i have 2 question 1. i have already one self occupied house and diverted land also (which is long term) now i sold land and construct another residential house can i get benefit for second residential house under 54f of income tax act. On other hand if my sale proceed not received (due to post dated cheques) can i use my other funds in this new residential house 2 i have another diverted land and i want to make contribution of this land as a share of capital in partnership firm on my indexed value of land in that case what will be my consideration for capital gain value recorded in books of partnership firm ( as per section 45(3) of income tax act ) or market value of land as per section 50C section 50C(specific provision) is overriding section 45(3) which is general provision pl explian in detail. in both above matters have u any case laws kindly quote
Dear Sir,
Please find the response below:
1. Yes, you can get benefit of second residential house. The only condition is you should not have more than 1 residential property at the time of sale of land other than the property purchased for claiming the exemption.
For second query, i ll check and revert.
Please feel free to call/revert in case you require any clarification on the above.
Thanks and Regards,
Abhishek Dugar
CA, CS, B.Com
Dear Sir,
Carlton Hotel (P) Ltd. v. Asstt. CIT (2009) 122 TTJ 515 took a view that s. 50C will prevail over s. 43(5). But i personally believe that section 43(5) should prevail.
My analysis is as follows:
1. General provision V/s Specific Provision
It is a well-known rule of interpretation that in a case where a general as well as a specific section is applicable, the specific provision will overrule the general provision. Examining the facts of the case with this rule, Section 45(3) of 50C, whichever is the specific provision should overrule the other section.
Though in the case “Carlton Hotel (P) Ltd. v. Asstt. CIT (2009 TaxPub (DT) 1039 (Luck–Trib)” it has been established that Section 45(3) is a general provision and section 50C is a specific provision, I believe it would be erroneous to jump to such conclusion. While section 50C is specific to a class of asset (land and building), section 45(3), though is general as far as the class of assets is concerned, it is specific to a category of transaction (contribution of capital by partner to a firm). This makes it difficult to arrive at a conclusion regarding which section is general and which section is specific and shall apply in this case.
Deemed consideration V/s Consideration received or accrued
Section 50C reads as “Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both..”. In case of contribution of land as capital by partner to the partnership firm, no consideration is received or accrued as a result of such transfer.
Section 45(3) was introduced for deeming an amount as ‘full consideration’, so as to calculate the capital gain on contribution of asset by a partner to a partnership firm. The deemed ‘full consideration’ is an expression different from the word ‘consideration’ appearing in Section 50C. Hence the amount determined as a consideration in case of contribution of an immovable property by a partner to partnership firm is a deemed one which is received by or accrued to the partner. Hence, Section 50C should not be invoked in such cases and Section 45(3) should apply.
Please feel free to call/revert in case you require any clarification on the above.
Thanks and Regards,
Abhishek Dugar
CA, CS, B.Com
Hi,
yes, you can claim exemption under section 54F of the income tax act. As per section 54F
The assessee should not own on the date of transfer of the original asset more than one residential house (other than the new house). He should also not purchase within a period of one year after such date or construct within a period of three years after such date any residential house whose income is taxable under the head "Income from House property"(other than the new house).
the exemption is available if the investment is made in one residential house situated in India.
Yes , you can used other funds in this new house. please find below the case law supporting this:
Construction undertaken from borrowed funds and the sale proceeds invested in private bank - Whether capital gain exemption would be available? [ITO v. K.C. Gopalan [1999] 107 Taxman 591 (Ker.)]
In the aforesaid case, the taxpayer had sold his land along with the building. His claim under section 54 in respect of exemption from capital gains was rejected by the Assessing Officer on the ground that the sale price received by the taxpayer was deposited in private banks and the construction of the building had been undertaken from borrowed funds. The Kerala High Court held that there was no provision in the Statute that the taxpayer should utilize the same amount which he obtained by way of sale consideration for the purpose of meeting the cost of the new asset. The taxpayer was entitled to the exemption under section 54, which squarely related to the cost of the acquisition of a new asset in the nature of a house property for the purpose of the taxpayer's residence. The said asset having been acquired within the specified period and the conditions prescribed under section 54 having been fulfilled, the benefit of the exemption could not be denied.
As for ques 2,Please find the extract: General provision V/s Specific ProvisionIt is a well-known rule of interpretation that in a case where a general as well as a specific section is applicable, the specific provision will overrule the general provision. Examining the facts of the case with this rule, Section 45(3) of 50C, whichever is the specific provision should overrule the other section.Though in the case “Carlton Hotel (P) Ltd. v. Asstt. CIT (2009 TaxPub (DT) 1039 (Luck–Trib)” it has been established that Section 45(3) is a general provision and section 50C is a specific provision, . While section 50C is specific to a class of asset (land and building), section 45(3), though is general as far as the class of assets is concerned, it is specific to a category of transaction (contribution of capital by partner to a firm). This makes it difficult to arrive at a conclusion regarding which section is general and which section is specific and shall apply in this case. Deemed consideration V/s Consideration received or accruedSection 50C reads as “Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both..”. In case of contribution of land as capital by partner to the partnership firm, no consideration is received or accrued as a result of such transfer.Section 45(3) was introduced, in 1987, for deeming an amount as ‘full consideration’, so as to calculate the capital gain on contribution of asset by a partner to a partnership firm. The deemed ‘full consideration’ is an expression different from the word ‘consideration’ appearing in Section 50C. Hence the amount determined as consideration in case of contribution of an immovable property by a partner to partnership firm is a deemed one which is received by or accrued to the partner. Hence, Section 50C should not be invoked in such cases and Section 45(3) should apply.since the immovable land is not assessable for the purpose of stamp duty, Section 45(3) is not a general provision and Section 50C is not a specific one and that the consideration as per Section 45(3), which is the charging section, is deemed consideration, it can be contended that Section 50C should not be invoked in a case of contribution by partner of an immovable property to a partnership firm as capital. The consideration as per Section 45(3) should be binding. However, due to lack of any High Court or Supreme Court decisions on this subject post the amendment in Section 50C in 2009, this controversy remains outstanding.
i think your question is already answered
