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iNCOME TAX Sec.54F

(Querist) 19 April 2009 This query is : Resolved 
One of my client has made a profit of Rs.25 lac from selling shares of Pvt.Ltd. company. He gave the entire consideration to a promotor for purchase of a residential flat. My query is that whether Sec.54F deduction will be allowed ob booking a flat or the physical possession of the flat has to be taken withing stipulated time of one year. Besides that whether deduction under sec.54F is at all allowable for Booking a flat because it speaks of purchase of a residential house.
Ashok Kumar Garg (Expert) 19 April 2009
You have to acquire the house in the specified period. Possession is sufficient. Mere advance is not sufficient, except when the one is making payment under a scheme similar to the Self Fianncing Scheme floated by DDA. Basic features of the scheme of SFS of DDA and the one started by private promoter should be very significantly similar, especially with regard title in property which is being constructed.

Ashok Garg
A V Vishal (Expert) 19 April 2009
Dear Pradeep,

Mere booking doesnot qualify for deduction U/s.54F, the Act has stipulated the following three conditions to claim deduction u/s. 54F:

where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or 89[two years] after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section..........

Alternately, The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme95 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset.
RAJENDER SINGH MANN (Expert) 19 April 2009
Dear colleague

For the correct answer for your query, please tell me whether the shares have been sold through recognised stock exchange and on this transaction, security transaction tax has been paid.

If the shares are sold through RSE and on which STT is paid then any LTCG on sale of shares is exempt U/s 10(38)

Please give full detail of your query.

Vineet (Expert) 10 December 2009
Dear Shri Mann

Shares of a Pvt ltd company cannot be sold through a stock exchange. Hence payment of STT or exemption of long term capital gain does not arise in this case.


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