Upgrad LLM

long term capital gains tax - 2 houses


Hello Experts,

I have recently sold off a house, which I was holding for 30 yrs. I understand that the long term capital gains tax can be avoided if I buy a residential property within the next two years.

My queries are

1 I currently have another house in my name. If I buy a house  will I get long term capital gains tax benifit?

2 If I buy more then one house with the taxable money, will it qualify for saving tax?


Thanks

Vaibhav
 

 
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Advocate

No you cannot claim exemption except that

The other residential property is purchased within one year before or within two years of sale

 
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B.com

Sec54 uses the language "a residential house property" while granting the exemption from capital gain. however, Karnataka High Court held that exemption u/s 54 should not be limited to 1 residential house property.

 

hence if you buy more than one house properties, exemption u/s 54 is available subject to other conditions.

 

Thank you! 

 
Reply   
 
Advocate

Mr Azim:

Please go through the facts of the case for the caselaw cited by you.

In CIT vs D. Ananda Pasappa (2009) 309 ITR 321 (Kar), the issue before the court was that the assessee sold a residential house and in lieu of the same purchased two residential flats adjacent to each other by entering into two separate sale deeds. The exemption u/s 54 was sought for investment in both the houses treating them as one unit.The A.O allowed exemption for only one house and the order of A.O was confirmed by the CIT(A).The Tribunal agreed with the ground of the assesee that both the house although purchased separately , but the builder had carried modification to make it usable as one unit. The Tribunal allowed the exemption on both the house.The department filed case in High Court and Hon’ble Karnataka High Court upheld the judgment of the Tribunal by accepting the contention of the assessee that both units were modified by the builder to be use as one

 
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B.com

Mr. vishal,

as i told earlier that Sec. 54 uses the word "a residential property" while granting the exemption from capital gain. time and again, courts have stuck to the literal interpretation of this word and allowed exemption to only one house property, where the assessee has invested in more than one. however the karnataka high court in CIT v D.anada basappa (2009) 309 ITR 329 has taken a contrary view. and according to sec. 13 of the General Clause Act, 1897, whenever the singular is used for a word, it is permissible to include the plural. and the high accordingly held that the exemption u/s 54 shall not be limited to one house property.  

I have quoted the above explanation from what i read for my exam. i did not refer the ITR. i will definately follow your suggestions.

Thank u sir.

 
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Advocate practising tax advisor

A bear reading of section 54 will mean the asset sold should be capital asset consisting of buildings and land appertant thereto. The world buildings indicate that even if more than one house the gain can be reinvested to get examption. However the investment is restricted to one house only. The karnataka High courts decison referred to above also proves this stand that the re investment should be made in one house only. In that case the assesse purchsed two units and before  that thery were amalgamated to one unit before purchase hence it was taken as one house. I do not know wheter two separate purchase deed were made on one single deed made. If two deeds then the position changes.

Thefore the answer to the query is  exemption is available for re ivestment in respect of one purchse only

it is immatereial tht you own more than one house after re investment and you also own another house.

A.R.Sathyan

advocae - retired income tx officer

tax advisor

 
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Tech legal Cosultant

Will this Karnataka judgement be valid all over India? Is there any SCourt ruling on this?

 
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