My self Vishal, i purchased a residential property in May 2014, and my father sold one residential land in Nov 2014, as my father is staying with me. does he need to pay the long term capital gain tax, or the amount of sale can be adjusted with my purchase of house?
Asked 3 years ago in Capital Gains Tax from Gurgaon, Haryana
In your above case there are different views : In my view the second answer is appropriate and can be differing from other professionals :
1. In one of the situations that came up before the Delhi High Court regarding investment in Property in the name of wife when the husband sold the property ,the High Court noted that the entire purchase consideration was paid only by the assessee and not a single penny was contributed by his wife. It held that a purposive construction of the legal provisions is to be preferred as against a literal construction. Further, even if the provisions of section 54F are literally constructed, there is nothing in the section to show that the house should be purchased in the name of the tax payer only. The High Court observed that section 54F does not require that the new residential property should be purchased in the name of the tax payer; it merely says that the tax payer should have purchased / constructed a ‘residential house’.
It may be noted that section 54F of the Act requires that in order to claim exemption, the residential house should be purchased by the tax payer, but does not stipulate that the house should be purchased in the name of the tax payer only. Including wife’s name in the property for any other social / economic reasons should not stand in the way of exemption granted by the said provision of the Act. These sections promote impetus to house construction and as long as this purpose is served; other factors should not matter.
2. In the present you have purchased the property before the sale of property by your father. In various cases of High Court it was held that the entire purchase consideration was paid only by the assessee. In the present case you have purchased the property before selling thus the sale proceeds of the property is not invested to claim exemption. Thus in the present case you cannot claim exemption if nexus of payment cannot be proved. Also your father need to pay Income Tax i.e. long term capital gain.
Dear Mr Vishal,
yourself and you are independent assessees under Income Tax Act, as per the information given by you. Your father will have to pay income tax on property sold by him and the property purchased by you cannot be claimed as deduction from his long term capital gains, unless the property purchased in joint names of yourself and your father.
The person liable to tax for the transfer of capital assets is different than the person claiming relief on account of investment - The law does permit so , except in the case of spouse .( Through case laws ).
However this case seems to be doable case if we have get some more facts and detail . Good case and argument can be developed on this .
CA, New Delhi Area, India