Exemption u/s 54 of the income tax act

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This query is : Resolved

Harrshal M Dakle (Querist)

08 September 2011 Dear Friends,

One of my clients has sold a residential house in dec 2010 and capital gain on the same is Rs 50 laks. Now in july to sep 2008 period advance of Rs 55 laks was paid to the builder for purchase of flat. Possesion of flat has not been recd till date and even the sale agreement has not been registered. can i use the said adv payment to builder for claiming exemption u/s 54 or are these two transactions seperate.Pl note that stil payment of close to Rs 25 lakhs is yet to be paid to the builder

CA.E.Deepan Chakravarthy

CA.E.Deepan Chakravarthy (Expert)

08 September 2011 If the possession is not given till date, then your client can claim exemption.

What is the evidence for advance money paid to the builder? whether any agreement has been made.
If the agreement was made on that period, cancel that agreement, pass a book entry for returning of advance payment, put a new agreement by mentioning the advance amount, pass a book entry for the fresh payment of advance, pay the remaining amount within two years, take the possession and claim exemption.
If the agreement was not made, pass a book entry for the returning of advance amount, again pass a entry for the fresh payment of advance amount.
Have a gap between cancellation and fresh payment.
This is my opinion. Let us see, what other experts say.

CA.M.V.RAMACHANDRA RAO

CA.M.V.RAMACHANDRA RAO (Expert)

08 September 2011 in my opinion your client can not claim exemption u/s 54 as he not taken the possession, not paid the amount and not provided in any deed or agreement.

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