India, March 21 -- A taxpayer who sold a residential property for around Rs.2.7 crore and reinvested the capital gains into seven adjacent flats on the same floor was initially denied exemption under Section 54 of the Income Tax Act, 1961, with the tax department arguing that the benefit applies only to investment in 'one residential house.'

However, the tribunal ruled in the taxpayer's favour, noting that the flats were contiguous and effectively used as a single residential unit. The ruling underscores a shift from a strict interpretation of 'one house' to a more practical, intent-based approach, where eligibility for tax exemption depends on actual usage, allowing multiple adjoining units to qualify if they function as one home.

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