A Mumbai bench of the Appellate Tribunal (ITAT) has allowed a taxpayer’s claim for Section 54 exemption on investments made in more than one property, while also allowing expenses incurred to make a newly purchased flat habitable.
The ruling, in Vivek Juneja v. ACIT, ITA No. 8512/Mum/2025, concerns Assessment Year 2013-14 and is important because the Section 54 provision applicable at that time was different from the law that applies to later assessment years. The order was pronounced on 29 May 2026.
The case involved an immovable property jointly owned by Juneja and his mother. After the property was sold, Juneja received ₹23.76 crore, representing his 50% share of the sale consideration. He reported long-term capital gains and claimed deductions under Section 54 and Section 54EC of the Income Tax Act.
He purchased a new flat in Raj Classic for ₹4.90 crore and also incurred ₹40.44 lakh on work in the property. The remaining ₹8.43 crore was deposited in the Capital Gains Account Scheme (CGAS). He subsequently withdrew amounts from the CGAS and invested in two other properties.
Why did the tax department deny the Section 54 claim?
The Assessing Officer (AO) questioned both the expenditure on the new flat and the taxpayer’s claim for Section 54 relief on subsequent investments.
On the ₹40.44 lakh expenditure, the AO took the view that some expenses related to air conditioning, painting, polishing, furniture, kitchen cabinets and appliances and were not necessarily required to make the house habitable. The AO therefore allowed only ₹20 lakh and disallowed ₹20.44 lakh.
The ITAT disagreed. It noted that the flat was not habitable when Juneja acquired it and that the documents and invoices showed the disputed expenditure was towards civil and electrical work. The Tribunal found that the department’s conclusion was not supported by the evidence and directed the AO to delete the entire ₹20.44 lakh disallowance.
The larger dispute concerned the ₹8.43 crore placed in CGAS and subsequently made in two properties. The AO argued that once Juneja had already claimed Section 54 relief for the Raj Classic flat, he could not claim further relief for additional properties.
The ITAT rejected this reasoning. It said there was no specific statutory provision under the law applicable to AY 2013-14 that barred the taxpayer from claiming relief merely because he had invested in more than one house.
What does the ruling mean for Section 54 exemption?
The Tribunal focused on the wording of Section 54 applicable during AY 2013-14. At that time, the provision referred to investment in “a residential house”. The law was subsequently amended to use the expression “one residential house in India”, with effect from 1 April 2015, applicable from AY 2015-16 onwards.
The ITAT relied on judicial interpretations of the earlier wording, including the Bombay High Court’s decision in Krishnagopal B. Nangpal v. DCIT. The Tribunal noted that courts had interpreted “a residential house” in the pre-amendment provision as capable of including more than one residential house.
The Tribunal also referred to the explanatory memorandum accompanying the 2014 amendment, which stated that certain courts had interpreted Section 54 as allowing exemption where investment was made in more than one residential house. The amendment was intended to restrict the benefit to one residential house in India and was made effective prospectively from AY 2015-16.
The ITAT therefore held that the taxpayer could not be denied the Section 54 benefit for AY 2013-14 merely because the capital gains were invested in more than one property. It also held that the amount deposited in the CGAS was not taxable in the year under consideration merely because the taxpayer had already claimed relief on the Raj Classic property.
The ruling is consequently relevant primarily to older property transactions governed by the pre-April 2015 Section 54 provision. It should not be read as permitting multiple-house Section 54 claims under the post-amendment regime.