KANNAN (Subject Matter Expert) (382 Points)
04 January 2011
Under Section 54, whether Exemption is available for investment in more than one residential house property?
Sold a residential house property
Purchased two residential house properties
Whether exemption is available for both the residential house properties?
Please reply
U S Sharma
(glidor@gmail.com)
(21063 Points)
Replied 04 January 2011
54. Profit on sale of property used for residence.
(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 assets 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, 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 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.
Kashish Grover
( CA-FINAL, CS-FINAL)
(1671 Points)
Replied 04 January 2011
i think exemption will be available 4 both house properties jointly ....
but sum of both the exemptions cannot exceed amount of capital gain invested..
Harsha
(Financial Accountant)
(60 Points)
Replied 04 January 2011
section 54(1) be claimed for the purchase of more than one residential premises? CIT v. D. Ananda Basappa (2009) 309 ITR 329 (Kar.) Relevant Section: 54 The assessee a Hindu undivided family sold a residential house. The assessee purchased two residential flats adjacent to each other from taking two separate registered sale deeds in respect of the two flats situate side by side purchased on the same day. The vendor had certified that it had effected necessary modifications to the two flats to make it one residential apartment. The assessee sought exemption under section 54. The assessing authority gave exemption for capital gains to the extent of purchase of one residential flat. It was found by the Inspector that the residential flats were in the occupation of two different tenants. The Assessing Officer held that section 54(1) of the Act does not permit exemption for the purchasers for more than one residential premises. The Commissioner (Appeals) confirmed the order of the assessing authority. The Tribunal set aside the order of the Commissioner (Appeals) and held that the flats purchased by the assessee had to be treated as one single residential unit and that the assessee was entitled to full exemption. The High Court held that it was shown by the assessee that the apartments were situated side by side. The builder had also stated that he had effected modification of the flats to make them one unit by opening the door in between the two apartments. The fact that at the time when the Inspector inspected the premises, the flats were occupied by two different tenants was not a ground to hold that the apartment was not one residential unit. The fact that the assessee could have purchased both the flats in one single sale deed or could have narrated the purchase of two premises as one unit in the sale deed was not a ground to hold that the assessee had no intention to purchase two flats as one unit. The assessee was entitled to the exemption under section 54.
nitish pawar
(article..)
(176 Points)
Replied 04 January 2011
KANNAN
(Subject Matter Expert)
(382 Points)
Replied 04 January 2011
Assuming that those 2 properties are unrelated to each other.
Can the exemption be availed?
Please support your answer with relevant case laws.
Please help!!!
CA MAULIK
(C.A)
(937 Points)
Replied 04 January 2011
yes for both excemption is available..................
Dheeraj
(Learner)
(1100 Points)
Replied 04 January 2011
yes the exemption can be avialed if both the residential houses are unrelated to each other
Smruti
(CA)
(183 Points)
Replied 04 January 2011
Yes the exemption is available for both the house proporties provided it doesnt exceed amount of capital gain
reshma rachel kuruvilla
(ca final)
(120 Points)
Replied 04 January 2011
Yes the exemption is available for both the house proporties provided it doesnt exceed amount of capital gain
supriya manne
(article student)
(60 Points)
Replied 04 January 2011
s exemption is available for both d houseseven though dey r unrelatd..................
SUNNY
(CA Final & CS Professional)
(327 Points)
Replied 04 January 2011
AS per the income tax act,1961 the term used under section 54 "a residential house" mean any residential house, because of:-
The article "a" is not neccessarily a singular term. It is often used in the sense of any, and when so used it may be applied to more than individual object- national union bank Vs. copeland 4N.E 794.
Hence yu can take exemption.
Harender Kumar
(artical)
(21 Points)
Replied 04 January 2011
in case the assessee has purchased more than one house/flat within the period prescribed in sec 54, it is for the assessee to claim relief againt the purchase of any one house
Navneet Garg
(Chartered Accountant)
(70 Points)
Replied 04 January 2011
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