TaxTMI 
TaxTMI 
"A" SOLD RESIDENTIAL HOUSE (PURCHSED BY HIM IN 1974) FOR Rs.1 Cr IN AUG 2011, IN SEPT,2011 HE PURCHSED ANOTHER RESIDENTIAL FLAT FOR 1.20 CR IN NAME OF SELF "A", HIS WIFE "B" AND TWO MAJOR SONS"C &D".. HE /HIS WIFE DOES NOT HOLD ANY OTHER RESIDENTIAL FLAT/ HOUSE.OUT OF THE SALE PROCEEDS OF Rs.1 CR. HE MADE GIFT OF Rs.75 LACS TO HIS ELDER SON. AND GOT HOUSING LOAN FOR Rs.85 LACS TO PURCHASE A NEW REIDENTIAL HOUSE. WHETHER "A" IS ENTITLE TO CLAIM EXEMPTION U/S 54 OF THE Income Tax Act. AS THERE ARE CERTAIN RULINGS THAT EXEMPTION IS AVAILABLE EVEN IF BORROWED FUNDS ARE UTILISED TO PURCHASE A NEW RESIDENTIAL HOUSE AS OTHER CONDITIONS MENTIONED U/S 54 ARE BEING SATISFIED.
EXEMPTION U/s 54 I.T ACT,1961
27 Oct 2011 
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Exemption under section 54: acquisition timing, not source of funds, may determine capital gains relief.
Whether exemption under section 54 is available where the replacement residential house is purchased with borrowed funds while sale proceeds have been used for other purposes. Authorities conflict: one line requires that sale proceeds (or equivalent funds) remain available for the purchase and denies exemption if the property is bought out of a loan after appropriation of proceeds; another line holds the source of funds is irrelevant so long as the residential house is acquired within the prescribed period and statutory ownership conditions are met. (AI Summary)
Whether exemption under section 54 is available where the replacement residential house is purchased with borrowed funds while sale proceeds have been used for other purposes. Authorities conflict: one line requires that sale proceeds (or equivalent funds) remain available for the purchase and denies exemption if the property is bought out of a loan after appropriation of proceeds; another line holds the source of funds is irrelevant so long as the residential house is acquired within the prescribed period and statutory ownership conditions are met. (AI Summary)