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Capital gain


05 January 2014  

Dear Friends,

I have a query related to Capital gain and need advice from you all , appreciate if somebody can refer to any case laws supporting your answer.

--->  NRI assessee buys an  agriculture land (not within 8 Km limit of municipality, population less than 10,000 etc)  in India 4 years back for INR 800,000 and is kept ideal (no activity done on that) now this land is being sold to Govt (Housing board society) for INR 50,00,000 .

Queries are -

1. Is this land be treated as capital assets , although the land opposite  to it is declared as SEZ ?

2. Can exemption under section 54F be claimed if NRI wants to repartiate this money outside India to buy a house outside India, since words" IN INDIA" is missing in the exemption section and it can be safely claimed that since assessee is NRI obviously he will stay outside India so house to be purchased outside India only.?

3 What are the RBI/ FEMA regulation regarding repatriation of this money outside India. ?

thanks in advance for your replies.




 1 Replies

Z (         ) (2945 Points)
Replied 05 January 2014

It is a Long term capital asset.Since no aggriculture work was done has it has lost its title of agriculture land.(Siddhart J.Desai GUJ HC)


There is a problem in 2, there are contrary judgements in this regards

Income Tax Act, 1961 applies only to India. Leena J Shah v. ACIT (2006) 6 SOT 721 (Ahd) Hence Exemption can not be availed.
Contra Prema P Shah v. ITO 100 ITD 60 (ITAT) (Mum.) section 54 does not impose any bar on acquisition outside India.
Just my personal opinion , The purpose of the exemption was to create more housing facility in India as there is need for more house till date, people stay on street and huts why should IT ACT give exemption for constructing home abroad? "Income Tax Act, 1961 applies only to India." Yes, so how about exempting income which accrue arises outside India for Ordinary residents in India?
High court decisions are binding on jurisdictional basis (SUPREME COURT)[I'll cite case when I'll be able to recall it)
In CIT vs. Vegetable Products Ltd 88 ITR 192 SUPREME COURT it was held that in case of controvarcial judgement,judgement which is favourable to assesse should be followed.
So if jurisdiction of your client is AHD,EXEMPTION CANT BE ALLOWED TO YOU, unless contrary held by SC
If clients jurisdiction is MUM then exemption will be allowed
In other case, you might have to follow channel of appeal if AO disallows it. Since in such a case AO can say that he is not bound by decision of MUM HC.
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