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Long term capital gain

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Querist : Anonymous

Querist : Anonymous (Querist)

27 July 2011 Sir, kindly do me a favor:-
1. A person bought a residential Plot in June 2005 for Rs. 1.10 lacs and sold the same plot in June 2010 for Rs. 6.47 lacs.
2. Considering the CI Index the acquisition cost of the plot is 1.58 lacs. Thus the LTCG is 6.47 - 1.58 = 4.89 lacs.
3. He bought a house for Rs. 12 lacs in June 2011 out of which Rs.9 lacs is the bank Loan.
4. Sir, Now the query is about the amount of the LTCG will he be exempted from the tax upto the extent of Rs. 3.00 lacs (i.e Rs. 3.00 lacs his contribution + 9 lacs Bank's contribution= 12 Lacs Or the full amount of LTCG which is =4.89 lacs be exempted from tax.
5. My contention is that as the property purchased is for Rs. 12 lacs which is more than the LTCG of 4.89 lacs therefore the amount should not be taxable. Whether the amount be sourced out of the Bank loan or arranged by his own self should not matter.
6. Please help...

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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27 July 2011 ITAT has taken divergent views.

i) Borrowed funds can be utilized for investing in new asset. Ref :- CIT Vs. Dr. P.S.Pasricha 20 SOT 468 (Mum).

ii) Borrowed money can't be used for 54F. Ref:- Milan Sharad Ruparel Vs. ACIT (2009) 20 DTR 289 (Mum).

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