applicability of section 54 or 54F

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This query is : Resolved

Naveen Kumar Jain (Querist)

08 July 2011 1. A has i/3rd share in a single residential house, including land, owned by 3 persons (Brother and sisters) A transfers 25% of his share to a third party on consideration amount of X. Will the capital gain arising out of this transaction be capital gain arising on transfer of residential house, whereby benefit of sec 54 can be availed? Or it will be covered under LTCG arising on transfer of a capital asset, not being a residential property and only benefit of sec 54F can be availed?
2. A has another house owned solely by him on the date of transfer of 25% of his share in the first house. If 54F is applicable for the above, can he still invest the consideration recieved in buying or constructing another house to get benefit of 54F?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

09 July 2011 In case of a single residential house is it possible to sale 25% of 1/3 rd share and that too to a third party ?

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God only knows, how residential arrangements will be possible there for all ?

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However, relying upon the facts given by Mr. Jain. it seems possible that the house can be divided in more than one residential units.

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It can be assumed that what Mr A sales is, nothing but a small residential unit. 75% of 1/3rd is another residential unit to which Mr. A keeps with him.

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The asset sold should be termed as a residential house only, as the said portion could have been purchased by the third party for the purpose of residence only.
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(Third party can not open a shop there....humour)

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By treating the same as a resi. house
claiming exemption U/s 54, will be possible even if he will be purchasing his 3rd house.

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If you go for Section 54F, you will not get it.

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