Long term capital gains on residential property

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PRAKASH V (Querist)
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22 July 2012 I built an independant house on a 2687 Sq Ft land (settled in my favour by my father in 1979) out of loan availed from my employer Indian Bank. The total amount spent was around Rs.6 lakhs availed in various periods and the present Indexed cost of acquisition comes to Rs.18 lakhs.
Now I have sold 2000/2687 Sq Ft undivided share of land to a builder who is going to demolish the building and construct flats for a consideration of 1 flat measuring 1200 Sq Ft and cash compensation of Rs.85 lakhs. If I invest in another property for Rs.75 lakhs out of the sale compensation of 85 lakhs, will I get Long Term Capital gain exemption.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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22 July 2012 Please clarify 2000/2687 Sqft undivided share of land ? If you feel it is necessary.
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If I assume it, as if you have given your house to the developer fro demolition, you would not have any objection.
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When the developer takes over the site from you, it can be said that you have transferred the Residential House to the builder for 1 flat & 85.00 lac.
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What ever sales consideration you are getting it is against your old residential house.
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The FMV of the New Flat +85.00 lac can be said as the sales consideration received by you. If you received so much, and invest the capital gains - it seems that -your capital gain is being invested in two residential units.
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It has been decided in D.Anand Basappa V ITO[2004] 91 ITD 53 (Bang.), Premprakash Bhutani v. CIT [2007] 110 TTJ (Delhi) and some other cases that there is no bar on acquiring more than one residential house out of proceeds of one residential house.
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PRAKASH V

PRAKASH V (Querist)
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23 July 2012 Sir

I will be selling only 2000Sq Ft undivided share of land out of the 2687 Sq Ft keeping 687 Sq Ft for the construction of my flat measuring 1300 Sq Ft. The promoter will demolish the building and construct around 5200 Sq Ft in the total area of 2687 Sq Ft land and out of which he will give me one flat of 1300 Sq Ft as mentioned above.

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