Hello guys...
An HUF assessee hasd a residential building and it converted it into a commercial property and then sold it out.
Now as per capital gain tax exemption to be claimed whether u/s 54 or 54F? Because before it was a residential house.
One more thing it has purchased land not any residential house so exemption under both above sectiion can be claimed or not????
Thanks in advance gyus.............
hi anjali,
exemption can be availed under 54F by claiming that the land s purchased for the purpose of constructon of house.However, the house must be constructed within 3 years
Dear Anjali,
Sec 54 applies -
>>>>> Asset Sold should be Residential House
>>>>> Asset Bought should be Residential House.
Sec 54F applies -
>>>>> Asset sold should be other than Residential House
>>>>> Asset Bought should be Residential House
Now u have mentioned that Asset Bought is a "Land" so neither of the section would come into picture.
And if u want to make it more tougher then I can help you - AO will treat this conversion from residential Property to Commercial as a Capital Gain u/s 45(2) & further will apply PGBP when House is actually sold.
Take the value as on the date of conversion and tax it in the year of sale.
Now, the building was residential and u purchased a land, then no exemption will be available as the NEW asset should be a residential property.
AS PER SECTION 54 AN EXEMPTION CAN BE AVAILED ONLYWHEN A LONG TERM RESIDENTIAL HOUSE PROPERTY HAS BEEN SOLD SINCE IN THIS SITUATION A COMMERCIAL PROPERTY HAS BEEN SOLD THERFOR ENO EXEMPTION CAN BE AVAILED u/s 54. AS FAR AS 54 F IS CONCERED IF ANY ASSET OTHER THEN RESIDENTIAL HOUSE PROPERTY IS SOLD /TRANSFERD THEN EXEMPTION CAN BE AVAILED ONLY AND ONLY IF A RESIDENTIAL HOUSE PROPERTY IS TO BE PURCHASED . SINCE IN THIS THE LAND IS ACQUIRED NOT FOR RESIDENTIAL PURPOSE THEREFORE NO EXEMPTION CAN BE AVAILED u/s 54 F
Sec 45(2) Conversion of capital asset into stock in trade will be applicable on conversion and such conversion will be taxable as capital gain in the year in which the house is sold and the difference bw selling price and FMV on the date of conversion will be PGBP income taxable in the same year with no exemption us 54 or 54g
sec 54F shall be applicable only if Land is Purchased for residential purpose and constucted within 3 years. Sec 45(2) shall be only applicable if property has been converted into stock in trade so if u want to apply dis section u have to compile whether the property been converted into stock or not ( RESIDENTIAL HOUSE CAN BE STOCK FOR REALTOR)
CAclubindia
