Long term capital gain exemption

15 March 2019
Mr. X is one of the Partners in an LLP which has invested in making a residential complex with a few shops. He has sold his own house to invest in this project of the LLP and in return has received an Allotment Letter of a residential flat in the same complex the LLP is going to build. Will he get the LTCG deduction u/s 54 ???
Points to be considered: 1. Mr. X has not directly purchased the flat, he has invested in the LLP which needs the funds to build the complex and in return will get a flat which has been pre-booked in his name.
2. As per Mumbai High Court, date of allotment is considered as date of acquisition of Asset.
Requesting you to provide relevant Section/judgement/notification justifying the answer to the same. Thank you.

Amol S Joglekar (Expert)

Click to Talk 16 March 2019
No. The exemption is not available for investment in LLP

Tehseen (Querist)
16 March 2019
But he has received an allotment letter of residential flat in return for the investment made. Will that not count as Purchase of residential property out of proceeds of sale of residential property?

Amol S Joglekar (Expert)

Click to Talk 17 March 2019
No. The two transactions are separate

Tehseen (Querist)
25 March 2019
Could you please provide relevant case laws, Sections of acts, etc. supporting your this conclusion. Thank you.

Amol S Joglekar (Expert)

Click to Talk 25 March 2019
can you please elaborate, what accounting entry is passed by LLP when it gave the allotment letter to Mr. X?

Tehseen (Querist)
26 March 2019
I would like to rephrase the question. There was no capital investment in the LLP in which Mr. X was a partner but there was simply a purchase of flat from the LLP which is constructing a complex. Mr. X has purchased this flat from the LLP in which he is a partner out of the proceeds of sale of his residential property.
The entry passed by the LLP would be as under:
bank a/c dr
to stock (flat) a/c

Amol S Joglekar (Expert)

Click to Talk 26 March 2019
That is better. Reconstructed question suggests that you can very well get the benefit of section 54.

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