Gifting of house property - sec 54 non compliance

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Zaid Patanwala (Querist)
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28 January 2014 Dear sir,

I would like to know the consequences of non compliance with Sec 54 in the below circumstance;
Mrs. A (mother) sold a residential house and purchased another house property thereby claiming exemption U/s. 54. Within a period of 6 months of such transfer, she gifted the property to Mr. B (her son) & hence non compliance with the requirements of Sec 54.

In the above case, what will be the consequences;
1) Whether Mrs. A will have to pay the tax amount immediately on gifting of the property.
2) Will Mr. B be liable to pay the same in the event Mrs. A expires
3) Will Mr. B be allowed to claim the cost of acquisition of such property in the event that Mr. B sells the same after few years.

Please advice.

CA Mohit Bansal

CA Mohit Bansal (Expert)
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29 January 2014 Hi Zaid,

The exemption gets withdrawn if the new residential property is SOLD and not when it is gifted to relative.

So, answers of the above questions are:
1) No, Mrs. A is not liable to pay tax amount
2)No, Mr. B is not liable to pay on event of Mrs. A death
3)Yes, Mr. B allowed to take the COA of the property as the same COA which was in the hand of Mrs. A

Zaid Patanwala

Zaid Patanwala (Querist)
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29 January 2014 Dear Mohit,

Thanks for your advice.

However Sec 54 gets contravened when the owner relinquishes his/her right over the property. Since Mrs. A will relinquish her right by gifting the house property, it will contravene Sec 54.

Please evaluate in light of the above.

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CA Mohit Bansal

CA Mohit Bansal (Expert)
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29 January 2014 In section 54, it is no where written about relinquishment of title, it only speaks about the sale of property