WHETHER EXEMPTION U/S 54 IS ELIGIBLE IN THIS CASE ?

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An individual aged 72 sold a residential property and bought two new ones within the same financial year. Although the new properties were registered in her son's name, the funds originated from her bank account. The core question is whether she can claim exemption under Section 54 for the Long Term Capital Gains (LTCG) tax. While precedents exist supporting such claims, the issue is debated, with some rulings limiting exemption to one property purchase, especially if capital gains exceed ₹2 crore, a rule applicable from the 2020-21 assessment year.

D R V Narendra Reddy

D R V Narendra Reddy (Querist)
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01 August 2020 Assessee is an Individual aged about 72 years during the financial year 2019-2020, she transferred a residential house property and purchased two other residential properties within the same financial year. But the properties acquired were in the name of her son and the sources for acquisition were transferred from her bank account to the sellers accounts. Now, the query is whether she can claim exemption under section 54 for the LTCG on the sale of residential house property.

BY: D R V NARENDRA REDDY

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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01 August 2020 She can claim exemption based on the decision in Third ITO Vs. S. Varadarajan (1989) 33 TTJ (Mad) 466, but divergent decision were also reported meaning thereby issue is debatable.

But in Pawan Arya Vs. CIT (2011) 237 CTR (P & H) 210 court allowed exemption for only ONE house wherein more than one house is purchased.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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03 August 2020 Two residential house can be purchased if the capital gains does not exceed Rupees two crores. This amendment is applicable from assessement year 2020-21.
I stand corrected.

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