Capital gain section 54(f)

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rajesh sharma (Querist)
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26 December 2014 Hi

I had sold one plot of land and invested the money from this sale in buying a flat in joint name with my younger brother's name. Will i get benefit for 100% investment or not?

I have come to know that i will be getting full benefit u/s 54(f) of IT Act. Please provide me link of any case law

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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26 December 2014 In one of the recent situations that came up before the Delhi High Court; an individual had sold an inherited flat and earned some long term capital gains. At the time of filing his income tax returns, the tax payer had claimed a deduction under section 54F of the Income Tax Act (‘the Act’) on the ground that the sale proceeds were invested in the acquisition of a residential home in the joint names of himself and his wife. Section 54F of the Act provides that if a tax payer invests the sale proceeds received from the sale of any capital asset for buying a residential property; the long-term capital gains on sale of the property would be exempt.

The income tax officer, during the course of assessment, took the view that under Section 54F, the investment in the residential house should be made in the tax payer’s name and in as much as the residential house was purchased by the assessee in the name of his wife, the deduction was not allowable. He reduced the deduction and computed the capital gains accordingly.

At the second appellate level; the authority admitted the tax payer’s claim and allowed the exemption from capital gains accordingly. However, the Income Tax department preferred an appeal before the Appellate Tribunal. The honourable Tribunal, while relying on various judgements, was also of the opinion that the exemption under section 54 should be available to the tax payer. It also observed that section 54F being a beneficial provision, enacted for encouraging investment in residential houses should be liberally interpreted to include investment done in the spouse’s name too.

On a further appeal with the High Court by the Department, the High Court also agreed to the view adopted by the Tribunal. The High Court noted that the entire purchase consideration was paid only by the assessee and not a single penny was contributed by his wife. It held that a purposive construction of the legal provisions is to be preferred as against a literal construction. Further, even if the provisions of section 54F are literally constructed, there is nothing in the section to show that the house should be purchased in the name of the tax payer only. The High Court observed that section 54F does not require that the new residential property should be purchased in the name of the tax payer; it merely says that the tax payer should have purchased / constructed a ‘residential house’.

CA Kumar Mukesh

CA Kumar Mukesh (Expert)
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26 December 2014 You are eligible to take exemption under section 54F as decided by honorable Delhi High Court in case of CIT v. Kamal Wahal

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Rupesh Jain

Rupesh Jain (Expert)
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29 December 2014 you can get the exemption u/s 54F. but may be face some problem due to under income tax it is exemption give to whom how sell the property and buy his name only.