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Ltcg query

A.K.AGGARWAL (CHAIRMAN) (26 Points)

10 October 2014

Respected Sir,

Please advice me on following issue.

I have long term capital gain from sale of a house property A during the year 2010-11 , this gain I invested by purchasing 50% share in another house property B of my son who is now major( above 18 Years age) . Here I wish to mention that initially the property B was purchased jointly by me and my minor son in the year 1998-99, thus my son now in 2010-11 sold his 50% share to me and i claimed exemption u/s.54. I want to ask if my investment is right as per provisions of section 54.

Pls reply asap.

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7 Replies

Mihir (Wealth Manager) (5293 Points)
Replied 10 October 2014

Looking at the section 54, an assessee, such as yourself, is in fact, investing LTCG in another property within a specified period to avail exemption. So, exemption u/s 54 should be available in your case.

However, the question could arise as to how did you purchase property B in 1998-99 in joint name along with minor son, because minor cannot enter into a contract and also cannot have contributed 50% of his share in purchasing the property B.

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A.K.AGGARWAL (CHAIRMAN) (26 Points)
Replied 10 October 2014

Originally posted by : Mihir
	Looking at the section 54, an assessee, such as yourself, is in fact, investing LTCG in another property within a specified period to avail exemption. So, exemption u/s 54 should be available in your case. However, the question could arise as to how did you purchase property B in 1998-99 in joint name along with minor son, because minor cannot enter into a contract and also cannot have contributed 50% of his share in purchasing the property B.

Sir, the 50% portion of minor was purchased from his money which he got by way of gifts from relative, myself, and his Grand Father and maternal Grand Father. Actually the amount received by him from his birth is much more than 50% of the flat cost which jointly purchased in 1998. these moneis were been used by me in business till 1998 and then in 1998 I paid for his portion of flat.

Mihir (Wealth Manager) (5293 Points)
Replied 10 October 2014

In purchasing 50% share in the property, you cannot prepare a sale deed. You might have to prepare a release deed, wherein your son his releasing his 50% rights unto you for a consideration which should not be less than the stamp value. In that case, the exemption u/s 54 shall pass the test.

Wait for more replies.

Kashish Gupta (B.com (H) , ACA) (368 Points)
Replied 10 October 2014

According to me, in 1998-99 when you purchased property in name of your son jointly, all consideration had been paid by you and therefore it is covered under deemed ownership...under this you were deemed as owner of property till your child was minor...but when he has become major, he become eligible to claim right over income from the said property, of he opts to do so....make him to opt....then you will be eligible to claim deduction

However, this planning is of no use to you because doing so capital gain will arise in hands of your son and for him cost of acquisition will be price paid by you in 1998-99

Kashish Gupta (B.com (H) , ACA) (368 Points)
Replied 10 October 2014

Originally posted by : A.K.AGGARWAL

Originally posted by : Mihir

All income of minor is to be clubbed with the income of parent whose income is higher.

Looking at the section 54, an assessee, such as yourself, is in fact, investing LTCG in another property within a specified period to avail exemption. So, exemption u/s 54 should be available in your case.

However, the question could arise as to how did you purchase property B in 1998-99 in joint name along with minor son, because minor cannot enter into a contract and also cannot have contributed 50% of his share in purchasing the property B.

Sir, the 50% portion of minor was purchased from his money which he got by way of gifts from relative, myself, and his Grand Father and maternal Grand Father. Actually the amount received by him from his birth is much more than 50% of the flat cost which jointly purchased in 1998. these moneis were been used by me in business till 1998 and then in 1998 I paid for his portion of flat.

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A.K.AGGARWAL (CHAIRMAN) (26 Points)
Replied 11 October 2014

Dear Mr.Mihir, cud u pls share with us your contact details, is it possible if we can meet to discuss this issue in detail. pls reply. Our contact details 9820929239/9819044349/022-49209000 (100 LINES)

Mihir (Wealth Manager) (5293 Points)
Replied 11 October 2014

Dear Mr. Aggarwalji,

I have just relocated out of Mumbai, and in the middle of setting up my house and my business, and so I am not taking any new assignment at the moment. But you may add me and if I could be of any assistance then you may send me PM from here.

Regards.