vineet (member) (73 Points)
21 June 2012
Could any one tell that for
Claiming deduction under section 54 of capital gain
Amount from Sale of house property utilised in rennovation of existing house property so it is eligible for deduction or not in section 54
if yes , what the type of modification in existing house considered , what the document have to kept for proofing such type of change
plzzz help
Rupesh Maheshwari
(ACA, Dip. IFR (ACCA))
(6166 Points)
Replied 21 June 2012
YES, Cost of Renovation will be eligible for claiming exemption u/s 54.
As you know, returns are paperless...no proof is required as far as submission of ROI is concerned.
If case falls under scrutiny, furnished relevant vouchers, bills of Raw Material, labour Wages etc.
vineet
(member)
(73 Points)
Replied 21 June 2012
sir ji but it is difficult to proof in case of scrutiny that how to proof the payment of labour , for gitti wala & all other & sir what type of modification considered
Rupesh Maheshwari
(ACA, Dip. IFR (ACCA))
(6166 Points)
Replied 21 June 2012
Eligible Expenditure - Any outlay of money in the nature of CAPITAL expenditure.
Example: Construction of additional floor
vineet
(member)
(73 Points)
Replied 21 June 2012
sir but what the best way for proofing such capital expenditure infront of income tax officer & what the chances of coming roi in scrutiny
Rupesh Maheshwari
(ACA, Dip. IFR (ACCA))
(6166 Points)
Replied 21 June 2012
| Originally posted by : vineet | ||
 |
sir ji but it is difficult to proof in case of scrutiny that how to proof the payment of labour , for gitti wala & all other & sir what type of modification considered |
 |
I can understand your position
Practically, A.O. makes Intangible Additions in such cases.
1. Maintain Payroll (Wage Payment) Register
2. Get Payment receipts from Stone dealers.
Rupesh Maheshwari
(ACA, Dip. IFR (ACCA))
(6166 Points)
Replied 21 June 2012
Jatin Singh Negi
(Country Analyst )
(505 Points)
Replied 21 June 2012
Bro if u have actually utilised the labour and material, then the bills would also be pertained to the same year.
It would be a sufficient evidence if the bills are of the same year for which you are claiming the exemption.
Just keep the bills and memos, that would be a sufficient evidence.
vineet
(member)
(73 Points)
Replied 21 June 2012
sir what u say if i deposit the amount in capital gain account & invest any where in house property
vineet
(member)
(73 Points)
Replied 21 June 2012
Jatin sir i have really invested amount but the modification is not seen clearly thats why i have a fear that it may come in scrutiny
praveen
(Chartered Accountant)
(6971 Points)
Replied 21 June 2012
(1) Subject to the provisions of sub-section (2), where in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, - (i) If the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or
(ii) If the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.
(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139 786 , shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139 in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme 787 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :
Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then, - (i) The amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and
(ii) The assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.
Arun Prasadh
(Practicing CA)
(49 Points)
Replied 21 June 2012
Sale Proceeds of a residence, invested in building an additional floor on another house is allowed. Case laws are available to support this claim.
Example: CIT Vs Narasimhan (PV) (1990) 181 ITR 101(Mad).
In your case, check what is the nature of renovation?
By renovating, if are adding additonal floors then you claim exemption u/s 54.
Any minor modification or patch work to an existing structure wont be elgilble for this deduction.
As maintenance of proof is concerned maintain full accounts of the renovation backed with vouchers.
vineet
(member)
(73 Points)
Replied 21 June 2012
Arun sir i have purchased an old kothi & spending around 5 lacs on its renovation but no additional floor is made so it will come under criteria or nottttt
Live class on PF & ESI Enrollment & Returns Filing(with recording)
CAclubindia
