied merely because the amount was not deposited in the Capital Gains Account Scheme, provided the assessee ultimately invested the capital gains in a residential property within the statutory time limits prescribed under the section. Accordingly, the Tribunal directed the Assessing Officer to consider the investments made even beyond the due date of filing the return while granting the exemption under Section 54, in accordance with judicial precedents. Allowing the appeal, the ITAT held that the assessee was entitled to claim exemption under Section 54 for investments made in more than one residential property for the relevant assessment year. The Tribunal also directed the tax authorities to consider the full investment made for the purpose of granting the exemption. Case Details Case Title: Mridula Agarwal Versus ITO Citation: JURISHOUR-222-ITA-2026(Del) Case No.: ITA No.8157/Del/2019 Date: 27.02.2026 Counsel For Appellant: Raj Kumar Gupta, CA Counsel For Respondent: Manoj Kumar, Sr. DR Click Here To Read Order Read More: Mere Investigation Reports, Abnormal Price Rise Can’t Render Genuine Stock Exchange Transactions As Sham: ITAT

Investments Made Beyond ITR Due Date: ITAT Allows S. 54 Exemption for Investment in Multiple Residential Properties

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