akshay (article) (34 Points)
17 February 2010
Sir please help me on this
the assessee sold a residential building and purchased another residential building . The new residential house acquired is registered in the name of his son.
My question is whether the assessee is eligibile for deduction under Section 54
CA Dhiraj Ramchandani
(CA, M. com)
(10823 Points)
Replied 17 February 2010
Why he did that...
I mean, i think he could have purchased the house in his name, availed exemption and then would have gifted the same to his son....
There would have been no extra tax liability...
Ameet
(L)
(1678 Points)
Replied 17 February 2010
I dont think that it will create tax liability. Continue for exemption.
CA Dhiraj Ramchandani
(CA, M. com)
(10823 Points)
Replied 17 February 2010
In ur case, i'm not sure to the optimum.. But it won't be allowed for exemption.... I mean, i dont find any valid or logic reason for giving exemption to son or even father...
But anywz, let others too reply for the same...
Amir
(Learner)
(4016 Points)
Replied 17 February 2010
Dear Akshay,
If the new house is in joint ownership with son, then no problem - exemption u/s 54 can be claimed.
If new House is soley in the ownership of Son then -
In view of the following judgement, I think EXEMPTION WILL BE ALLOWED -
For the purpose of attracting the provisions of section 54, it is not necessary that the assessee should become the owner of the property. Section 54 speaks of purchase. Moreover, the ownership of the property may have different connotations in different statutes. In view of various decisions of the Supreme Court, it was to be held that the Tribunal went wrong in holding that for the purpose of applicability of section 54, registration of document is imperative. Therefore, the assessee was entitled to exemption in terms of section 54. - Balraj v/s CIT - Delhi HC
For ur info there is another JUDGEMENT OF Bombay HC u/s 54 F, which u might say that in contradiction with the above Judgement but u/s 54F it is mandatory to have New Property in the name of the assessee since that exemption has a condition attached to it which prohibits the assessee to become owner in another property. Therefore don't get confused with this judgement
Residential house must be in the name of the assessee only - For qualifying for the exemption under section 54F, it is necessary and obligatory to have the investment made in residential house in the name of the assessee only. Thus, investment of sale proceeds of agricultural land by the assessee in purchasing plot and constructing residential house thereon in name of his only adopted son would not qualify for exemption under section 54F - Prakash v. ITO [2008] 173 Taxman 311 (Bom.).
lucky
(Student)
(25 Points)
Replied 17 February 2010
the assessee can avail exemptin u/s 54 irrespective of the ownership of property .
C.Balaji
(Learner)
(1867 Points)
Replied 17 February 2010
dear friend...
The Res. house should be purchased by the Assessee in his own name to claim the exemption or he should have gone for co-ownership i.e. assessee and his son....
Simply purchasing the Res. house in the name of his son....i don't think he can claim the exemption...
he won't be allowed to claim the exemption u/s 54.........
i have seen a case law where the assessee is 90yrs old and he sold a Res. house and claimed 54 exemption by puchasing a res. house on his son's name stating that he is too old and he can die at anytime...
The tribunal/court dismissed the case stating that death is uncertain, it can happen to anyone at anytime...so to claim exmption u/s 54 the assessee should purchase the res. house in his own name....
Nithin Chettoor
(Assistant Manager)
(388 Points)
Replied 17 February 2010
Agreeing to Amir and Balaji.. Both hav the same opinion.. and i join u..
Ameet
(L)
(1678 Points)
Replied 17 February 2010
Dear Balaji,
But it is not necessary that assessee should be the Owner. Section 54 not said about ownership. Assesse should invest to claim deduction. Out of Lover and affection, It may be in his son name. It is also to be noted that this deduction is also available to HUF also.
Sourav Modi
(Learner!)
(306 Points)
Replied 17 February 2010
In the case of Balraj vs. CIT, it was held that purchase of residential house, coupled with possession is a precondition, registration of document is not imperative.
Further, in the case of V.Natarajan vs. CIT, it was held that where assesse transferring a property and gains thereon has been invested in a residential property in the name of spouse, exemption u/s 54 shall be allowable.
There is no caselaw oppossing these views. Hence, exemption shall be allowable in the above case.
As far as sec 54f is concerned, I agree with what Amir said.
Sourav
C.Balaji
(Learner)
(1867 Points)
Replied 19 February 2010
Dear friends please see this case law....
Prakash v. ITO [2008] 173 Taxman 311 ....
The Bombay high court in this case has held that inorder to qualify for exemption under section 54f it is necessary and obligatory to have investment made in Res. house in nameof assessee only and not in name of any other person. The fact that the property would ultimately go to his osn on his death did not cut ice with the court....
The assessee in this case after disposing of Agri. land which fell within 8 km of corporation limit, purchased a plot on his son's name and completed construction of a house on the plot...He claimed exemption u/s 54F of the Act, which was denied to him by the AO and confirmed by the tribunal on the following lines..
"A Plain reading of section 54F would show that it is the assessee who has to invest the CG in the new construction of a res. house in his name..The expression that the assessee has purchased or constructed a new asset in sub-section (1) would only mean that the new asset has to be in the name of the assessee.The proviso to sub section 1 makes the position very clear in as much as it says that the assessee shall not own any res. house on the date of transfer or construct res. house wihin one year of the transfer or construct res. within a period of 3 yrs, other than the new asset. Thus reading of sub section 1 together with the proviso would show that the investment in the new asset by the assessee has to be in his own name and not in the name of any other person..The legal consequences of purchase of the new asset by assessee in the name of his son is to sonstitute his son as the beneficial owner of the new asset.The assessee has,therefore, not made the investment in his name .. Therefore he has rendered himself liable to pay tax on CG arising out of the transfer of a cap. asset.
One of the reasons for purchase of the asset by the assessee in the name of his son was that he was too old even at the time when the property was disposed of by him and he was therefore advised to invest in the name of his son...The point was also answered by the tribunal int eh following words...
" in all the above cases it will be significant to note that the issue was never regarding purchase of new asset in the name of other person...Death during the period within which the new asset had to be acquired was an intervening event in some cases....The distinction between a legal heri and a heir apparent in law is very significant. A heir apparent succeeding to the estate of a prepesitus is dependetnt on the fact of his surviving the prepositus. Death is a certain event but who will die first is not certain event...This is the reason whu law regards transfer by a heir apparent of his chance of succession as non-transferable under section 6 of the Transfer of Property Act"
C.Balaji
(Learner)
(1867 Points)
Replied 19 February 2010
https://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2009ITAct/casesec54f.htm
Please see this link....
C.Balaji
(Learner)
(1867 Points)
Replied 20 February 2010
Please see the above link and the case....
Hareesh H Sharma
(Cleared IPCC..now article)
(894 Points)
Replied 21 February 2010
Dear all
ONE DOUBT
Can the assessee jus purchase the house for same amount from his son now , claim exemp and then transfer it to his son soon after claimin the exemption..This wudnt take away his claim for exemption as gift is not a transfer U/S 47...so the property can be gifted within 3 yrs and the amount wont be taxable too i suppose....
CAclubindia
