CAPITAL GAIN EXEMPTION

[puneet virmani]

X INCURRED CAPITAL GAIN FOR 1 CR BY SALE OF HOUSE PROPERTY. X IN PROPER TIME INVESTED IN NEW PROPERTY 1.25CR. HOWEVER OUT OF 1.25 CR HE INVESTED 50 LACS SELF AND BALANCE 75 LACS THRU BANK LOAN IN NAME OF X HIS WIFE AND TWO MAJOR SONS.HIS INVESTED SELF MONEY IN HIS BUSINESS.

WHETHER EXEMPTION IS AVAILABLE TO X U/S 54 FOR PURCHASE OF NEW PROPERTY AND TO WHAT EXTENT. FURTHER HERE IT IS IMPORTANT TO NOTE THAT AS HOUSING LOAN STANDS IN NAME OF X AND 3 OTHER FAMILY MEMBERS , ALL ARE MAKING REPAYMENT AND TAKING BENEFIT OF ITR IN THEIR RESPECTIVE RETURNS. NO INVESTMENT HAS BEEN MADE BY OTHER THREE IN PURCHASE OF NEW HOUSE PROPERTY EXCEPT MADE BY X...

AI Summary

Capital gains exemption questioned when purchase funded partly by loan in relatives' names and repayments claimed by them.
Issue concerns whether a taxpayer who reinvested sale proceeds of a house in a new house-using personal funds for part and a bank loan in the names of the taxpayer, wife and two major sons for the balance, while diverting his own cash to business-qualifies for capital gain exemption and to what extent, given that all named borrowers repay the loan and claim related benefits.