dear ours is partnership firm.We got capital gains from sale of industrial land by demolish building and sold machinery which is in municipal limites.The details are as under land sale long term capital gains Rs 90 lac development agreement on long term land(notional) gain ie we get shops for Rs 105 lacs we partners distributed the shop in their own names. Now we are planning to put a new unit with investment of RS 150 lacs in rural with bank finance 100 lacs Can we claim 54 g on which amount
The total LTCG is Rs. 195 Lakhs (Rs 90Lakhs on land and Rs 105 Lakhs on JDA).
The amount invested by you in the new unit is Rs 150 Lakhs, out of which the bank finance is Rs 100 Lakhs. Hence, your net investment in Rs 50 Lakhs.
Your exemption will be limited to Rs. 50 Lakhs only under 54G(1)(i).
The distribution of shops amongst the partners has no impact on your tax liability.
Dear Sir,
Your can avail exemption upto INR 50 Lakhs under 54G(1)(i).
Please feel free to call/revert in case of any doubts
Thanks and Regards
Abhishek Dugar
CA CS B.Com
No you cannot claim 54G
54 G caselaw Ishwar Singh Chawla , Mumbai vs Assessee on 30 July, 2009
Sir Ishwar Singh Chawla case is regarding Section 54 and not 54G. This is not related to your query.
In case following conditions are fulfilled, the capital gain U/s. 54G shall be exempted as per rates given below :
(i) Capital asset (P & M, Land, buildings or any right therein) is transferred due to shifting of industrial undertaking from urban areas to rural areas; and
(ii) Capital Gain is reinvested within a period of 1 year before or 3 years after the date in
(a) purchase of new machinery or plant for the purposes of business of the industrial undertaking in the area to which the said undertaking is shifted;
(b) acquiring building or land or construction of building for the purpose of his business in the said area;
(c) shifting the original asset and transferring the establishment of such undertaking to such area; and
(d) incurred expenses on such other purposes as may be specified in a scheme framed by the Central Government for the purposes of this section.
In your case you are not purchasing on the firm name and investing the same after distribution among yourself. If you read Section 54G as explained above you will get your answer, we believe.
The wordings of 54 and 54G in respect of cost of new asset are similar and the ratio laid down in the case cited by you can be used in your case also. However, the most important issue is that you should have utilised the LTCG in the repayment of loan taken earlier to acquire the new property.
Further, even if you have taken loan now and the LTCG is used for the repayment of such loan within the specified period, still you should be able to claim exemption.
However, one word of caution - the issue is debatable and contrary view can be taken by the IT Dept. Further, you should also be concerned about the provisions of Section 270A.