I have a query on long term capital gain exemption u/s 54F. Under the case, the assesse has bought a residential plot in his name around 10yrs back. In the current year he has purchased 2 residential flats (under construction) at same location...one in his own name and the other in his wife and son name. He is willing to sell the residential plot in the current year to get the benefit of exemption u/s 54F by utilising the capital gain against the above two residential flats. Can he do so?
11 Replies
Dharmendra Jha
(Asst. Manager Finance)
(100 Points)
Replied 18 June 2011
Yes Ms Divya you can get the exemption u/s 54f in ithis case, as youe are covered under the defenition of the Section 54F of Income Tax Act1961,
Provides that :-
if an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (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 (hereafter in this section referred to as the new asset), is eligible for exemption u/s 54f.
Regards
Dharmendra Jha
CA Suraj Prasad Shaw
(Chartered Accountant)
(504 Points)
Replied 18 June 2011
Agreed with above views........................
Divya Khemka
(Service)
(31 Points)
Replied 18 June 2011
Dear All.... Please note that the second flat is not in the name of the assessee but in his wife and son name.... is he still eligible to take the exemption u/s 54F?
Moreover since there are two different flats....can he claim exemption by investing the capital gain arising on the sale of 1 residential plots on 2 flats...
U S Sharma
(glidor@gmail.com)
(21063 Points)
Replied 18 June 2011
| Originally posted by : Divya Khemka | ||
 |
Dear All.... Please note that the second flat is not in the name of the assessee but in his wife and son name.... is he still eligible to take the exemption u/s 54F? Moreover since there are two different flats....can he claim exemption by investing the capital gain arising on the sale of 1 residential plots on 2 flats... |
 |
There is no such binding to get it registered under self name, but the money should be transfered from the account of the person who is claiming benefit.
Divya Khemka
(Service)
(31 Points)
Replied 18 June 2011
and can benefit be availed by investing the sale proceeds/capital gain in two flats ?
U S Sharma
(glidor@gmail.com)
(21063 Points)
Replied 19 June 2011
no such bar to have one /two flats, the motto is to get the house property with LTCG, and not to dispose that property(ies) within 36 months
Aparna Raja K.C
(Student)
(520 Points)
Replied 19 June 2011
Agree with Dharmendara and U S Sharma :)
CA,CMA,CS Karan Gogia
(Employed)
(230 Points)
Replied 23 June 2011
yes i think he can do sooooooooo....and can claim the benefit....
Vishhy
(Audit Manager)
(24 Points)
Replied 30 November 2011
Capital gains exemption (u/s 54 or u/s 54F) on sale of flat on the ground of acquisition of two houses - Disallowed
CASE 1: Income Tax - 2010 - TMI - 79018 - HC
Sh. Pawan Arya Versus Commissioner of Income Tax - (PUNJAB AND HARYANA HIGH COURT )
Assessee claimed exemption - capital gains on sale of flat on the ground of acquisition of two houses - assessee is claiming exemption in respect of two independent residential houses situated at different locations - Assessing Officer set off the capital gain against one of the houses but held the claim not to be admissible against second house.
Held that: - Purchase of two flats in the same building which were united for living of theassessee by making necessary modifications made the 'residential unit as one' and, thus, that case could not be applied to the facts of the case of the assessee - No substantial question of law arises - appeal is dismissed.
CASE 2: Income Tax - TMI - 205679 - HC
Commissioner of Income-tax, Bangalore Versus Smt. Jyothi K. Mehta - (KARNATAKA HIGH COURT )
Exemption under sections 54 and 54F - The Assessing Officer held that the assessee was already an owner of a residential flat at Bombay and she has purchased two flats out of the sale proceeds - The fact that the assessee could have purchased both the flats in one single sale deed or could not have narrated the purchase of two premises as one unit in the sale deed could not have made any difference.
An asset newly acquired after the sale of the original asset can also be buildings or lands appurtenant thereto, which also should be ‘a residential house - The evidence on record also discloses that the two units are situated side by side, modification were made, the door was opened making it as a single unit and the consideration received from the sale of the residential unit is utilised to purchase these residential units and therefore, the assessee is entitled to the benefit of section 54.
NOTE:
=====
As you can see in Case 2, if the two units acquired are side-by-side and can be modified, making them a single residential unit, then 2 units can be purchased and tax exemption u/s 54 or 54F can be availed.
Else, as demonstrated in Case 1, one cannot avail exemption u/s 54, and most likely u/s 54F also. (Capital gains exemption on sale of residential plot falls under purview of Sec. 54F.)
Please look into ITAT/HC/SC cases.
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