EXEMPTION UNDER SECTION 54F IS UNAFFECTED BY SECTION 50C

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EXEMPTION UNDER SECTION 54F IS UNAFFECTED BY SECTION 50C

SECTION 54F

Query 1]
Sir, my query is in the context of views expressed in Query No. 3 of “Tax Talk” dated 15.03.2010 titled “Sale of shop by transfer of share & computation of capital gain” 
I am a CA student & a bit confused over the view expressed in the query. Kindly correct me if I am wrong. I have reservation with the point (g) which stated as under:
“U\s 54F, it’s the investment of actual sale consideration that determines the claim of exemption. Effectively, if you invest the entire sale consideration of Rs.23 Lacs for the purchase of residential house property, you can claim LTCG as exempt”.
If I am not wrong, for computing the sale consideration, we take the full value of consideration as per section 48 of the Income Tax Act. Section 50C provides for deeming full value consideration. Section 50C is amended by the Finance Act-2009 also. 
The amended version provides that where the consideration received or accruing as a result of transfer of land and\or building is less than the value adopted as assessed or assessable by an authority of State Government for the purpose of payment of stamp duty in respect of such transfer, value so adopted or assessed or assessable shall be deemed to be the full value of consideration received or accruing as a result of such transfer for computing capital gain.
Effectively, considering the above mentioned explanation, full value of consideration in the said case shall be Rs.39 Lacs. As there are no transfer expenses, the resultant figure of net sale consideration remains same at Rs. 39 Lacs.
If by going through the relevant sections of the act, the net sale consideration comes to Rs. 39 Lacs, Then why should  the actual sale consideration of Rs. 23 Lacs for claiming exemption u\s 54F be considered & why not Rs. 39 Lacs?
In short, I am of the view that assessee shall be required to invest the sale consideration as adopted by the stamp authority; unless he doesn’t appeal it before the stamp act or claims before assessing officer the value adopted is higher than actual value of consideration. It would be very kind of you to correct me if I am going wrong. [abhishek_puri1@yahoo.com]
Opinion:
  1. Thanks for nicely responding back the issue. We are happy to see the readers like you.
  2. With reference to exemption from Long term Capital Gain, Section 54F provides that:
    (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 assets 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.
  3. The meaning of the word “Net Consideration” is given in the explanation to section 54F as under:
    ”net consideration”, in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of transfer of the capital assets as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.
  4. Section 50C provides for deeming the full value consideration u/s 48 as stamp duty value for the purpose of calculation of LTCG if it is higher than the actual sale consideration.
  5. The modus operandi of calculating exemption u/s 54F remains unaffected by introduction / incorporation of section 50C in the I.T.Act-1961.
Query 2]
Please clarify, If the house property is in the name of wife, whether the husband can claim the benefit of accrued interest for computation of income under the head “Income from House Property” on the ground that the loan is taken by husband and the bank had issued interest certificate in the name of Husband.[sans592000@yahoo.co.in]
Opinion: –

Ownership of the property is the pre-requisite for claiming deduction u/s 24(b) towards housing loan Interest. Merely availability of husbands name on the loan document/ Interest certificate doesn’t confer the privilege of deduction u/s 24(b) of the Income Tax Act-1961.

 

Query 3]
I have earned a Long Term Capital Gain of approx Rs. 10,00,000/- by selling a flat at Rs 15,00,000/- in 2010 which was bought by me in 2001 at Rs 5,00,000/-. If I invest this capital gain of Rs 10 Lacs in a new house property, I can claim full exemption of LTCG. However ,if instead of investing these Rs. 10 Lacs, I purchase a new house property say at Rs. 12 Lacs and get it financed by availing housing loan (loan amount more than Rs. 10 Lacs), can I still get the LTCG exemption on Rs. 10 Lacs. Please guide. [hinglas@rediffmail.com]
Opinion: –

In view of the recent decision of the Mumbai Tribunal in Milan Sharad Ruparel Vs. Asst. CIT (2009) 28 (II) ITCL 362, we are of the considered opinion that you would not be able to claim exemption u/s 54 to the fullest extent of Rs. 10 Lacs if the borrowed capital is used for purchase of new residential house property.

SECTION 54F


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