Section 54 of the Income Tax Act provides that if the long term capital gains on sale /transfer of a house property is used for buying or contsructing a house within stipulated time , the long term capital gain shall be exempt to the extent of investment. The provision u/s 54 has used the phrase ” a residential house” . Now this phrase has become a bone of contention between the department and assessee . It is usual that the sale proceeds are invested in more than one house or units for various reasons and is used as one residential house . However, the department denies the exemption on all amount stating that section 54 restrcits the tax exemption in case of one residential house only . Fortunately, the courts have goine into the issue and settled the law that the meaning of ” a residential house” is not ” a residential unit”.