Exemption u/s 54f

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This query is : Resolved

anupama shenoy (Querist)

10 December 2011 The case is as follows.
An HUF and a woman assesee has jointly invested the long term capital gain, araising to them seperately, in a flat. Part of the consideration for purchase of flat is taken as loan.
The AO is contending that the above is the case of co-ownership as per sec 26. Sec 26 can even be applied for the Sec 54F and exemption is denied on the above ground. Further, AO is of the opinion that the total amount of exemption claimed by the HUF and the woman assesee is clubbed and taxed as an income in the hands of AOP.

Is the contention of the AO is correct?
Please give reference to the Caselaws in support of the reply.

Thanks.......

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

11 December 2011 The AO is always correct. If he says that the new asset is a co-ownership property, we can not deny it. The shares of HUF and Woman Assessee are definite and ascertainable. Can the AO deny it? I think... he can not (as you have calculated capital gains in both the cases separately by following the principle of a definite share).
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If he can prove that share is undetermined and indefinite, then only he can go with the theory of AOP, otherwise not.
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Because, on going ahead...the same section says that such persons shall not be assessed as an AOP in respect of such property.
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As such it can be submitted respectfully that the AO is not correctly interpreting Section 26.

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