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Tribunals have held that capital gains from multiple houses and of multiple years can also enjoy complete tax holiday!

Section 54 and 54F of the Income-tax Act provide for an exemption in respect of long term capital gains (LTCG), where subject to fulfillment of prescribed conditions, a taxpayer makes investment either in the purchase or construction of a residential house.


In the case of ‘Rajesh Keshav Pillai vs. ITO’ (2011) 44 SOT 617 (Mum.), the taxpayer sold two separate flats and earned long-term capital gains. The taxpayer bought two different flats and claimed that the long-term capital gain was exempt under Section 54. The first appellate authority following the judgement of the Special Bench in ‘ITO vs. Sushila M. Jhaveri’ (2007) 107 ITD 327 (SB) held that the benefit of Section 54 was available in respect of only one flat and not two flats.

On appeal, the Tribunal held that though Section 54 refers to capital gains arising from ‘transfer of a residential house’, it does not provide that the exemption is available only in relation to one house. If the taxpayer has sold multiple houses, then the exemption under Section 54 is available in respect of all houses, if the other conditions are fulfilled. If more than one house is sold and more than one house is bought, a corresponding exemption under Section 54 is available. However, the exemption is not available on an aggregate basis, but has to be computed considering each sale and the corresponding purchase, adopting a combination beneficial to the taxpayer.         (more…)


Though equity and taxation are often held as strangers,

Courts have ensured that they do not always remain so!

             Courts have been liberal in their judicial interpretations, while dealing with issues relating to exemption provisions, holding that “a beneficial section has to be construed liberally, having due regard to the object which it intends to serve.”

            In a recent matter that came up before the Punjab & Haryana High Court in the case of ‘CIT vs. Jagtar Singh Chawla’ [2013] 33 38, the taxpayer had sold his property on 20.06.2006 for a consideration of Rs. 2.24 crores. The said amount was not invested in the capital gains account scheme by the due date of filing the return under Section 139(1) (i.e., 31.07.2007) and was instead used to purchase a new residential house on 31.3.2008. The taxpayer claimed exemption under Section 54F which was denied by the Assessing Officer & Commissioner (Appeals) on the ground that under Section 54F(4), the amount of the consideration which is not appropriated for purchase of the new asset before the date of furnishing the return of income had to be deposited in the “capital gains account scheme” before the due date for filing the return of income under Section 139(1). 



If your taxable income exceeds Rs.5 lakhs, E-filing of your Income-tax Return shall be mandatory from A.Y. 2013-14!

         The Income-tax (IT) Department is seeking to place increasingly greater reliance on Information Technology (IT). Under its notification issued on 1st May, 2013, the Central Board of Direct Taxes (CBDT) has made it mandatory for all taxpayers with total income exceeding Rs.5 lakhs to e-file their tax returns from the current Assessment Year (AY) 2013-14.

        Today, nearly 90% of India’s personal Income-tax collection is contributed by this group with incomes above Rs.5 lakh, although they comprise just 10% in number, an estimated 35 lakhs out of the total 3.50 crore taxpayers in India. This also goes a long way in building a strong database of the income and financial information and analysis of taxpayers in the country. Infact, through the FM’s budget speech this year, we got to know for the first time that there are only 42,800 persons in the country who have admitted taxable income over Rs.1 crore. We would not have got this information, without the e-filing database of the I.T. Department.



Important amendments under Capital Gains Tax & Wealth-tax provisions under the Finance Act 2013 

Section 2(14) of the Income-tax Act, which defines ‘capital asset,’ excludes from within its purview an agricultural land situated in India at a place having a population of less than 10,000 as per the last preceding census or at an area not comprised within any municipal limits or within a prescribed distance from such municipal limits.

      The Finance Act 2013 has, with effect from F.Y. 2013-14, revised the prescribed distance as being within a range of upto 2, 6 or 8 kms. (such distance being the aerial distance) from the municipal limit, based on the population as described hereunder:

  • Where population is more than 10,000 but not exceeding 1 lakh, 2 kms.
  • Where population is more than 1 lakh but not exceeding 10 lakhs, 6 kms.
  • Where population is more than 10 lakhs, 8 kms. (more…)
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