Tax Implication

This query is : Resolved

Mujeeb ur Rehman (Querist)
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21 April 2008 If a person has sold residential house property in India and has long term capital gain on it, will he be able to claim the benefit of Section 54 if he purchases residential house property outside India? Will the answer be different if he is non-resident in India last year?

R.V.RAO

R.V.RAO (Expert)
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21 April 2008
DEAR REHMAN SAB,
THE ANSWER IS IN AFFIRMATIVE.
THE FOLLOWING CASE LAW QUOTED IN CACLUB FORUM IS SUPPORTING THE VIEW THAT ONE CAN BUY PROPERTY OUTSIDE INDIA AND STILL GETS BENEFIT UNDER SEC 54.

Court : HC

Brief : : Held by the Ho"ble Bench that section 54 does not prohibit from purchasing property in a foreign country however all other conditions should be satisfied.The Bench also observed that the assessee should be the absolute owner of the new property in order to claim the exemption.

Citation : (1) Mrs. Prema P. Shah (2) Sanjiv P. Shah Vs. I.T.O.

Judgment :

Capital Gain - exemption u/s 54
(1) Mrs. Prema P. Shah (2) Sanjiv P. Shah Vs. I.T.O.
11/29/2005
(2006) 282 ITR (AT) 211 (Mumbai)

Case Fact:
Whether it is necessary to purchase new residential property in India to utilise the sale proceeds as received on sale of residential property, not acquired in convertible foreign exchange, for claiming exemption u/s 54(1) and whether the new property can be acquired on perpetual lease?

Decision:
Held by the Ho"ble Bench that section 54 does not prohibit from purchasing property in a foreign country however all other conditions should be satisfied.The Bench also observed that the assessee should be the absolute owner of the new property in order to claim the exemption.

NRI also enjoys same exemption as stated above LIKE A resident,but following points to be noted for compliance.
TRANSFER
1.) Sale to
a.) Person resident in India -No permission is required
b.) NRI (Citizen of India) No permission is required only if the seller is Indian citizen- All other cases prior RBI permission is required.
c.) NRI(Person of Indian origin) No permission is required only if the seller is Indian citizen - All other cases prior RBI permission is required.
d.) Others - Prior RBI permission is required

SOURCE:www.nritaxservices.com
R.V.RAO