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Capital gain - proceeds for purchasing a new house

babugr (dgm) (509 Points)

10 August 2019

One of my friends is selling his residential house acquired in 1978, and he desires to purchase a residential flat in his wife's name with the sale proceeds. Please let me know the tax implication under section 54, he is a senior citizen presently does not fall under taxable income hence not filing any IT returns after retirement. He owns only one house in his name which he would like to sell and buy a new one. Kindly advise

Thanks

GR Babu

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6 Replies

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 10 August 2019

firstly you need to arrive at the vsluuif the old house that needs to be sold in order to know the cost of acquisition.
Secondly the new house shud be purchased in the name of the freind only else he wud not get exemption under section 54. his wife name can be added as a second owner. he will have to file return for showing capital gains.

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Ruby Kumari (72 Points)
Replied 10 August 2019

As per case of Shri kamal wahal court decision .
It thus appears to us that the predominant judicial view, including that of this Court, is that for the purposes of Section 54F, the new residential house need not be purchased by the assessee in his own name nor is it necessary that it should be purchased exclusively in his name. It is moreover to be noted that the assessee in the present case has not purchased the new house in the name of a stranger or somebody who is unconnected with him. He has purchased it only in the name of his wife. There is also no dispute that the entire investment has come out of the sale proceeds and that there was no constribution from the assessee's wife.

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 10 August 2019

is the same judicial ruling applicable for section 54 as well because assessee is claiming exemption under section 54 since he's selling old house and purchasing new house

Ruby Kumari (72 Points)
Replied 10 August 2019

This Court in the decision cited alone also noticed the judgment of the Madras High Court (supra) and agreed with the same, observing that though the Madras case was decided in relation to Section 54 of the Act, that Section was in pari materia withSection 54F. The judgment of the Punjab and Haryana High Court in the case of CIT Vs. Gurnam Singh : (2014) 327 ITR 278 in which the same view was taken with reference to Section 54F was also noticed by this Court.

babugr (dgm) (509 Points)
Replied 10 August 2019

Thanks for your prompt response. I am obliged. Shall advise my friend to buy a new flat in joint name with the proceeds, of course he will have to file a return for the benefit of exemption. Thanks again

GR Babu