17 February 2012
Sale of House property for Rs 96,00,000/- Indexed Cost of Acquisition comes to Rs 36,32,797/- Long Term Capital Gain:59,67,203/- Assessee Purchased new House property for Rs 90,00,000/- out of which Rs 40,000,00 were financed by Bank and own funds invested by Assessee were Rs 50,000,00/- Whether Long term Capital Gain should be paid on Rs 9,67,203 ( ie 59,67,203-50,00,000)?
17 February 2012
Section 54 of the income tax act stated that the capital gain from sale of long term property can be saved if someone buy long term residential property or construct residential property from the capital gain amount. so property should be financed by capital gain amount to be eligible for exemption. not borrowed.
18 February 2012
Please see CIT Vs. Dr. P. S. Pasricha (Mum - HC) wherein the assessee sold a house and used the sale proceeds to buy commercial property. Subsequently (but within the specified period) he borrowed funds and purchased a new house. The AO denied deduction u/s 54 on the ground that the new house had been purchased out of borrowed funds and not out of the consideration received for the old house. On appeal, the Tribunal and High Court upheld the claim on the ground that s. 54 merely required the purchase of the new house to be within the specified period. The source of funds for the purchase was irrelevant.
Kerala High Court decision in K. C. Gopalan's case reported in 162 CTR 566 may also be relied on.
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