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Capital Gain Exemption u/s 54 F

Sowmya.S.Balan (Paid Assistant) (749 Points)

24 December 2009

Whether exemption u/s 54 F is withdrawn when the house purchased is transfered within 3 years by way of gift

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16 Replies

Nitesh Chordia (Business) (231 Points)
Replied 24 December 2009

yes whether u sell house or gift it exemption shall be withdrawn

Rakesh (Asst Manager) (209 Points)
Replied 25 December 2009

Yes exemption shall be withdrwan

CA Sumit Arora (CA) (1411 Points)
Replied 25 December 2009

Yes Exemption Shall be withdrawn .

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 25 December 2009

Hiiiii...

Such transfer is never considered as TRANSFER, its a gift and not sales...

RITESH KOTHARI (B.COM, FCA, DISA(ICAI)) (778 Points)
Replied 25 December 2009

yes the exemption will be withdrawn.

kalyani (Article staff) (42 Points)
Replied 25 December 2009

yes exemption will be withdrawn since it is transferred within the period of three years eventhough tranferred by way of gift

Vikram Gagneja (a/c) (108 Points)
Replied 25 December 2009

no the exeption is not withdrwan because house transfered as gift is not treated as transfer

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 25 December 2009

Transactions are not deemed to be transfer for the purposes of capital gains [section 47].

The following transfers shall not be deemed as transfers: -

any distribution of capital assets on the total or partial partition of a Hindu undivided family;
any transfer of a capital asset under a gift or will or an irrevocable trust;
any transfer of a capital asset by a company to its subsidiary company, if-
-The parent company or its nominees hold the whole of the share capital of the subsidiary company, and
-The subsidiary company is an Indian company;
any transfer of a capital asset by a subsidiary company to the holding company, if-
-the whole of the share capital of the subsidiary company is held by the holding company, and
-the holding company is an Indian company:

Provided that nothing contained in clause (iv) or clause (v) shall apply to the transfer of a capital asset made after the 29th day of February, 1988, as stock-in-trade;
any transfer, in a scheme of amalgamation, of a capital asset by the amalgamating company to the amalgamated company if the amalgamated company is an Indian company;
any transfer, in a scheme of amalgamation, of a capital asset being a share or shares held in an Indian company, by the amalgamating foreign company to the amalgamated foreign company, if-
-at least twenty-five per cent. of the shareholders of the amalgamating foreign company continue to remain shareholders of the amalgamated foreign company, and
-such transfer does not attract tax on capital gains in the country, in which the amalgamating company is incorporated ;
any transfer by a shareholder, in a scheme of amalgamation, of a capital asset being a share or shares held by him in the amalgamating company, if-
the transfer is made in consideration of the allotment to him of any share or shares in the amalgamated company, and
the amalgamated company is an Indian company:
any transfer of a capital asset being bonds or shares referred to in sub-section (1) of section 115AC, made outside India by a non-resident to another non-resident ;
any transfer of agricultural land in India effected before the 1st day of March, 1970;
any transfer of a capital asset, being any work of art, archaeological, scientific or art collection, book, manuscriptttt, drawing, painting, photograph or print, to the Government or a University or the National Museum, National Art Gallery, National Archives or any such other public museum or institution as may be notified by the Central Government in the Official Gazette to be of national importance or to be of renown throughout any State or States.
Explanation.-For the purposes of this clause, "University" means a University established or incorporated by or under a Central, State or Provincial Act and includes an institution declared under section 3 of the University Grants Commission Act, 1956 (3 of 1956), to be a University for the purposes of that Act;
any transfer by way of conversion of bonds or debentures, debenture-stock or deposit certificates in any form, of a company into shares or debentures of that company.
any transfer made on or before the 31st day of December, 1998 by a person (not being a company) of a capital asset being membership of a recognised stock exchange to a company in exchange of shares allotted by that company to the transferor.
Explanation.--For the purposes of this clause, the expression "membership of a recognised stock exchange" means the membership of a stock exchange in India which is recognised under the provisions of the Securities Contract (Regulation) Act, 1956( 42 of 1956);
any transfer of a capital asset, being land of a sick industrial company, made under a scheme prepared and sanctioned under section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985( 1 of 1986) where such sick industrial company is being managed by its workers' co-operative :

Provided that such transfer is made during the period commencing from the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of that Act and ending with the previous year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses.

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 25 December 2009

So, in ur given case, there's been no transfer at all.........

Therefore, exemption won't be withdrawn...

C.Balaji (Learner) (1867 Points)
Replied 25 December 2009

No.. gift is not regarded as transfer...therefore i think exemption u/s 54f will not be withdrawn...

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 25 December 2009

Now, as per all information to me.. i think exemption won't be withdrawn....

But few other members and especially MR. KOTHARI, being a CA, suggest that it will be withdrawn... I respect their answers and so asking any valid reason for withdrawing exemption... I know, i'm not cent percent perfect, but at the same time, i just need some clarifications for withdrawal...

Regards,

DHIRAJ

Archit Goyal (Learning Professional) (344 Points)
Replied 25 December 2009

bro ur exemption will not be withdrawn as u doesnt amount to transfer the asset

the above transfer is not to be treated as transfer in capital gain charging section

meant to be transfer by gift or Irrevocable trust

Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such new asset is transferred.

nicky (Ca student) (112 Points)
Replied 07 January 2010

ya ,,its true exemption can not be withdraw because it is not treated as a transfer......

Max Payne (employed) (2574 Points)
Replied 07 January 2010

Dhiraj appears correct to me....

Section 45 says capital gains will be charged to tax in the year of accrual, save as provided by section 54, 54B, 54F etc.

Section 54F says where the new asset is transferred within 3 years, the LTCG not charged under section 45 earlier, now becomes taxable in the year of transfer.

The charging section still remains sec 45, not 54F.

Section 47 starts off as "Nothing contained in section 45 shall apply to the following transfers" and the 3rd clause covers gifts, irrevocable trusts and wills.

Even though it is transfer within the meaning of section 2(47), it is not a transfer chargeable under section 45.

Hence, i think Dhiraj is correct.