Sale of two residential houses and acquisition of one house

Although to be entitled to exemption u/s 54 the capital gains arising from the sale of one residential house cannot be invested in more than one residential house however there is no restriction that capital gains arising from sale of more than one residential houses cannot be invested in one residential house. The Mumbai bench in Dy CIT v., Ranjit Vithaldas (2012) 79DTR (Trib) 377 allowed exemption for both the hoses sold in the absence of any evidence suggesting use of either property for business purposes no matter that the assessee has not shown any deemed income under the head house property for one out of the two properties held.

So to be on the safer side it is better to include deemed income in such cases to avoid any dispute as in this case the assessee having not declared such income had to run through the High Court door