Plz help capital gain sec 54f

Tax queries 1573 views 8 replies

Dimple

Student

364 Points Joined October 2009

If the assessee has sold a commercial property on 14.03.2012 which was purchased on 13.10.2006

i.e. long term capital asset.

Sale consideration : 3100000

-Indexed cost

(947550*785/519) 1433192

Capital Gain: 1666808

Tax on LTCG 333362

he wants to construct a residential property for claiming exemption u/s 54F

Pls guide what amount should he invest in the construction of property?

Is it the Capital Gain part or Net consideration 3100000?

What if he purchase a new house?

Replies (8)

CS,CA F,Numrologi TusharSampat

CS CA F Numerologist Astrologer Graph

85935 Points Joined May 2010

1. He should invest d net consideration ( as per explainatio to proviso to Sec54F) to get exemption.

2. If he wants to purchase a new house other then constructed house at sam time from capital gain den if purchased house is chargeable to income tax under house property head ,

den exmeption will not be allowd for d house constructed.

Wait for others to comment.

Dimple

Student

364 Points Joined October 2009

Thanks 4 ur reply Tushar

If he purchase a house instead of construction then?

the same net consideration or capital gain part?

Anumanchipalli Sathikonda

Tax Consultant

1559 Points Joined June 2009

Ms.Dimple

and

Mr.Tushar S. Sampath

I have got a doubt. You have said that the property sold was a commercial property. Please clarify that any depreciation was claimed on the said property.

If depreciation was claimed the provisions of section 50 of Income-tax Act, 1961 will apply.

Subject to my above doubt, what Mr.Tushar said is correct.

In any case the entire net consideration has to be spent for acquiring new asset.

Best Wishes

p.s. Mr.Tushar please do not use SMS language. You are a professional man. Please do not think other wise for my comment on your language.

CA SACHIN VIJ

Chartered Accountant

112 Points Joined February 2012

Net Consideration Rs. 3100000/- in both the cases.

Dimple

Student

364 Points Joined October 2009

@ sathikonda: thanks for ur reply.

@ Sachin Vij: thanks for ur reply..

CS,CA F,Numrologi TusharSampat

CS CA F Numerologist Astrologer Graph

85935 Points Joined May 2010

Originally posted by : Dimple
	Thanks 4 ur reply Tushar If he purchase a house instead of construction then? the same net consideration or capital gain part?

Net consideration in case of construction also.

SHARIQUE TAHSEEN

OWNER

57 Points Joined March 2012

Originally posted by : sathikonda
	Ms.Dimple and Mr.Tushar S. Sampath I have got a doubt. You have said that the property sold was a commercial property. Please clarify that any depreciation was claimed on the said property. If depreciation was claimed the provisions of section 50 of Income-tax Act, 1961 will apply. Subject to my above doubt, what Mr.Tushar said is correct. In any case the entire net consideration has to be spent for acquiring new asset. Best Wishes p.s. Mr.Tushar please do not use SMS language. You are a professional man. Please do not think other wise for my comment on your language.

Please confirm:

a) As Sathikonda said, the commercial property will be depreciable asset, in such case section 50 applies and any gain arising out of sale will be SHORT TERM CAPITAL GAIN.

b) But, Sec 54F applies only to LONG TERM CAPITAL GAIN cases only.

c) Therefore, Exemption u/s 54F is not available to the commercial property.

A close look at the above said conditions show that there is enough scope for controversies in each of them. Sale of even depreciable asset held for more than 36 months and obtaining the status of long-term capital asset was held as eligible for tax exemption on re-investment (CIT v. Assam Petroleum Industries (P) Ltd (2003) 262 ITR 587 (Gau)).Obviously, owning residential houses in any other status is to be excluded while computing the number of houses for the purpose of this exemption.

When the net consideration is fully deployed in acquiring or building a residential house, whether section 50C could be applied is a recent controversy.

In Gouli Mahadevappa v. ITO (2011) 9 ITR (Trib) 129 (Bangalore), it was held that Section 50C and Section 54F operate in different fields. Section 54F cannot impede the operation of Section 50C and the proportion of actual net sale consideration so reinvested in residential house was held as eligible for exemption under Section 54F. Independent of the exemption under Section 54F, the deeming provisions contained in Section 50C will apply.

However, a contrary ruling could be found in Gyan Chand Batra v. ITO (2010) 45 DTR (JP) (Trib) 41 wherein it was held that ‘full value of consideration' as mentioned in Explanation to Section 54F(1) is not to be construed as having the same meaning as it is assigned in Section 50C.