CLAIMING EXEMPTION U/S 54 & 54F SIMULTANEOUSLY FOR SINGLE PROPERTY PURCHASES

CLAIMING EXEMPTION U/S 54 & 54F SIMULTANEOUSLY FOR SINGLE PROPERTY PURCHASES




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U/S 54 & 54F

Query 1]

Mr. X had two Property 1st a Residential Property (used for own residence) and another commercial building (rented to a Nationalized bank).

1st property was sold in the financial year 2009-10 and 2nd property was sold in the financial year 2010-11 and then he build up just one Residential house with high (entire) Investment. Hence in order to save Tax on capital gain, can we claim exemption u/s 54 for the 1st house sold in the FY 2009-10 and u/s 54F for the commercial plot sold in the FY 2010-11 against the one house Built.

In short, I want to know whether we can claim exemption under two different sections for two different years for the purchase of single residential property as we were required to sell both properties so that we can a better house. [Rohit Sharma- rohit4334@gmail.com]

Opinion:

The basic question is whether exemption u/s 54 for the 1st year & u/s 54F for  2nd year for  the Purchase of the same property is admissible or not? There is nothing in the Act that prohibits claim under section 54 & 54F simultaneously. In fact, conditions under both the section is different and therefore both these provisions are for different situation. Hence, if conditions of the said provisions are fulfill, claim of exemption shall lie even if only one property is purchase to claim the LTCG arisen on sale of different assets. It is settle principal that section 54 and 54F are relief mechanism and therefore, if the conditions are fulfill, the exemptions are allowable. There is no bar in section 54 or in Section 54F against claiming exemption for the second, third or any number of time for the same property if the cost of the property is within the limit arisen to the Assessee. Reliance may be place on the judgment in the case of  Anagha Ajit Patnekar v ITO (2006) 9 SOT 685 (Mum).

Query 2]
I am the employee of the University. Last year, I got sixth pay arrears (Financial Year 10-11). But after Audit verification, it came to know that extra arrears payment was make. So, this total extra amount was divide into 10 equal parts and are deduct from the monthly payment of financial year 2011-12. In 2010-11, I have pay the income tax on whole amount receive. This year (2011-12) I have submit my income tax statement to the office after deducting the extra amount receive from the total salary receive this year (2011-12). Therefore my questions are:
  1. Whether the step is correct?
  2. Can I get the income tax back which I have already paid for the extra arrears?
  3. If so, please tell the procedure or
  4. What else can I do?
    [Prajakta Kuralkar-pskuralkar@rediffmail.com]

Opinion:

  1. There is nothing in the Income Tax Act-1961 to cover the situations elaborated by you. However, the basic guiding principle is “Same income cannot be taxe twice”. You can opt for the mode mentione by you in the query subject to the condition that your DDO admits the same.
  2. Basis of charge in respect of salary income is fixe by section 15 of the Income Tax Act-1961. It is chargeable to tax either on due basis or on receipt basis, whichever matures earlier. In our opinion, levy of income tax on the salary paid to you in the FY 2010-11 was as per the provision of the I.T. Act. To compensate the income tax implication on the same, you can claim relief under Section 89(1) by splitting the income year wise. The require particular for relief u/s 89 is require to be work out in Form No. 10E. Section 89 gives relief to the salari Assessee where the arrears of salary is receive or the salary is receive in Advance

 

Query 3]
  1. If gift in the form of cash is given to nearest relative, whether the amount of cash is deductible from the income of the income tax payer? If so what is the section and the limit of amount deductible?
  2. Are there any procedural formalities or papers to be attache to income tax return? [parhatay@rediffmail.com]

Opinion:

  1. The gift given to relative is NOT deductible in computing the income tax.
  2. No papers are as such require to be attache with the income tax return showing the amount of gift done to the relatives.

U/S 54 & 54F

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