Exemtion/Deduction under section 54 of I.T.Act

[SANJAY BAHETI]

Dear Experts,

one of my client being a lady has owned a residential house property since 2005.

She is regular I.T.Assesse. During F.Y.2013-14 for which a return is to filed now prior to 31/03/2015.

She has sold the said house in June,2013 and purchased another residential house property in April,2013.The investment in new house property from means of unsecured loans from relatives which is exceeding the sales proceeds from the sale of old house property likely to be sold in June,2013.

Thereafter she has paid the said unsecured loans from the sales proceeds on sale of old house property during the same year.

Now query is as whether she can claim a deduction under section 54 of I.t act to avoid long term capital gain on sale of house property as she invested entire sales consideration in purchase of another new house property to claim the benefit of section 54 or not.

Please reply at the soonest to enable file the income return prior to 31/03/2015.

Thanks in advance for prompt reply.

AI Summary

Capital gains exemption for residential property where purchase funded by loans then repaid from sale proceeds raises eligibility question. A taxpayer sold a long-held residential house in June 2013 after purchasing another residential house in April 2013 funded by unsecured loans; those loans were repaid from the sale proceeds later the same year. The core issue is whether repaying acquisition loans with the sale proceeds counts as reinvestment of the entire sale consideration so as to claim the capital gains exemption under section 54.