The issue is whether the exemption u/s 54 was available in cases where more than a single house is sold and the resultant combined long-term capital gain is invested in purchasing or constructing one single residential property within the prescribed time limit of 2 years or 3 years as the case may be.
Sec. 54 states, “… where… the capital gains arises from the transfer to a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head ‘Income from house property’ …
Clearly, the Section itself has defined the expression ‘a residential property’ to mean buildings or lands appurtenant thereto. This expression is descriptive of the nature of the property and not the quantity.
Consequently, there is no bar on acquiring one residential house out of sale proceeds of two or more buildings or lands appurtenant thereto.
It has to be carefully noted that such a property need not necessarily be a residential house. The only restriction is that the income therefrom should be chargeable under the head ‘Income from house property’.