smruti varathan (Final) (25 Points)
10 December 2010I need to get a case solved for my Auditor, please help.
One of our client owns 2 houses, one of which is Self Occupied and the other Let Out. The One which was Let Out has been Sold and the Sale proceeds have been Invested in another House Property. Can Deduction be claimed U/s 54???
Please refer Case law if any.
Thankyou
NIKIT SHETH
(Chartered Accountant)
(55 Points)
Replied 10 December 2010
Yes deduction can be claimed in case of individual. As the condition to claim deduction does not mention that the assessee should own not more than one house. This condition is applicable u/s 54G if the proceeds are invested elsewhere... So deduction u/s 54 is available.......
Raju (Meger, Aquisi,Takeover)
(Audit Assitant)
(56 Points)
Replied 10 December 2010
yes We can claim exemtion under section 54 becasue it doesn't matter that hawmany house property you hold at the time of transfer of house property
But under section 54f we can not claim the exemption because we cannot own more than one residence house property at the time of transfer.
C.Balaji
(Learner)
(1867 Points)
Replied 10 December 2010
Dear smruti varathan...
Exemption u/s 54 is allowed to the above issue.... No harm in claiming the exemption u/s 54.... Sale of Res. House and Purchase/construction of another res. house....
CA Deepesh Ruhela
(Keen to Learn)
(3271 Points)
Replied 10 December 2010
Dear Raju 54F available on t/f of Capital Asset other than residential house property and condition for such,the assessee should not own more than one residential house, (excluding the new house) on the date of transfer.
As the condition to claim deduction u/s 54 does not mention that the assessee should own not more than one house... So deduction u/s 54 is available.......
CA CS Amit Borade
(Chief Accountant)
(2828 Points)
Replied 10 December 2010
Capital gains on transfer of a long-term capital asset other than a house property [Sec. 54F]
The provisions of section 54F are given below—
Conditions - Exemption under section 54F is available if the following conditions are satisfied—
WHO CAN CLAIM EXEMPTION -
Under section 54F, only an individual or a Hinduundivided family can claim exemption. In other words, no other person is eligible for claiming exemption under section 54F.
WHICH ASSET IS QUALIFIED FOR EXEMPTION -
Under section 54F, exemption is available only if the capital asset which is transferred is a long-term capital asset but other than a residential house property (for instance, it may be a plot of land, commercial house property, gold, share or any asset but not a residential house property).
WHICH NEW ASSET SHOULD BE PURCHASED OR ACQUIRED -
To claim the exemption under section 54F, the taxpayer will have to purchase a residential house property (old or new) or construct a residential house property (hereinafter referred to as “new house”). It may be in India or outside India. The new house should be purchased or constructed within the time-limit given below—
The following points should be noted :
Time-limit
For purchasing a new house It should be purchased within one year before, or within 2 years after, the date of transfer of the original asset.
For constructing a new house The construction should be completed within 3 years from the date of transfer of original asset.
Time-limit in the case of compulsory acquisition - In case of compulsory acquisition, the time-limit
of 1 year, 2 years or 3 years shall be determined from the date of receipt of compensation (whether initial or additional).
Construction may commence before transfer of capital asset - Construction of the house should be completed within 3 years from the date of transfer of the original asset. Date of commencement of construction is irrelevant. Construction may be commenced even before the transfer of the original asset.
>>>> Allotment by co-operative societies - Case of allotment of flat under the self-financing scheme of DDA (or similar scheme of co-operative societies or other institutions) is treated as construction of house for this purpose—Circular No. 471, dated October 15, 1986 and Circular No. 672, dated December 16, 1993.
>>>> Holding of legal title not necessary - Holding of legal title is not necessary. If the taxpayer pays full consideration or substantial portion of it (in terms of the agreement to sell) within the stipulated period given in the table above, the exemption under section 54F is available, even if possession is handed over after the stipulated period or the sale deed is registered later on.
Residential house should be purchased/acquired (may or may not be used for residential purposes) - The requirement of section 54F is that the property should be a residential house. The use of the property is not the relevant criterion to consider the eligibility for benefit under section 54F. What is required is investment in a residential house. Mere non-residential use would not render a property ineligible for benefit under section 54F, if it otherwise is a residential house—Mahavir Prasad Gupta v. CIT [2006] 5 SOT 355 (Delhi).
Investment in the name of transferor - It is necessary and obligatory to have investment made in residential house in the name of transferor only and not in name of any other person—Prakash v. ITO [2008] 173 Taxman 311 (Bom.).
NOT MORE THAN ONE RESIDENTIAL HOUSE PROPERTY SHOULD BE OWNED BY
TAXPAYER - Under section 54F, exemption is available only if on the date of transfer of the original assets, the taxpayer does not own† more than one residential house property (other than the new house). He should also not purchase within a period of two years after such date (or complete construction within a period of 3 years after such date) any residential house1 (other than the new house).
OTHER POINTS - One should also keep in view the following—
1. If by applying section 54F, there is no income in hands of a minor child to be added under section 64(1A), the benefit under section 54F cannot be denied to minor child on the ground that father of minor child had two residential houses at the time of transfer of the capital asset—CIT v. Madan Lal Bassi [2004] 88 ITD 557 (Chd.)
2. Where an assessee purchases ground floor of a house and later, when vendor builds first floor, the assessee purchases first floor by a separate sale deeds, the assessing authority is not justified in disallowing the assessee’s claim for exemption of capital gains on ground that ground floor and first floor constitute two residential houses and, therefore, provisions of section 54F(2) are attracted— Hansa Bai Sanghi v. ITO [2004] 89 ITD 239 (Hyd.).
Scheme of deposit in respect of exemption under section 54F - The provisions are given
below—
What is the scheme of deposit - Under section 54F, the new house can be purchased/constructed within the time-limit given above (i.e., 2 years/3 years from the date of transfer of original asset). The taxpayer has to submit his return of income on or before the due date of submission of return of income (i.e., generally July 31 or September 30 of the assessment year)*. If the amount is not utilised for purchase/construction of the new house till the due date of submission of return of income, then it should be deposited in “Capital gains deposit account scheme” (hereinafter referred to as deposit account). On the basis of amount utilized in acquiring the new property and amount deposited in the deposit account, the Assessing Officer will give exemption under section 54F.
How the deposit account should be utilised - By withdrawing from the deposit account, new house can be purchased/constructed within the period given above.
What happens if the deposit account is not fully utilised - If the amount deposited is not utilised fully for purchase or construction of new house within the stipulated period, then the following amount shall be treated as long-term capital gain of the previous year in which the period of three years from the date of transfer of original asset expires [see also footnote 1, para 179.4].
In such a case, the assessee can withdraw the unutilised amount at any time after the expiry of 3 years from the date of the transfer of the original asset in accordance with the aforesaid scheme.
Unutilised amount in the deposit account in respect of which exemption was claimed under section 54F but which is not utilised within the specified timelimit for purchasing/constructing a residential house
x
Amount of original capital gain Net sale consideration
Sriram Aryan
(Article Student)
(38 Points)
Replied 11 December 2010
But the Contention of the IT Officer in this case is that a person cannot hold more than one property if he wants to claim Dedcution U/s 54. So we need some case law to assist our arguement
-Smruti's Colleague
abhishek
(Job)
(132 Points)
Replied 11 December 2010
Yes, u can claim exemption 54 because u cannot own more than one residence house property at the time of transfer.
but following condition fulfillment
1. assesse is an individual or a H.U.F.
2. Asset is Long term capital assets
Sriram Aryan
(Article Student)
(38 Points)
Replied 11 December 2010
And also the IT Officer is claiming that the House eligible should not be a let out property. Is that so?? Any Case laws in support..
-Smriti's Colleague
Ramandeep singh
(CA-final,M.com (Final))
(59 Points)
Replied 12 December 2010
siddharth jain
(ca- ipcc)
(197 Points)
Replied 12 December 2010
| Originally posted by : NIKIT SHETH | ||
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Yes deduction can be claimed in case of individual. As the condition to claim deduction does not mention that the assessee should own not more than one house. This condition is applicable u/s 54G if the proceeds are invested elsewhere... So deduction u/s 54 is available....... |
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deduction u/s 54G is in respect of EXEMPTION OF CAPITAL GAINS ON TRANSFER OF ASSETS IN CASES OF SHIFTING OF INDUSTRIAL UNDERTAKING FROM URBAN AREA.
| Originally posted by : NIKIT SHETH | ||
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Yes deduction can be claimed in case of individual. As the condition to claim deduction does not mention that the assessee should own not more than one house. This condition is applicable u/s 54G if the proceeds are invested elsewhere... So deduction u/s 54 is available....... |
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