Delhi Tribunal rules that investment in multiple adjacent residential units is admissible for Section 54 capital gains tax exemption

In the case of Saroj Rani ^[1]  (Taxpayer), for the tax year 2015-16, the issue before the Delhi Tribunal was whether the seven adjacent residential units on the same floor could be construed as "one residential house" for the purpose of capital gains rollover exemption under section 54 of Income Tax Act, 1961. 

The Taxpayer sold a house property (original residential unit) and invested the proceeds from such sale in seven residential units located on the same floor in the residential complex, thereby claiming exemption under section 54. The seven units purchased were adjacent to each other. The Taxpayer placed reliance upon Delhi HC decision in case of Gita Duggal ^[2]  (pertained to tax year 2006-07) which held that multiple residential units may be construed as a single residential house. As against that the tax authority contended that seven residential units constitutes multiple houses and not "one residential house," under the amended section 54. The ruling in Gita Duggal’s case (supra) pertained to tax year 2006-07 which was prior to amendment to section 54 w.e.f. tax year 2014-15 to restrict the exemption to “one residential house”. Accordingly, the tax authority allocated the total cost proportionally to each unit and allowed rollover exemption only for one unit, denying the balance exemption claimed. The First Appellate Tribunal upheld the decision of the tax authority and distinguished the applicability of Gita Duggal ruling, on the ground that the amendment overruled this precedent.

The Delhi Tribunal referred to another decision of the Delhi High Court in the case of Lata Goel ^[3]  (pertained to tax year 2010-11 i.e. before amendment) in which the Delhi High Court held that different floors in a building would not mean multiple houses. The physical structure of a new residential house — whether lateral or vertical, does not affect its classification as a residential house. Multiple independent units within the house cannot be treated as an impediment to claiming capital gains roll over exemption, as there is no express or implied prohibition.

The Tribunal applied the principles of the above decision to the current case and held that the seven adjacent units on the same floor encompassed within the fold of "one residential house" under section 54/54F of the Income Tax Act. 

^{[1] ITA No. 5472/DEL/2024
[2] 257 CTR 208 (DEL)
[3] ITA 127 /2025 & CM No. 25518/2025 order dated 30 April 2025} 

P.S – The information regarding whether there exists a common kitchen, refurbishment of apartments to it a cohesive unit, single registration for property tax etc. is not available.