Capital Gain Section 54F
This query is : Resolved
16 June 2008
My friend is constructing a house property since 2003. The construction is almost over except interior decoration and some minor things. He has sold shares and has made Capital Gain of Rs.1 crore in FY 2007-08. He wants to claim exemption u/s.54F for the Capital Gain against the construction of the property. The developer says he will give a certificate of completion for the house property Dt:FY 2007-08. Can my friend claim the exemption?
16 June 2008
YES, he can claim exemption.
Also refer below mentioned case:
Brief : : Sale of residential house and investment in new house – Even though registration is not complete assessee is entitled to exemption u/s. 54F
Citation : CIT. vs. Ajitsingh Khajanchi [2008] 297 ITR 95 (MP)
Judgment :
The issue before the Hon’ble Madhya Pradesh High Court was whether the benefit of section 54F can be allowed even if the transfer is not evidenced by a registered deed. In this case the assessee had sold his plot of land and claimed exemption under section 54F of the Act in respect of purchase of residential flat. While completing the assessment the Learned Assessing Officer had denied the claim of the assessee by observing that the title was not vested in the assessee because the flat was not registered in his name. On appeal, the first appellate authority allowed the appeal of the assessee.
Being aggrieved by the Order of the CIT(A), the revenue preferred an appeal to the Income-tax Appellate Tribunal. The Hon’ble Tribunal dismissed the appeal of the revenue and observed that there was effective transfer of the flat in favour of the assessee, the same having been actually possessed by him. Therefore, merely on account of the absence of registered sale deed, the assessee was not disentitled to exemption under section 54F of the Act.
Being aggrieved by the Order of the Appellate Tribunal, the revenue filed an appeal before the Hon’ble Madhya Pradesh High Court under section 260A of the Act. Hon’ble High Court upheld the order of the Appellate Tribunal and held that in order to attract the application of section 54F, it is not necessary that the new house should be registered in the name of the assessee. Section 54F speaks of purchase and registration is not imperative.
Also refer below mentioned case:
Brief : : Sale of residential house and investment in new house – Even though registration is not complete assessee is entitled to exemption u/s. 54F
Citation : CIT. vs. Ajitsingh Khajanchi [2008] 297 ITR 95 (MP)
Judgment :
The issue before the Hon’ble Madhya Pradesh High Court was whether the benefit of section 54F can be allowed even if the transfer is not evidenced by a registered deed. In this case the assessee had sold his plot of land and claimed exemption under section 54F of the Act in respect of purchase of residential flat. While completing the assessment the Learned Assessing Officer had denied the claim of the assessee by observing that the title was not vested in the assessee because the flat was not registered in his name. On appeal, the first appellate authority allowed the appeal of the assessee.
Being aggrieved by the Order of the CIT(A), the revenue preferred an appeal to the Income-tax Appellate Tribunal. The Hon’ble Tribunal dismissed the appeal of the revenue and observed that there was effective transfer of the flat in favour of the assessee, the same having been actually possessed by him. Therefore, merely on account of the absence of registered sale deed, the assessee was not disentitled to exemption under section 54F of the Act.
Being aggrieved by the Order of the Appellate Tribunal, the revenue filed an appeal before the Hon’ble Madhya Pradesh High Court under section 260A of the Act. Hon’ble High Court upheld the order of the Appellate Tribunal and held that in order to attract the application of section 54F, it is not necessary that the new house should be registered in the name of the assessee. Section 54F speaks of purchase and registration is not imperative.
16 June 2008
Please give full information like Capital Gain is short term or long term. Whether it is sale through Stock Exchange or not. Whether STT has been paid or not
16 June 2008
where in the case of an assessee being an individual or an HUF, the capital gain arises from the transfer of any long-term capital asset, not being a residential house, and
the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed a residential house,
the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,—
(a) If the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45;
(b) If the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45 :
Provided that nothing contained in this sub-section shall apply
where the assessee owns on the date of the transfer of the original asset, or purchases, within the period of one year after such date,
or constructs, within the period of three years after such date, any residential house,
the income from which is chargeable under the head ‘Income from house property’, other than the new asset.”
the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed a residential house,
the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,—
(a) If the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45;
(b) If the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45 :
Provided that nothing contained in this sub-section shall apply
where the assessee owns on the date of the transfer of the original asset, or purchases, within the period of one year after such date,
or constructs, within the period of three years after such date, any residential house,
the income from which is chargeable under the head ‘Income from house property’, other than the new asset.”
16 June 2008
So if Following conditions satisfied then he can claim Exemption:
1. Asset sold must be Long Term but not Residential House
2. Assessee must be individual or an HUF
3. The assessee should not, on the date of the transfer of the original asset, owns a house/Purchase a house within 1 year/Construct house within 3 years...
If he do so the amount which was taxfree earlier become taxable.
1. Asset sold must be Long Term but not Residential House
2. Assessee must be individual or an HUF
3. The assessee should not, on the date of the transfer of the original asset, owns a house/Purchase a house within 1 year/Construct house within 3 years...
If he do so the amount which was taxfree earlier become taxable.
16 June 2008
Dear CA Prakash,
The matter before me is not whether the property is registered or not? My question is whether can we claim exemption against the construction of a property which has been started a long back and there were no intentions to sell the shares while the money has been invested. To put it in more simple words,is there any co-relation required between the sale proceeds and its application of money. Can I start construction a decade back and still can I claim the exemption u/s.54F just becauase I sold the shares and reailised long term capital gain?
The matter before me is not whether the property is registered or not? My question is whether can we claim exemption against the construction of a property which has been started a long back and there were no intentions to sell the shares while the money has been invested. To put it in more simple words,is there any co-relation required between the sale proceeds and its application of money. Can I start construction a decade back and still can I claim the exemption u/s.54F just becauase I sold the shares and reailised long term capital gain?
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