Capital gain
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
02 September 2011
AN ASSESSEE SOLD RESIDENTAIL HOUSE AND REINVESTED THE GAIN AND CLAIMED DEDUCTION U/S 54 AND PURCHASED CO-OWNED RESIDENTAIL HOUSE. IS IT ALLOWED?
WITHIN ONE YEAR THEREAFTER THE ASSESSEE ONCE AGAIN PURCHASED A CO-OWNED RESIDENTIAL HOUSE. IN THIS CASE ALL CHANCES THAT HE LOOSES DEDUCTION CLAIMED U/S 54. IN SUCH CIRCUMSTANCES CAN THE ASSESSEE TAKE A PLEA THAT I ALONGWITH THE OTHER PARTY HAS IN PARTNERSHIP OR IN VENTURE ACQUIRED THE PROPERTY AND STRAIGHT AWAY THAT PROPERTY IS REFLECTED IN THE BOOKS OF THE FIRM AS PURCHASE OF STOCK.
WITHIN ONE YEAR THEREAFTER THE ASSESSEE ONCE AGAIN PURCHASED A CO-OWNED RESIDENTIAL HOUSE. IN THIS CASE ALL CHANCES THAT HE LOOSES DEDUCTION CLAIMED U/S 54. IN SUCH CIRCUMSTANCES CAN THE ASSESSEE TAKE A PLEA THAT I ALONGWITH THE OTHER PARTY HAS IN PARTNERSHIP OR IN VENTURE ACQUIRED THE PROPERTY AND STRAIGHT AWAY THAT PROPERTY IS REFLECTED IN THE BOOKS OF THE FIRM AS PURCHASE OF STOCK.
03 September 2011
You can purchase a Co-owned property but your share of purchase cost of property should exceed capital gain of the sold property.
You can purchase any no. of house within three years or after 3 yrs. No limit has been prescribed u/s.54, only it has been prescribed u/s.54F.
You can purchase any no. of house within three years or after 3 yrs. No limit has been prescribed u/s.54, only it has been prescribed u/s.54F.
04 September 2011
Sorry I disagree with the opinion given by Deepan Chakravarthy.
There is restriction of owning of houses. A person for availing deduction u/s 54F cannot have more than 1 house. If he owns more than 1 house then he is not eligible for exemption u/s 54.
IT- Sec 54F - assessee is co-owner in a residential house - sells some shares in order to construct additional floor on existing house - claims exemption for capital gains - mere extension of existing property not to entitle assessee to benefit of exemption u/s 54F: ITAT TM
By TIOL News Service
CHENNAI, AUG 05, 2009: SECTION 54F is one of the most popular sections in the Income Tax Act. This entitles an assessee to claim exemption for long-term capital gains if the same is invested in either purchase or construction of a residential property. However, the fact in the instant case is that the assessee is a joint-owner in a residential house, and he sells some shares in the same in order to construct an additional floor on the existing house for residential purpose, and claims exemption u/s 54F for capital gains arising out of sale of shares in the same house. Revenue disallows such exemption. Even the Tribunal Members differ on the issue. Thus the issue goes to the Third Member who agrees with the Judicial Member who has denied the exemption, following the binding precedent of Jurisdictional HC decision in Pradeep Kumar case where it was held that a mere extension of the existing building will not give benefit to the assessee under sec.54F of the Act. Since the case of the assessee clearly comes within the ken of the ratio of the HC decision, the Third Member disallows the exemption u/s 54F.
Facts of the case
The assessee in this case was co-owner of a house property bequeathed by his father. He sells some share in the house and constructs an additional floor on the existing property to live with his family and claims exemption to long-term capital gains u/s 54F. The assessee filed his return of income on 3.7.2000 declaring a total income of Rs.17,76,370/- and claimed a sum of Rs.10,22,862/- as exemption u/s 54F. This was processed u/s 143(1) accepting the total income declared by the assessee. Subsequently, the Assessing Officer passed an order u/s 154 disallowing the assessee's claim of exemption u/s 54F.
The Assessing Officer disallows the exemption u/s 54F on the ground that the assessee has only constructed additional floor on his existing house property but the exemption u/s 54F is available only for purchase or construction of a new property and in cases where the assessee does not own a house other than the new property. The assessee preferred an appeal against this revision and the Commissioner of Income Tax (Appeals) allowed the appeal in favour of the assessee for the reason that the point is debatable and action u/s 154 is beyond the scope. The Assessing Officer thereafter issued notice u/s 148 and completed the assessment u/s 143(3) r.w.s. 147 by order dated 18.01.2006. In doing so, the Assessing Officer disallowed the claim of Rs.10,22,862/- as exemption u/s 54F for the reason that the assessee was already owning a house on co-ownership basis and has only extended the co-owned, bequeathed property and no new asset had come out of the investment, as per the assessee's claim.
The Assessee appealed before the Commissioner of Income Tax (Appeals), both on the matter of initiation of assessment proceedings and the merits of the case. Upon consideration of assessee's submissions, the Commissioner of Income Tax (Appeals) upheld the re-opening. As regards the merits of the case, he held that he was of the opinion that it was established as per records that assessee had spent his long term capital gains on the construction of additional space. He also accepted the assessee's submission that the assessee did not own any other property in assessee's name as on the date of application of long terms capital gains on house building.
Thus the issue landed up before the Tribunal whee the DR argues that since assessee was owning undivided portion of the residential house, which came in his share on the basis of a WILL executed by his deceased father as joint owner with his brother and life time interest of their mother and assessee has just constructed additional first floor on the said joint residential house. Therefore, in view of provisions of section 54F, as applicable during the period under consideration, assessee could not be held to be entitled to exemption under section 54F, firstly, owning of any residential property at the time of sale of the old asset disentitles the assessee for exemption under section 54F and secondly, assessee has just constructed additional floor in the existing joint residential house, which further disqualifies the assessee from exemption under section 54F.
Although the counsels of both the parties cited several judicial decisions in favour and against the Revenue's stand, the unanimity of view eluded the Members, and each Member takes differing stand. Thus, the issue was referred to the Third Member who agreed with the Judicial Member who based his decision on the binding precedent of jurisdictional High Court, holding that mere extension of an existing property does not entitle an assessee to the benefits of exemption u/s 54F. And thus the issue was decided in favour of the Revenue
There is restriction of owning of houses. A person for availing deduction u/s 54F cannot have more than 1 house. If he owns more than 1 house then he is not eligible for exemption u/s 54.
IT- Sec 54F - assessee is co-owner in a residential house - sells some shares in order to construct additional floor on existing house - claims exemption for capital gains - mere extension of existing property not to entitle assessee to benefit of exemption u/s 54F: ITAT TM
By TIOL News Service
CHENNAI, AUG 05, 2009: SECTION 54F is one of the most popular sections in the Income Tax Act. This entitles an assessee to claim exemption for long-term capital gains if the same is invested in either purchase or construction of a residential property. However, the fact in the instant case is that the assessee is a joint-owner in a residential house, and he sells some shares in the same in order to construct an additional floor on the existing house for residential purpose, and claims exemption u/s 54F for capital gains arising out of sale of shares in the same house. Revenue disallows such exemption. Even the Tribunal Members differ on the issue. Thus the issue goes to the Third Member who agrees with the Judicial Member who has denied the exemption, following the binding precedent of Jurisdictional HC decision in Pradeep Kumar case where it was held that a mere extension of the existing building will not give benefit to the assessee under sec.54F of the Act. Since the case of the assessee clearly comes within the ken of the ratio of the HC decision, the Third Member disallows the exemption u/s 54F.
Facts of the case
The assessee in this case was co-owner of a house property bequeathed by his father. He sells some share in the house and constructs an additional floor on the existing property to live with his family and claims exemption to long-term capital gains u/s 54F. The assessee filed his return of income on 3.7.2000 declaring a total income of Rs.17,76,370/- and claimed a sum of Rs.10,22,862/- as exemption u/s 54F. This was processed u/s 143(1) accepting the total income declared by the assessee. Subsequently, the Assessing Officer passed an order u/s 154 disallowing the assessee's claim of exemption u/s 54F.
The Assessing Officer disallows the exemption u/s 54F on the ground that the assessee has only constructed additional floor on his existing house property but the exemption u/s 54F is available only for purchase or construction of a new property and in cases where the assessee does not own a house other than the new property. The assessee preferred an appeal against this revision and the Commissioner of Income Tax (Appeals) allowed the appeal in favour of the assessee for the reason that the point is debatable and action u/s 154 is beyond the scope. The Assessing Officer thereafter issued notice u/s 148 and completed the assessment u/s 143(3) r.w.s. 147 by order dated 18.01.2006. In doing so, the Assessing Officer disallowed the claim of Rs.10,22,862/- as exemption u/s 54F for the reason that the assessee was already owning a house on co-ownership basis and has only extended the co-owned, bequeathed property and no new asset had come out of the investment, as per the assessee's claim.
The Assessee appealed before the Commissioner of Income Tax (Appeals), both on the matter of initiation of assessment proceedings and the merits of the case. Upon consideration of assessee's submissions, the Commissioner of Income Tax (Appeals) upheld the re-opening. As regards the merits of the case, he held that he was of the opinion that it was established as per records that assessee had spent his long term capital gains on the construction of additional space. He also accepted the assessee's submission that the assessee did not own any other property in assessee's name as on the date of application of long terms capital gains on house building.
Thus the issue landed up before the Tribunal whee the DR argues that since assessee was owning undivided portion of the residential house, which came in his share on the basis of a WILL executed by his deceased father as joint owner with his brother and life time interest of their mother and assessee has just constructed additional first floor on the said joint residential house. Therefore, in view of provisions of section 54F, as applicable during the period under consideration, assessee could not be held to be entitled to exemption under section 54F, firstly, owning of any residential property at the time of sale of the old asset disentitles the assessee for exemption under section 54F and secondly, assessee has just constructed additional floor in the existing joint residential house, which further disqualifies the assessee from exemption under section 54F.
Although the counsels of both the parties cited several judicial decisions in favour and against the Revenue's stand, the unanimity of view eluded the Members, and each Member takes differing stand. Thus, the issue was referred to the Third Member who agreed with the Judicial Member who based his decision on the binding precedent of jurisdictional High Court, holding that mere extension of an existing property does not entitle an assessee to the benefits of exemption u/s 54F. And thus the issue was decided in favour of the Revenue
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