Exemption u/s54 f- long term capital gains

This query is : Resolved

shivaji prasad bhimavarapu (Querist)
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06 October 2016 A peculiar question was posed in a scrutiny assessment by an assessing officer. An assessee purchased a residential flat ( old) for Rs.28,00,000 ( includes stamp duty) on 15.12.2014. He availed a housing loan of Rs.20,00,000/- from Bank. The same have been shown in his books of accounts and the self occupied property, interest thereon were also claimed.Next assessment year, he sold his two different plots in October 2015. Plot 101 for Rs.40,00,000/-.Plot 555 for Rs.62,00,000/-. Working out the indexed cost, I have taken the benefit of higher amount of LTCG as exemption U/s 54 F for the residential flat purchased on 15.12.2014, which falls withing the period of 1 year. After selling these plots, he borrowed money from another Bank and purchased Industrial Shed for his own factory in December 2015.
Assessing officer says, the Industrial Shed is purchased with the sale proceeds of the two Long term held PLOTS and nothing of these sale proceeds have been utilized in purchase of residential flat in the year Prev year 2014-15. The funds for house are from housing loan and own margin money. As there is no advance taken for sold plots, he can NOT grant exemption U/s54 F to set off the flat purchased in earlier year. He wants to issue 148 for Asst year 2016-17, where in Sec 54 F claimed for LTCG on sale of plots.
My argument: There is no rule that the same funds are to be used in purchase of flat for claim of exemption. There is no live connection of funds to specific asset for exemptions.
Can any one give more clarity on this subject.?

Amol S Joglekar

Amol S Joglekar (Expert)
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06 October 2016 your contention is absolutely correct.
To stretch the imagination to yet another extreme one can say......even the same currency notes should have been used to buy the new asset......

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Amol S Joglekar

Amol S Joglekar (Expert)
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06 October 2016 that has never been the intention of the law maker......
immediately you raise the objection.....ask for the CBDT circular and/or departmental instruction, if any, to that effect
The act DOES NOT say anything like that