Deduction under section 54 of i.t.act

Dear Experts,

one of my client being a lady has owned a residential house property since 2005.

She is regular I.T.Assesse.During F.Y.2013-14 for which a return is to filed now prior to 31/03/2015.

She has sold the said house in June,2013 & purchased another residential house property in April,2013.The investment in new house property from means of unsecured loans from relatives which is exceeding the sales proceeds from the sale of old house property likely to be sold in June,2013.

Thereafter she has paid the said unsecured loans from the sales proceeds on sale of old house property during the same year.

Now query is as whether she can claim a deduction under section 54 of I.t act to avoid long term capital gain on sale of house property as she invested entire sales consideration in purchase of another new house property to claim the benefit of section 54 or not.

Please reply at the soonest to enable file the income return prior to 31/03/2015.

Thanks in advance for prompt reply.

Dear Professional,

Go through the following for the better understanding.

It is not necessary to acquire the new property to claim exemptions u/s 54 and 54F by spending the money from the exact source of the sale of that property. The Kerala High Court in the case of ITO v. K.C. Gopalan [2000] has held that law does not insist the sale consideration obtained by assessee itself should be utilized for purchase or construction of new house property. Assessee is entitled to exemption u/s 54/54F , even though for the purchase or construction of new house, the amount that was received by way of sale of his old property/asset as such was not utilized.

I hope that the information provided will help you to solve the problem.