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Expemtion u/s 54f

Shreya Aggarwal (Student) (125 Points)

04 May 2012

If husband sells a plot of land and purchases a residential property in the name of his wife, can he claim exemption from long term capital gain u/s 54F?

Please reply to my query.

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2 Replies

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 04 May 2012

The assessee cannot claim exemption in the above case.The Bombay High Court in the case of Prakash vs ITO has rules that for qualifying for the exemption u/s 54F,it is necessary and obligatory to have the investments made in the residential house in the name of teh assessee only.

Regards,

Fatema

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Z ( ) (2965 Points)
Replied 18 May 2012

‘Purchase’ does not mean that the new house must be registered in assessee’s name - For the purpose of attracting the provisions of section 54, it is not necessary that the assessee should become the owner of the property purchased. The word ‘purchase’ occurring in section 54(1) has to be given its common meaning, viz., buy for a price or equivalent of price by payment in kind or adjustment towards a debt or for other monetary consideration. Therefore, for the purpose of applicability of section 54, registration of the document is not imperative - Balraj v. CIT [2002] 123 Taxman 290/254 ITR 22 (Delhi).

source: https://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2005ITAct/casesec54.htm

(govs own site)

CIT Vs. Ravinder Kumar Arora (Delhi HC)

Full exemption even if property is purchased in joint names

CIT Vs. Podar Cements (P) Ltd. & Ors., (1997) 226 ITR 625 (SC), the Supreme Court has also accepted the theory of constructive ownership . Assesse is actual constructive owner

Allowed

There are many other case laws aswell but IMPORTANT ONE IS OF SUPREME COURT WHERE BY VIRTUE OF CONSTRUCTIVE OWNERSHIP EXEMPTION WILL BE ALLOWED