Please suggest the answer for the below query with case law

This query is : Resolved

varsha (Querist)
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04 February 2008 If Mr.X has two residensial property he sales one property for 1000000/- and buys a new residentialproperty for 3000000/- as on 1/5/2007 and other res.property he sales on 1/5/2008 for 1000000/-and repays the loan which he has brought from bank to buy the new property.(the new property cost is 300000;he pays 1000000 out of sale of his first res. prop.and remaining 2000000 loan fro hdfc.)
Can you please tell me that repayment of the loan from sale of second res.prop.will be consider as deduction and no capital gain will be levied.
Please reply.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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04 February 2008 As I understand your query:

1. Financing of property C
Cost-property C bought on 1/5/2007= 3000000
Financed by Bank loan 2000000
Sale of property A 1000000

2.Total Bankloan Rs 2000000
Repayment by
selling B Rs 1000000

The repayment of towards bank loan can not be adjusted against the capital gains arising out of sale of properties A and B.

But benefit u/s 54 is possible subject to fulfillment of conditions mentioned in that section.

Peter,A.Matthai

Peter,A.Matthai (Expert)
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05 February 2008 sir,
let me understand your query this way- Mr X owns two residential houses as on 1/5/07 and he sells one of the two on and invests the same in buying a new one costing Rs 30 lakhs by taking a loan from HDFC of Rs 20 lakhs
here clarification is required on the following items - for how long a period Mr X was holding the property-what was the cost to him - we can arrive at gain only on getting these figures
If the gain is not Long Term,54 excemption is doubtful- minimum 2 yrs needed
Again details are required to find out gain from 2 nd property also - there is no excemption just because the proceeds are used to repay another loan
pls provide more details for a complete solution

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varsha

varsha (Querist)
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08 February 2008 first property he has bought on 25/08/2004 and he sold it on 1/5/2007 for 100000 and buys the new property on 1/5/2007 for 3000000.the second res property he owns from 25/5/2003 and sells on 25/8/2008 for 1000000/- and repays the loan taken on new property.
So the question is the repayment of loan by selling the second proprty ;will it be considered for sec 54.
Please reply.

varsha

varsha (Querist)
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11 February 2008 please reply

CA. GOPAL SONIKA

CA. GOPAL SONIKA (Expert)
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27 February 2008 No it will not be considered U/s 54. Section 54 is attracted only when the whole of the consideration is paid and possession of the house is obtained.