29 June 2009
Eg: Mr X sold a residential flat on march 2008 for 10 lacs. out of the sale proceeds rs 2lacs was used to pay loan of another residential property purchased on November 2006. whether he can claim benefit under section 54 of the income tax act for Rs 2 lacs paid??
the dedutions which an assesse can claim form sale consideration is given u/s 48. out of which one is cost of acquisition and cost of transfer of the house sold out.
so loan related to another house property can not be claimed as deduction u/s 54.
29 June 2009
Hi As the property is purchased before april 2007 , you are not entitled to get benefit u/s. 54. The relevant date is the date of purchase and not of payment.
CIT Vs T.N.Arvinda Reddy [1979] 120 ITR 46 (SC) held that puchase need not necessarily be on cash and carry basis. The word 'purchase' in Section 54 must be interpreted in its ordinary meaning, as buying for a price or equivalent of price by payment in kind or adjustment towards an old debt or for other monetary consideration. Based on this can Mr. X claim deduction under Section 54.
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