Long term capital section exemption u/s 54

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Querist : Anonymous

Querist : Anonymous (Querist)

14 January 2013 Whether in following circumstances LTCG exemption u/s 54 will remain or if not the F/Y in which same will be taxable with reasons thereof :-

Mr. X gained Rs 50L on Sale of his only Residential House on 31-12-2008. To Save Tax he invested u/s 54 as per detail given below :-

(a) First Rs 60 Lac on 15-2-2009
(b) Further Rs 40 Lac at different period
during next 2 years
(C ) Construction completed on 15-10-2011.
(D) Newly Constructed House was sold on 22-
3-2012 for Rs 1.3 Crore.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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14 January 2013 1. The prescribed period for keeping the new asset with the assessee is 3 years from its purchase or construction, as the case may be.
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2. Here if we go rigidly with the wordings of the Section (as a stern AO)- then the condition of 3 years is breached as the house is said to be constructed on 15.10.2011 and sold on 22.03.2012.
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3. If such is the case, Cost of acquisition has to be reduced by 50 lakhs and STCG of Rs 80 lakhs becomes taxable and assessee may come into a state of depression by paying tax on such a huge gain.
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4.It is also clear that (1.30-.60-.40)=.30 crore is the minimum taxable STCG on which assessee would not mind in paying tax.
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5. There is no proper definition of "Purchased" or "Constructed" in the Section. One has to go through the spirit of the Section. If a person sales Original Asset and invests entire capital gain in the new asset -the date when such obligation is discharged by the assessee, should be construed as the date of purchase or construction.
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6. In the above case the obligation U/s 54 was itself met by the assessee on 15.02.2009 when he has invested the capital gains. After this date any investment made by the assesee was optional and not obligatory.
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7. Assuming 15.02.2009 as the date of construction for the purpose of S 54, the assessee has to retain this property till
15.02.2012.
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8. In the instant case , the property was sold on 22.03.2012 in adherence to the requirement of 3 years as prescribed U/S 54. As such, The Benefit of Long Term capital Gain enjoyed for AY 2009-10 can not be snatched away.
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9. The opinion given hereinabove have scope of improvement subject to the facts of the case and may not be treated as final.
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