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Exemption u/s 54

Started by Gaurav, December 28, 2012, 11:38:05 AM

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I have a doubt regarding exemption u/s 54. The details are as under:-

1.  Purchased a flat (1st property)in 2005-06 for 15 lakhs.
2.  Booked new flat (2nd property)in 2009 under Construction Linked plan for 37 lakhs. Bank Loan taken 29 lakhs, rest Rs. 8 lacs from own sources. 80%payment made till July'2011 to the builder.
3. Registration of the new flat done in Nov'2011 after payment of remaining 20%.Possession given by builder in January'2012.
4.  Sold and transferred the old flat(1st one) in August'2012 at 38 lakhs.LTCG being 13 lakhs(say)
5. Repaid Rs. 8 lakhs towards loan taken for new flat in August'2012.
6. Can I get the exemption for full Rs. 13 lakhs towards LTCG by investing in new flat as the registry/possession was done before 1 year from sale of old flat. Or the tax exemption will be restricted to Rs. 7 lakhs, considering the fact that only 7 lakhs were paid to the builder within one year from the date of sale of old flat and the rest payment was paid before more than one year?
7. Secondly whether Rs. 8 lacs repaid to the bank on loan taken for 2nd flat will also be considered for capital gain exemption?

May pls guide


Hello Mr. Gaurav,

In my opinion,  you will be eligible to claim entire LTCG of 13 lakhs.

Pls. refer Sec 2 for defnition of transfer plus Sec 53A of Transfer of Property Act 1882 , reproduced below as applicable to your case :

"transfer"32, in relation to a capital asset, includes,—

(i)  the sale32, exchange32 or relinquishment32 of the asset ; or

35[(v)  any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A36 of the Transfer of Property Act, 1882 (4 of 1882) ; or

Sec 53A : and the transferee has, in part performance of the contract, taken possession of the property or any part thereof,

The objective is to take possession of the property.  You have taken possession in Jan 2012 and have sold the old flat in Aug 2012 which is less than the period of one year.

You can also refer the following case law : Punjab and Haryana High Court in the case of CIT v. Ved Parkash & Sons (HUF) [1994] 207 ITR 148.

Hope this helps.

Bala FCA, LL.B