Question ID : 40751

WHETHER EXEMPTION U/S 54 IS ELIGIBLE?

Assessee is an Individual aged about 72 years during the financial year 2019-2020, she transferred a residential house property and purchased two other residential properties within the same financial year. But the properties acquired were in the name of her son and the sources for acquisition were transferred from her bank account to the sellers accounts. Now, the query is whether she can claim exemption under section 54 for the LTCG on the sale of residential house property.

Answer ID : 80648

Yes, Exemption can be claimed u/s 54 as this section does not require that the new residential property shall be purchased in the name of the assessee only. It merely says that the assessee should have purchased/constructed a residential house within the prescribed limit specified in this section. Refer Case: Bhagwan Swroop Pathak Vs ITO (ITAT Delhi)

Answer ID : 80651

She can claim exemption based on the decision in Third ITO Vs. S. Varadarajan (1989) 33 TTJ (Mad) 466, but divergent decision were also reported meaning thereby issue is debatable. Also in Pawan Arya Vs. CIT (2011) 237 CTR (P & H) 210 court allowed exemption for only ONE house wherein more than one house is purchased.

Answer ID : 80652

The provisos shall be inserted after clause (ii) of sub-section (1) of section 54 by the Act No. 7 of 2019, w.e.f. 1-4-2020 : The assessee can acquire two residential house in india out of sale proceeds of a residential house property and capital gain should not be exceed of Rs. 2 crores. Various judgment has decided that the property can be acquired with relatives out of sale proceeds of residential property in India. Abdul Hameed Khan Mohammed (2016) 65 taxmann.com 211.

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