The capital gains exemption under section 54 or section 54F of the Income Tax Act is often denied by the assessing officer because of the use of words “a residential house” under section 54 or 54F of the Income Tax Act. This problem often arises in case of a development agreement by a taxpayer with a builder for joint construction exercise under which taxpayer receives more than one house or may be a floors having many independent residential units from the builder.When in that case question of giving exemption u/s 54 or 54F comes , the approach of the assessing officer is to allow exemption only in case of one unit of house or flat . The main reason for this is the presence of phrase ” a residential house” in section 54 or sec. 54F .
Section 54 & 54F: A Residential House Does Not Mean One Residential Unit !