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Exemption under both the section 54 & section 54gb

kabir (owner) (61 Points)

10 April 2018

LTCG arise from sale of residential house property: can exemption under section 54 & section 54GB both can be avail in a single gain transaction because their is some commonalty in both one need open Capital Gains Account Scheme (CGAS) account and fund need to utilize in the prescribed time under each section . i hope i am able to explain correctly.

hope some one put light on this topic

thanks

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11 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (183881 Points)
Replied 10 April 2018

" can exemption under section 54 & section 54GB both can be avail in a single gain transaction?"

Yes, exemption under both section can be claimed simultaneously.

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kabir (owner) (61 Points)
Replied 10 April 2018

thanks for reply sir you are always the best and precise in your reply

so one can claim the proportionate exemption(assuming one didn't invest the entire consideration in subscripttion to the share of a new company)by using the formula :- the balance out of the capital gain can be utilize under section 54.

sir for both of these exemption one need to have the fund deposited in CGAS how will the fund movement will work does one need to take undertaking from the authority every time fund is utilize .

there is some confusion when word like" ELIGIBLE COMPANY " "ELIGIBLE STARtUP" "ELIGIBLE BUSINESS" is there in section54GBis it still relevent for MSME sector where core manufacturing business is engage or is it only for technology based company i am asking this because eligeble business is where innovation development deployment commercialization of new product process or service driven by technology or Intellectual Property

it will great if you shed some light on this topic.

thanks sir

your the best

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (183881 Points)
Replied 10 April 2018

"eligible company" means a company which fulfils the following conditions, namely:—

(i) it is a company incorporated in India during the period from the 1st day of April of the previous year relevant to the assessment year in which the capital gain arises to the due date of furnishing of return of income under sub-section (1) of section 139 by the assessee;

(ii) it is engaged in the business of manufacture of an article or a thing [or in an eligible business];

(iii) it is a company in which the assessee has more than fifty per cent share capital or more than fifty per cent voting rights after the subscripttion in shares by the assessee; and

(iv) it is a company which qualifies to be a small or medium enterprise under the Micro, Small and Medium Enterprises Act, 2006 (27 of 2006) [or is an eligible start-up];

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (183881 Points)
Replied 10 April 2018

"eligible start-up" and "eligible business" shall have the meanings respectively assigned to them in Explanation below sub-section (4) of section 80-IAC;]

(d) "new asset" means new plant and machinery but does not include—

(i) any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person;

(ii) any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house;

(iii) any office appliances including computers or computer software;

(iv) any vehicle; or

(v) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any previous year:

[Provided that in the case of an eligible start-up, being a technology driven start-up so certified by the Inter-Ministerial Board of Certification notified by the Central Government in the Official Gazette, the new asset shall include computers or computer software.]

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (183881 Points)
Replied 10 April 2018

exemption-under-section-54gb/

section-54gb-income-tax-act

lawstreetindia.com/experts/column

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kabir (owner) (61 Points)
Replied 12 April 2018

thanks sir

but how the process of fund movement happen do one need to take approval from authority for movement of fund as i have been told that banks some time asks letter form respected IT officer before releasing the fund from the CGAS account and i am sure you know how it officer work,. also when assesee subscriptttion in shares capital does the company required to open CAGS account till the fund is utilized.it will great if you share working of it.

thanks a lot sir.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (183881 Points)
Replied 12 April 2018

Well, I do not have practical experience of 'start-up' for exemption u/s. 54GB.

Secondly I personally prefer other options like 54EC....... rather then setting up new venture....

As far as withdrawal from CGAS, is concerned...... not difficult..

Everytime a form is to be filled up at bank level. ITO permission is required only for withdrawal of unutilized funds......

CA Rashmi Gandhi (Chartered Accountant) (86333 Points)
Replied 10 April 2018

No you can't.

kabir (owner) (61 Points)
Replied 28 April 2018

sir i have come across a case in which the assesee has LTCG and he sold an house in and went and deposit this into a CGAS account in his bank with in the said 6 month period but before his ITR return been filing, now he want to start a company and want to take benifit of 54GB can he take some or full amount from the CGAS account which is been opened to purchase residential house property in the two year period and transfer it to a new account as per the section54GB and use it in purchase plant and machinery of a new co where he hold 51%+ shares. he has not filled his return so far timeline of events

1) sale of assert OCT 2017

2) deposit in CGAS account DEC 2017

3) 6 month period end in APRIL 2018

4) want to create company and use SECTION 54GB may 2018

5) plan to file return by july 2018 first week

sir it will great if you help here.

thanks

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (183881 Points)
Replied 29 April 2018

1. He will have to establish company and buy shares of the company before filing his return i.e. by July end.

2. For withdrawal of amount from CGAS account, he may apply for the permission to withdraw the amount with his Jurisdictional ITO. If permission granted, he can withdraw the amount and close the account.