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CAPITAL GAINS –Issues u/s 54 and 54F

CAPITAL GAINS –Issues u/s 54 and 54F. BY, CA NAVEEN KHARIWAL G MOB: 9880683725 EMAIL ID: naveenkhariwalg@gmail.com. SECTION 54:. “ (1) [Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family ],

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CAPITAL GAINS –Issues u/s 54 and 54F

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  1. CAPITAL GAINS –Issues u/s 54 and 54F BY, CA NAVEEN KHARIWAL G MOB: 9880683725 EMAIL ID: naveenkhariwalg@gmail.com

  2. SECTION 54: “(1) [Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property", and the assessee has within a period of [one year before or two years after the date on which the transfer took place purchased], or has within a period of three years after that date constructed, a residential house, then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—

  3. (i) if the amount of the capital gain [is greater than the cost of [the residential house] so purchased or constructed, the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.

  4. [(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :

  5. Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,—   (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and  (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.”

  6. Profit on sale of property used for ResidenceSection 54Basic Conditions- Individual or HUF- Transfer of long term capital asset- buildings or lands appurtenant thereto- Residential house- The income of which is chargeable under the head “income from house property”Compliance for exemption- Purchase a residential house - one year before - two years after the date of transfer- constructed a residential house - with in period of 3 years after the date of transfer- Restriction on transfer of new assett

  7. Exemption U/s 54 Capital Gains > Cost of the new residential house - diff liable to tax u/s 45. Capital Gains < Cost of the new residential house - No taxability u/s 45.

  8. New Asset - Not to be transferred with in a period of 3 years of its purchase or construction as the case may be In case transferred: Gain to be short term capital gain Cost of acquisition depends upon extent of exemption availed at the time of its acquisition - if fully exhausted - Nil - Otherwise - Balance

  9. Section 54F: Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house. 54F. (1) [Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or [two years] after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,— (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45:

  10. (2) Where the assessee purchases, within the period of [two years] after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head "Income from house property", other than the new asset, 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 residential house is purchased or constructed.

  11. (3) 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.] [(4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :

  12. Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,—  (i)  the amount by which—  (a) 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 the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1), exceeds  (b)  the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset, shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires ; and (ii)  the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid.

  13. Profit on sale of capital asset other than residential house Section 54F Basic Conditions - Individual or HUF - Transfer of long term capital asset Other than residential house Compliance for exemption - Purchase a residential house - one year before or - two years after the date of transfer or - constructed a residential house - with in period of 3 years after the date of transfer - Eligibility as well as other conditions to be fulfilled

  14. Conditions for section 54F Assessee should not own more than one residential house other than the new asset on the date of transfer of the original asset Should not purchase/ construct any other residential house within two years / three years respectively of the transfer of the original asset Restriction only for RH where income chargeable under the head “Income from house property” New asset not to be transferred before three years from the date of its purchase/ construction, in case transferred LTCG exempted earlier to be taxed in the year of sale 14

  15. Exemption U/s 54F Net consideration > Cost of the new residential house - Proportionate diff liable to tax u/s 45. Net consideration < Cost of the new residential house - No taxability u/s 45. 15

  16. SCOPE OF THE PROVISIONS In CIT v Aravinda Reddy (TN), the Supreme Court Succinctly Summed up the object, purpose and symmetry of the section in the following words: “if you sell your house to make a profit, pay Caesar what is due to him. But, if you buy or build another, subject to the conditions of section 54(1), you are exempt.” The language, the purpose and the symmetry of the section was therefore held to be plain. Thus, if the assessee buys and also further constructs a house which is used for his residence, exemption under this section cannot be refused.

  17. Self financing scheme - DDA. [S. 2(29A), 2 (42A)] Allottee of a flat under self financing scheme of the DDA gets title to the property on issuance of allotment letter as clarified vide Circular No. 471 dt 15-10-1986, and therefore, capital gain arising on sale of flat by the assessee on 6th Jan., 1989 which was allotted to him on 2nd Feb., 1982, by issuance of an allotment letter was a long term capital gain, irrespective of the date of allotment of specific flat number and delivery of possession on 15th May, 1986, assessee was entitled to exemption under section 54 on reinvestment of sale proceeds in another house. ( A. Y. 1989-90). - Vinod Kumar Jain v. CIT (2011) 244 CTR 346 / (2010) 195 Taxman 174 / 46 DTR 185 (P&H)(High Court)

  18. Circular : No. 471 [F. No. 207/27/85-IT(A-II)], dated 15-10-1986. Investment in a flat under the self-financing scheme of the Delhi Development Authority to be treated as construction for the purposes of capital gains. Cost of the new asset is the tentative cost of construction.

  19. Circular : No. 672, dated 16-12-1993 Allotment of flats/houses by co-operative societies and other institutions, whose schemes of allotment and construction are similar to those of DDA, should be treated as cases of construction for purposes of sections 54 and 54F .

  20. Is investment in more than one house possible U/s 54 ? In favour of revenue •Exemptionu/s54canbeclaimedonlyinrespectofonehouseprovided conditionsofSec54aresatisfied. • K.C.KaushikvITO185ITR499(Bom.)(1990)] • Assessee was not entitled to exemption in respect of two independent residential houses situated at different locations. (A. Y. 2005-06) • Pawan Arya v. CIT (2011) 237 CTR 210 / 49 DTR 123 / 200 Taxman 66 (P&H)(HC) • Allowedonlyforoneflat. • [GulshanbanooR.Mukhiv.JCIT83ITD649(ITAT-Mum)(2002)]

  21. In favour of revenue In Asstt. CIT v. Dr. P.S. Paricha (2008) 20 SOT 468 (Mum). The taxpayer acquired two adjoining residential flats in one building and gave them on rent to two different tenants. The Tribunal held that the eligibility for exemption under section 54 would be limited to one flat only; as it was occupied by two tenants the two flats could not be treated as single residential unit. InDy. CITv. RanjitVithaldasLokupavan[2008] 25 SOT 420 (Mum.) the taxpayer reinvested the capital gain in two different places. The taxpayer claimed that, though the flats were located at different places, a common kitchen and common prayer place were held for being treated as single unit. The Tribunal rejected the taxpayer's claim for the reason that they were not contiguous and could not be treated as one unit. In result, the taxpayer became eligible for exemption only for the amount invested in one residential unit.

  22. In favour of the assessee: In ITO v. Ms. Sushila MJhaveri [2000] 107 lTD 327 (Mum.)(SB) the taxpayer acquired two adjoining flats and by removing the intermediate walls with a common kitchen it was used as one residential house. Since both the units were combined and made into one unit, investment in two flats was held as eligible for exemption under section 54. In Prem Prakash Bhutani v. Asstt. CIT [2009] 31 SOT 38 (Delhi)(URO) even construction of several residential units meant for family members and in the presence of evidence in the form of ration card where all the residents were shown as belonging to same family, it was held that such independent portions occupied by the family members were eligible for exemption notwith­standing fact that several independent residential units were occupied in the same place.

  23. In favour of the assessee: The Karnataka High Court in CITv. D. AnandaBasappa[2009] 180 Taxman 4 the taxpayer transferred a residential building and invested the long-term capital gain in acquisition of two residential flats situated side by side by means of two separate registered sale deeds and claimed exemption for both the residential units acquired. Both the units were in the occupation of two different tenants. The Court held that the apartments were situated side by side and the builder had made necessary modifications to make them one unit by fixing opening door in between those two apartments. The mere fact that when the Inspector visited the premises they were occupied by two different tenants was not a ground to hold that the apartments were not one residential unit. The aspect of one registered sale deed or more than one deed could not be determinative of the building being considered as one residential unit or otherwise.

  24. In favour of the assessee: The Court referred to section 13 of the General Clauses Act, 1897 wherein it is declared that whenever the singular is used for a word, it is permissible to include the plural. The expression 'a' residential house should be understood in a sense that building should be of residential nature and 'a' should not be understood to indicate a singular number.

  25. Dismissal of the special leave petition in Ananda Basappa’s (D) case (2010) 320 ITR (St.) 19 was in following words. “Their Lordships S.H. Kapadia and Aftab Alam JJ. Dismissed the Department’s special leave petition against the judgment dated October 20, 2008 of the Karnataka High Court in ITA No. 113 of 2004 reported in 309 ITR 329 whereby the High Court held that the assessee was entitled to exemption under section 54 on purchase of two flats which were combined to make one residential unit. CIT v Ananda Basappa (D) (2009) 309 ITR 329 (kar.)”

  26. CITv. Smt.Jyothi K.Mehta [2011] 12 taxmann.com 440 (Kar.) the taxpayer sold a residential house and acquired two flats and claimed exemption under section 54 of the Act. The Assessing Officer held that the taxpayer was already owner of a residential flat at Bombay and she had purchased two flats out of the sale proceeds. Hence, the taxpayer was not entitled to claim exemption from the capital gains. The Commissioner (Appeals) factually found that the two flats were utilized as a common residence and, hence, the taxpayer was eligible for exemption under section 54. The Tribunal too, upheld the order of the Commissioner (Appeals).

  27. The Karnataka High Court held that the two flats acquired by a taxpayer were situated side by side. The builder had effected necessary modifications to the flats to make them one unit by opening the door in-between the two apartments. It was further held that the taxpayer could have purchased both the flats in one single sale deed or could not have narrated the purchase of two premises as one unit in the sale deed, did not make any difference. The Court made reference to the precedent in CITv. Smt.KG.Rukminiamma [2011] 196 Taxman 87/[2010] 8 taxmann.com 121 (Kar.).1n Smt. KG. Rukminiamma's case (supra) it was held that the expression 'a residential house' used in section 54 does not convey the intention of the Legislature to mean a single residential house as eligible for exemption. If that was the intention, the Legislature might very well have used the word 'one' instead of 'a residential house'.

  28. The Court in Smt. Jyothi K Mehta's case (supra) also made reference to section 13(2) of the General Clauses Act, 1897 and held a new asset acquired after the sale of the original asset can also be buildings or lands appurtenant thereto, which also should be 'a residential house'. The letter 'a' in the context it is used should not be construed as meaning 'singular'. Being an indefinite article the expression should be read in consonance with the other words 'buildings' and 'lands'. A further evidence that the two residential units were situated side by side and necessary modifications were made by means of a door in between the units to make it as a single unit satisfied the requirements. The Court, accordingly, held that the taxpayer was eligible for exemption under section 54 for both the residential units which could be used as a single residential unit.

  29. In favour of the assessee: •Twoadjoiningflatsconvertedintosingleresidence,exemptionallowed. [ACITvMrs.LeelaP.Nanda286ITR(AT)113(Mum)(2006)] •Fourflatspurchasedinsamebuildingbutondifferentfloorsbecauseoflargesizeof family,whichmaintainedacommonkitchenandacommonrationcard,exemption allowed. [Vyas(K.G.)vITO16ITD195(Bom.)(1986)]

  30. Contd…. In favour of the assessee: •Severalselfoccupieddwellingunitswhichwerecontiguous andsituatedinthesamecompoundandwithinthecommon boundaryhavingunityofstructureshouldberegardedas oneresidentialhouse. [ShivNarainChoudharyv.CWT108ITR104(All)(1997)] • Morethanoneunitsconvertedintoonesinglehouse • allowedforthepurposeofsec.54Faswell. • [NevilleJ.Pereirav.ITO8Taxmann.com68(Mum.ITAT)]2010)]

  31. Investment in two adjacent flats. The assessee had purchased two adjacent flats which were interconnected and used as one residential house. Assessing Officer denied the exemption. On appeal the Tribunal held that the Assessing Officer shall allow the exemption in respect of both the flats if it is found that the flats are being used as one residential house and the investment was made by assessee himself. In appeal by revenue the Bombay High Court up held the decision of Tribunal. - CIT v. Joe B. Fernandes ITA No. 1467 of 2007 dt. 10-12-2008 429 (2012) 43. B.BCAJ (January- 2012 – P. 41)

  32. Investment in residential unit by merging 4 flats and that too prior to handing over of the possession of said residential unit The assessee earned capital gain from sale of ancestral property. The assessee claimed exemption u/s 54F in respect of amount invested towards purchase of four flats which were converted into one residential unit. The AO allowed exemption only in respect one flat by holding that flat were separate and independent residential unit having separate kitchen and entrance and thus, according to him flat could not be said as adjacent flats even though builders had referred them as composite unit.

  33. It was held by the Tribunal that, if requirement of assessee family was met-out only by enlarging residential unit by merging 4 flats and that too prior to handing over of the possession of said residential unit, then said converted residential unit would be treated as a residential house as stipulated u/s 54F and thus, claim of the assessee was allowed. (AY 2007-08) • ACIT v. Deepak S. Bheda (2012) 52 SOT 327 (Mum.) (Trib.)

  34. Multiple sales & purchases of residential houses. Though section 54 refers to capital gains arising from “transfer of a residential house”, it does not provide that the exemption is available only in relation to one house. If an assessee has sold multiple houses, then the exemption under section 54 is available in respect of all houses if the other conditions are fulfilled. If more than one house is sold and more than one house is bought, a corresponding exemption under section 54 is available. However, the exemption is not available on an aggregate basis but has to be computed considering each sale and the corresponding purchase adopting a combination beneficial to the assessee.(A. Y. 2006-07) - Rajesh KeshavPillai v. ITO (2011) 44 SOT 617 / 60 DTR 402 / 141 TTJ 183 (Mum.)(Trib.) .

  35. Sale of commercial properties/capital asset and Investment in two residential units Assessee sold two commercial properties/ capital assets and claimed deduction under section 54F on ground of purchase of two residential units being ground and first floor in a Group Housing Complex. Assessing Officer disallowed same on ground that deduction was not allowable as two distinct properties were purchased. Commissioner (Appeals) considering all the factors held that assessee had in possession was one single unit comprising of two floors of one and same double storied residential house having common stair case kitchen, etc. The Tribunal held that assessee would be entitled to exemption as claimed. (A. Y. 2005-06). - ACIT v. SudhaGurtoo (2011) 48 SOT 393 / 7 ITR 653 (Delhi)(Trib.)

  36. WhetherInvestment should be in assessee’s name – Where a liberal view was taken •Sec.54clearlysaysthatiftheassesseeisowneroftheproperty,heisentitledto exemptioneven if the new property purchased is in the name of his wifebutthe same is assessed in the hands of the assessee. [CITv.V.Natarajan154Taxman399(MAD.)[2006]]

  37. Profit on sale of property used for residential house and Property purchased in the joint names of assessee and husband. To claim exemption under section 54 and 54EC what is material is investment of sale consideration in acquiring residential premises or constructing a residential premises or investing amount in bonds set out in section 54EC, there is no requirement that such investments should be in name of assessee only. Assessee sold her residential house property and invested part of sale proceeds in purchasing residential house property and specified bonds in joint names of assessee and her husband.

  38. The Court held that as entire consideration had flown from assessee and no consideration had flown from her husband, merely because either in sale deed or in bonds her husband’s name is mentioned, in law, he would not have any right, and assessee could not be denied benefit of deduction under section 54 and 54EC. (A. Y. 2007-08). - DIT v. Jennifer Bhide (2011) 203 Taxman 208 (Karn.)(High Court)

  39. Purchase of house in joint names of assessee and his wife, assessee is entitled to exemption under section 54F. Assessee purchased the house in the joint name of assessee and his wife and claimed exemption under section 54F. The assessing Officer has allowed exemption only to the extent of 50 percent, which was confirmed by Commissioner (Appeal). On appeal to the Tribunal, the Tribunal allowed the full exemption to the assessee.

  40. On further appeal to High Court by revenue the Court held that as the wife has not contributed to purchase and whole purchase consideration was paid by assessee, it would be treated as the property purchased by the assessee in his name and merely because he had included the name of his wife and the property purchased in the joint name of his wife would not make any difference and the assessee is entitled to exemption under section 54F.Accordingly the appeal of revenue was dismissed.(A.Y. 2007-08) • CIT v. Ravinder Kumar Arora ( 2012) 342 ITR 38/75 DTR 406/252 CTR 392 (Delhi) (High Court)

  41. Investment in property in joint name-Benefit of exemption to be allowed for entire amount of investment .[S. 22 to 26, 27(i), 64(i)(iv)] The assessee sold the inherited property and purchased a new residential property in joint name with his wife and claimed deduction under section 54. The Assessing Officer allowed the exemption only to the extent of 50% investment on the ground that 50% property belongs to wife. On appeal the Commissioner (Appeals), granted the exemption of entire amount . On appeal by revenue, the Tribunal held that the name of assessee’s wife was entered in the sale agreement just for purpose of security , and for purpose of sections 22 to 26, 27 and 64. Assessee would be owner of whole property and income there from would be assessable in his hands, therefore benefit of section 54 of entire amount invested in new property was to be allowed. Appeal of revenue was dismissed. (A.Y 2007-08) ACIT v. Suresh Verma ( 2012) 135 ITD 102/72 DTR 82 (Delhi) (Trib.)

  42. Purchase of house jointly with spouse is eligible for exemption. The assessee had made long-term capital gain on sale of shares. The sale proceeds were invested in purchase of row house in the joint names and exemption under section 54F was claimed. The Assessing Officer denied the exemption on the ground that the property was purchased in joint name of wife. In appeal Commissioner (Appeal) confirmed the denial of exemption.

  43. On appeal to Tribunal, the Tribunal held that total consideration for the house had been met by the assessee and the name of wife was added only for the sake of convenience. The Tribunal drew the support from the section 45 of the Transfer of Property Act which provides that the share in the property will depend on the amount contributed towards the purchase consideration.(A.Y.2004-05) • (ITA no 4285/Mum/2009 dated 6-6-2012.Bench ‘F’)VasudeoPandurangGinde v.ITO (2012) BCAJ –July –P.57(Mum.)(Trib.)

  44. Contd…. WhetherInvestment should be in assessee’s name – Where a narrower view was adopted •HousepropertyinthenameofHUFsoldbutnewhousepurchasedin thenameofKartaandhismother-Toclaimthebenefitofsec.54Fthe residentialhousewhichispurchasedorconstructedhastobeofthe sameassessee. [VipinMalik(HUF)VsCIT183Taxman296(Delhi)(2009)] •Exemptionu/s54Fisallowedonlywhenthenewresidentialproperty ispurchasedbytheassesseeinhisownnameandnotinnameofhis adoptedson. [Prakashv.ITO173Taxman311(Bom.)[2008]]

  45. Nexus between capital gain and amount of investment u/s 54 is not Necessary. Heldthattheassesseehadinitiallyutilizedthesaleproceedsonsaleofits residentialflatincommercialpropertiesand,lateron,hepurchasedtwo residentialflatswithinaperiodspecifiedinsub-section(2)ofsection54.The Revenue’smaindisputewasthatthesaleproceedswereutilizedforpurchaseof acommercialpropertyandresidentialhousewaspurchasedoutofthefunds obtainedfromdifferentsources,assuch,theidentityofheadshasbeenchanged Assesseeisnotrequiredundertheprovisionforsec54toestablishthenexus betweentheamountofcapitalgainandthecostofnewasset. [IsharSinghChawlaVs.CIT130TTJ(Mum)(UO)108(2010)andAjitNaswanit Vs.CIT1127Taxman123(Delhi)(Mag.)(2001)]

  46. Whether capital gains earned by assessee can be utilized for other purpose, and as long as assessee fulfils condition of investment of equivalent amount in asset qualifying for relief under section 54F, by securing money spent out of capital gains or from other sources available to it either by borrowal or otherwise, he is eligible for exemption under section 54F in respect of entire amount of capital gains realised? Judgement: Held, yes - Whether merely because capital gains earned had been utilized for other purposes and borrowed funds were deposited in capital gains investment account, benefit of section 54F exemption cannot be denied [2012] 24 taxmann.com 104 (Hyd.) J.V. Krishna RaoV Deputy Commissioner of Income-tax, Circle 3(3), Hyderabad*

  47. A residential house was purchased by assessee - Assessee contended that she had sold certain shares and sale proceeds of said shares were invested for purchasing of said house and, accordingly, claimed deduction under section 54F – Tribunal considered entire facts and circumstances of case and came to conclusion that assessee was not entitled for deduction under section 54F on reason that assessee had not utilized sale consideration of shares for purchase of house property and house was purchased by assessee partly from bank loan and partly from loans taken from family members and others – Assessee filed miscellaneous application for rectifying said order - Whether since sale proceeds of shares were not appropriated towards purchase of residential house, Tribunal, was justified in disallowing deduction under section 54F – Held, yes - [In favour of revenue] [2012] 18 taxmann.com 265 (Hyd. ITAT) Smt. V. Kumudav. Deputy Commissioner of Income-tax, Circle-16(2), Hyderabad*

  48. Contd…. •Whereassesseeutilizedthesaleconsiderationforotherpurposes andborrowedthemoneyforthepurposeofpurchasingtheResidential House Propertyto claimexemptionu/s54,itwasheldthatthecontentionthatthesame amountshouldhavebeenutilizedfortheacquisitionofnewasset couldnotbeaccepted. •[BombayHousingCorporationv.Asst.CIT81ITD454(Bom)(2002)]

  49. Purchase of new residential house -Deposit under Capital Gains accounts scheme. Assessee having deposited the sale proceeds of property in his bank account under the capital gains account scheme within the prescribed period and purchased a new property by availing of a loan which was paid out of the same bank account, he has complied with the provisions of Capital Gains Accounts Scheme and, therefore, assessee is entitled to exemption under section 54F. (A. Y. 2006-07) - P. Thirumoorthy v. ITO (2011) 49 DTR 91 / 135 TTJ 75 / 7 ITR 10 (UO)(Chennai)(Trib.)

  50. Link capital gain & investment Capital asset sold resulting in long term capital gains and sale proceeds utilized for business. New residential house property purchased after getting the same financed from bank Other stipulations for exemption complied Whether assessee entitled to deduction u/s 54F Exemption u/s 54F not admissible Milan Sharad Ruparel v. ACIT 121 TTJ 770 (Mum) Ajit Vaswani v. (2001) CIT 117 Taxman 123 (Delhi) (Mag.)

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