21 February 2018
Hi, I have this residential property in Kandivali which i bought in 2009 for 50lac. I am selling it now at 1.8cr. With indexation benifit my long term capital gain comes to approximately 1.1cr. I gifted property to wife (100%share) in June 2017 duly registered. My wife wants to sell that property now and buy new under construction residential property worth Rs3cr. 1) Is she eligible for long term capital gain? 2) Should she claim Sec 54 benefit or shud i claim it due to clubbing provision as per Sec 64? 3) Who should accept the sale proceeds of the flat she or me or should we split it as she taking the capital with indexation benifit and me taking long term capital gain in my book?
22 February 2018
In my opinion (i) The Capital Gain will arise in your hands as per provisions of Sub-Clause (iv) of Sub Section (1) of Section 64 as the asset was transferred by you to your wife without adequate consideration.Therefore, the income arising therefrom is liable to be clubbed. In terms of Section 27 also, you are deemed to be the owner of the house property. (ii) Therefore, you should claim the deduction under Section 54 on re-investment. There are certain ITAT Judgments which state that purchase of flat in the name of a loved one, will also be eligible for Section 54 deduction. (iii) The receipt of consideration really is moot. Of course, the buyer or if it is being sold to a person taking a loan, his bank would issue the cheque to the owner of the property only as evidenced by the sale deed/deed of assignment in your case. In view of answer (i) and (ii) above this is just a matter of convenience and protocol of the buyer.
Having said the above, practically, it would appear that the income tax department may scrutinise this transaction in your wife's return because the buyer would deduct tds and the credit for that would be claimed in the hands of the wife whereas capital gain and investment would be handled in your return. It may be a good idea to explain these provisions to the buyer and have him deduct TDS in your own name
DISCLAIMER The views expressed by me are pro bono, based on facts presented in the question and assumptions made by me. They represent my personal understanding based on my experience, education and training as may be relevant. Although due care is taken by me before expressing an opinion, the views or opinions expressed by me do not constitute professional advice. Any course of action or inaction that may be adopted by the reader is on their own responsibility without any recourse to me, the author.
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