CA J.Alamelu lakshmi (Chartered Accountant) (852 Points)
28 July 2014One Civil Contractor sold his long term asset Land during FY 2013-14 for Rs.70 lacs. He has invested the proceeds around Rs.50 lacs in another land in which he plans to construct flats and sell in the future.
What can be the options to save tax in this case?
Tribhuvan Aditya Singh
(Student as well as Self-employed)
(3710 Points)
Replied 29 July 2014
Mihir
(Wealth Manager)
(5293 Points)
Replied 29 July 2014
First compute the LTCG. He may claim exemption u/s 54F when purchasing another plot. But later if he construct a building and sells flats, they will have to be converted into stock-in-trade.
Tribhuvan Aditya Singh
(Student as well as Self-employed)
(3710 Points)
Replied 29 July 2014
CA J.Alamelu lakshmi
(Chartered Accountant)
(852 Points)
Replied 29 July 2014
Yes. That is what the problem. We cant claim Exemption u/s 54F since the amount is invested in land. Also he does not have enough funds for sec 54EC.
What will be the impact if the sold land is deemed to be stock in trade from the date of its purchase itself ? In that case I guess, the sale consideration would be taxed @ 30% when compared to LTCG tax of 20%. 
Mihir
(Wealth Manager)
(5293 Points)
Replied 29 July 2014
Yes, i am wrong but land also is an asset and exemption should be allowed. Not enough funds to construct a house nor buy bonds. Maybe some adjustment in black and white will reduce his liability.
Tribhuvan Aditya Singh
(Student as well as Self-employed)
(3710 Points)
Replied 29 July 2014
CA J.Alamelu lakshmi
(Chartered Accountant)
(852 Points)
Replied 29 July 2014
But 54F exemption wont be available since the assessee purchased land to construct flats and sell.
Tribhuvan Aditya Singh
(Student as well as Self-employed)
(3710 Points)
Replied 29 July 2014
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