Issues w.r.t.

deductions under
Capital Gains

~ CA. Shashank A. Mehta

1
 Coverage
• Cost of Acquisition/Improvement
• Deduction under section 54
• Deduction under section 54F
• Deduction under section 54EC

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Case 1

3
 Case Study 1
In the year 1987 Mr. ABC was allotted a plot of land on lease for 99 years by MMRDA
(under a govt. scheme) for total consideration of Rs. 4,00,000/-.
FMV of the said plot on 01.01.2001 was Rs. 12,00,000/-
SDV of the said plot on 01.01.2001 was Rs. 10,00,000/-

In December 2022; MMRDA and Mr. ABC entered into a Agreement for absolute transfer
of the said plot of land in the name of Mr. ABC. No additional cost paid at this point.
The fact about allotment of plot on lease and the consideration for the same (as entered
in the year 1987) was specified in this agreement.

In March 2023, Mr. ABC entered into a Sale Agreement for transfer of the said plot of
land for agreement value of Rs. 90,00,000/-. SDV as on this date was Rs. 1,20,00,000/-

Mr. ABC received Rs. 50,00,000/- in the month of March, 2023 and balance was
receivable in July, 2023. However, actually received on 18.08.2023

In May, 2023; Mr. ABC acquired a residential house property (under construction) in
Lonavala for agreement value of Rs. 90,00,000/-.
Against this purchase consideration – Mr. ABC has paid Rs. 50,00,000/- on date of
executing the sale agreement.

Due date applicable for filing ITR – 31.07.2023 (AY 2023-24)

4
 Issues Involved
Q1. What is the type of ‘Capital Asset’ transferred by Mr. ABC (in March,2023)?
Leasehold Rights in land or Plot of land?
• Nature and character of Capital Asset to be seen as on date of ‘Transfer’.
A.R. Dahiya v. Asstt. CIT [2004] 141 Taxman 449 (Punj. & Har.)
• Nature of Capita Asset  Plot of land

Q2. What will be the period of holding for the purpose of determining the
whether the Capital Asset is long Term or Short Term?
Plot under lease  Year 1987 to December, 2022 [ more than 420 months]
Plot as absolute owner  January, 2023 – March, 2023 [ 3 months]
• Section 2(14)(a):
"capital asset" means—
(a) property of any kind held by an assessee, whether or not connected with his
business or profession;
• In contradistinction to the word 'owner' or 'owned' definition uses the phrase
'held'
Madathil Brothers v. Dy. CIT [2008] 301 ITR 345 (Mad.).
• Type of Capital Asset  Long term Capital Asset
5
 Issues Involved
Q3. Indexation from which year?
From the year 2001 or FY 2022-23 (i.e. in this case, no indexation) ?
"indexed cost of acquisition" means an amount which bears to the cost of acquisition the same
proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost
Inflation Index for the first year in which the asset was held by the assessee or for the year
beginning on the 1st day of April, 2001], whichever is later.”

Indexation from the year  2001

Q4. Cost of Acquisition of the Capital Asset?

Rs. 4,00,000/- (actual cost) or
Rs. 12,00,000/- (FMV on 01.04.2001) or
Rs. 10,00,000/- (SDV on 01.04.2001)

• Section 55(2)(b):
(i) Actual Cost of Acquisition or FMV as on 01.04.2001
(ii) Proviso to above: [Finance Act, 2020, w.e.f. 1-4-2021.]
In case of Capital Asset being Land/Building 
FMV as on 01.04.2001 should not exceed SDV as on 01.04.2001

• Cost of Acquisition  Rs. 10,00,000/-

6
 Issues Involved
Q5. What will be the amount required to be invested for the purpose of claiming
entire amount of CG as deduction under section 54F?
Actual Sale Consideration received  Rs. 90,00,000/-; or
SDV as on date of sale  Rs. 1,20,00,000/- [value as per section 50C]

Section 54F:
"net consideration", in relation to the transfer of a capital asset, means the full value
of the consideration received or accruing as a result of the transfer of the capital
asset as reduced by any expenditure incurred wholly and exclusively in connection
with such transfer.

Section 50C(1):
“(1) Where the consideration received or accruing as a result of the transfer by an assessee of
a capital asset, being land or building or both, is less than the value adopted or assessed or
assessable by any authority of a State Government (hereafter in this section referred to as the
"stamp valuation authority") for the purpose of payment of stamp duty in respect of such
transfer, the value so adopted or assessed or assessable shall, for the purposes of section
48, be deemed to be the full value of the consideration received or accruing as a result of such
transfer:”
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 Issues Involved

• Deeming fiction created in section 50C is limited only to the extent and
for the purpose of section section 48 and this deeming fiction cannot be
extended or interpreted as meant for the purpose of other provisions of
the Act including Section 54F.
 Baskarababu Usha vs. ITO [2022] 135 Taxmann.com 307 (Chennai
Tribunal)
 DCIT vs. Dr. Chalasani Mallikarjuna Rao [2016] Taxmann.com 270
(Vaizag)
 Sunil Miglani vs. DCIT [2020] 115 taxmann.com 91 (Delhi Trib)

• Value to be invested for the purpose of claiming entire amount of the

capital gains as as deduction under section 54F  Rs. 90,00,000/-
(agreement value)

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 Issues Involved
Q5. What if the balance consideration which was receivable in July, 2023 – was
actually received in August, 2023 – impact on deduction u/s.54F?

Scenario 1:
Assessee will have to arrange for Rs. 40,00,000/- and deposit the same in CGAC
before 31.07.2023

Scenario 2:
Assessee does not deposit any amount in CAGS; however, when the amount was
received subsequently on 18.08.2023– the same was invested in the new House
property.

“(4) The amount of the net consideration which is not appropriated by the assessee towards
the purchase of the new asset made within one year before the date on which the transfer of
the original asset took place, or which is not utilised by him for the purchase or construction
of the new asset before the date of furnishing the return of income under section 139, shall be
deposited by him before furnishing such return [such deposit being made in any case not
later than the due date applicable in the case of the assessee for furnishing the return of
income under sub-section (1) of section 139] in an account in any such bank or institution
as may be specified…” 9
 Venkata Dilip Kumar v. CIT [2019] 419 ITR 298 (Mad.)
“15. At this juncture, the Division Bench decision of the Karnataka High Court
made in I. T. A. No. 47 of 2014 in the case of CIT v. K. Ramachandra Rao is
relevant to be quoted, wherein while considering the scope of section 54F(1) to 54F(4) of
the Income-tax Act, it has been observed as fo lows :
"If the intention is not to retain cash but to invest in construction or any purchase of
the property and if such investment is made within the period stipulated therein, then
section 54F(4) is not at all attracted and therefore, the contention that the assessee has
not deposited the amount in the bank account as stipulated and therefore, he is not
entitled to the benefit even though he has invested the money in construction is also not
correct.“

“16. Learned counsel for the Revenue relied on the decision of the Supreme Court
in Commissioner of Customs v. Dilip Kumar and Co. [2018] 6 GSTR-OL 46
(SC)/[2018] SCC Online SC 747 in support of her contention that exemption
notification should be interpreted strictly and the burden of proof of its applicability
would be on the assessee. I have already pointed out that the assessee, in this case, has
claimed that it has utilised the disputed sum towards the cost of the additional
construction within the period of three years from the date of the transfer and therefore,
if such contention is factually correct, it is to be held that the assessee has satisfied the
mandatory requirement under section 54(1) to get deduction. Therefore, I find that the
above decision relied on by the Revenue is not helping the case of the respondents under
the facts and circumstances of the present case.”
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 Issues Involved
Q5. What if the balance consideration which was receivable in July, 2023 – is not
going to be received?

Scenario 3:
What is the amount of Rs. 40,00,000/- is not going to get recovered?

“3. After hearing learned counsel for the parties, I have no hesitation in holding that the
properties do not necessarily pass as soon as the instrument is registered, for the true test is
the intention of the parties. Registration is prima facie proof of an intention to transfer, but
it is no proof of an operative transfer if there is a condition precedent as to the payment of
consideration or delivery of the deed. Thus the seller may retain the deed pending payment of
price and, in that case, there is no transfer until the price is paid and the deed is delivered.”
Smt. Raj Rani Devi Ramna v. CIT [1992] 201 ITR 1032 (Patna).

“In the instance case, given that the sale transaction fell through in view of non-fulfillment
of the terms of sale deed whereby cheques have been dishonored by Sh. Rajeev Singh and he
has failed to discharge the full sale consideration, there is no transfer and no income which
has accrued or arisen to the assessee besides the fact that there is no receipt of sale
consideration, thus no real income in hand of the assessee and in absence thereof, the
assessee is not exigible to capital gains tax.”
ACIT vs. Ijyaraj Singh [2020] 117 taxmann.com 424 (Jaipur - Trib.)
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Case 2

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 Interest expenditure as Cost of Acquisition

Section 24(b) read with second proviso  interest on borrowed capital allowed as
decoction on self occupied properties only to the extent of Rs. 2,00,000/-

No limit for interest deduction u/s. 24(b) in case of LOP/DLOP

However, section 71(3A)  Loss under the head “house property” shall be allowed
to be set-off against any other head of income only to the extent of Rs. 2,00,000.

Case scenario:
Mr. ABC having 2 SOPs; total interest expenses is Rs. 5,00,000/-

Rs. 2,00,000/- claimed as deduction u/s. 24(b)

Balance interest expenditure will lapse for the purpose of section 24(b)

Balance Rs. 3,00,000/- can it be capitalized to COA and be claimed as deduction

against FVOC - when such property is sold?

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 Interest expenditure as Cost of Acquisition

Prior to the amendment made in Finance Act, 2023:

An assessee can include interest paid on housing loan for computation under
section 48 even though said amount has already been deducted under section 24(b)
while computing income from 'house property‘
~ ACIT vs. C. Ramabrahmam [2012] 27 taxmann.com 104 (Chennai - Trib.)
~ Gayatri Maheshwari vs. ITO [2017] 88 taxmann.com 757 (Jodhpur) (UO)

Cost of acquisition: [section 48(ii)]

Following shall be inserted in clause (ii) of section 48 by the Finance Act, 2023, w.e.f.
1-4-2024 :
“Provided that the cost of acquisition of the asset or the cost of improvement
thereto shall not include the deductions claimed on the amount of interest under
clause (b) of section 24 or under the provisions of Chapter VIA.”

Obliquely it also means that the interest expenditure which is not claimed as
deduction u/s. 24(b) or u/c. VIA can be added to the cost of acquisition.

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Case 3

15
 Issue 3
Benefit of indexation under section 48:
Allotment/booking of flat in January 2015 (FY 2014-15)  Rs. 5,00,000/-
1st Slab to 6th Slab – FY 2015-16  Rs. 30,00,000/-
7th Slab to 12th Slab – FY 2016-17Rs. 40,00,000/-
Final Completion and Occupation – FY 2017-18 Rs. 15,00,00/-
Total Coast of Acquisition  90,00,000/-

Flat Sold in August, 2023  Rs. 1,50,00,000/-

Indexation to be calculated on entire Rs. 1,50,00,000/- from FY 2014-15?

Or
To be allowed based on payments made in each Financial year?

As per Explanation (iii) to section 48 of the Income-tax Act "Indexed Cost of Acquisition"
is defined which is as under:
"indexed cost of acquisition" means an amount which bears to the cost of acquisition the same
proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost
Inflation Index for the first year in which the asset was held by the assessee or for the year
beginning on the 1st day of April, [2001], whichever is later.

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 Date of allotment = date of acquisition
The allottee gets title to the property on the issue of allotment letter and the
payment of installments was only a followup action and taking the delivery of
possession is only a formality.

CBDT in its circular No. 471 dated 15th October, 1986

CBDT circular No 672 dated 16th December, 1993
Pr. CIT v. Vembu Vaidyanathan [2019] 413 ITR 248 (Bom.)
CIT v. Tata Services Ltd. [1980] 122 ITR 594 (Bom.).

The definition of indexed cost of acquisition does not refer to payment

made or the date of payment. What is relevant is when was the asset first
held.

Hence the assessee is entitled to claim the benefit of indexation from the
date the assessee held the property i.e. the rights in the flat upon receipt of
allotment letter.
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 Date of allotment = date of acquisition
Favorable decisions:
Smt. Lata G.Rohra v. Dy. CIT [2008] 21 SOT 541 (Mum.)
Charanbir Singh Jolly v. ITO [2006] 5 SOT 89 (Mum.)
Nitin Parkash Vs DCIT (ITAT Mumbai) ITA NO. 817/MUM/2015
Pooja Exports v. ACIT [ITA 2222/Mum/2010, dated 15-7-2011]
Sumit Export v. ACIT [2023] 148 taxmann.com 475 (Mum. -Trib.).

Mr. Nitin Parkash vs. DCIT [ITA NO. 817/MUM/2015](ITAT Mumbai)

Ms. Renu Khurana vs. ACIT [2023] 149 taxmann.com 160 (Delhi - Trib.)

Against:

Nirmal Kumar Seth vs. CIT [2012] 17 taxmann.com 127 (All.)

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Case 4

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 Issue 4
The Assessee had sold an immovable property and had earned LTCG of Rs.
3,00,00,000/-.

The assesse made investment in new house property (within the prescribed time)
for Rs. 2,50,00,000/- which was claimed as deduction u/s. 54.

Further, the Assessee had incurred other expenses as follows: (Total Rs. 50 Lakhs)
Brokerage – Rs. 6,00,000/-
Legal Fees – Rs. 1,00,000/-
Construction and Structural repairs – Rs. 33,00,000/-
Architect Fees – Rs. 4,50,000/-
Imported wall clock – Rs. 50,000/-
Luxury accessories & electronics – Rs. 5,00,000/-

The Ld. Assessing Officer allowed the claim u/s. 54 for the value of new property
of Rs. 2,50,00,000/-; however, disallowed the claim for other costs of Rs. 50,00,000/-
for the purpose of section 54.
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 Issue 2
Section 54(1):
54. (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an
individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term
capital asset, being buildings or lands appurtenant thereto, and being a residential house, the
income of which is chargeable under the head "Income from house property" (hereafter in this
section referred to as the original asset), and the assessee has within a period of one year before or
two years after the date on which the transfer took place purchased, or has within a period of three
years after that date constructed, one residential house in India, then, instead of the capital
gain being charged to income-tax as income of the previous year in which the transfer took place,
it shall be dealt with in accordance with the following provisions of this section, that is to say,—

(i) if the amount of the capital gain is greater than the cost of the residential house so
purchased or constructed (hereafter in this section referred to as the new asset), the
difference between the amount of the capital gain and the cost of the new asset shall be
charged under section 45 as the income of the previous year; and for the purpose of
computing in respect of the new asset any capital gain arising from its transfer within a
period of three years of its purchase or construction, as the case may be, the cost shall be nil;
or

(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the
capital gain shall not be charged under section 45; and for the purpose of computing in
respect of the new asset any capital gain arising from its transfer within a period of three
years of its purchase or construction, as the case may be, the cost shall be reduced by the
amount of the capital gain: 21
 Cost of New Asset vs. Price of New Asset

The words used about the amount spent on purchase of new asset are "cost
thereto" and not "price thereto".

The cost includes purchase as well. Consequently, we are of the view that
the word used signifies that the amount of purchase will include other
necessary expenditure in this behalf to make a residential house habitable
and taken together will be the cost of the new asset.

The residential house was in a state of general disrepair and was

unhabitable.

Consequently, the necessary repairs carried out to make the same habitable
will constitute part of the cost of new house.

~Mrs. Gulshanbanoo R. Mukhi vs. JCIT [2002] 83 ITD 649 (Mumbai)[16-01-

2002]
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 Habitable vs. Inhabitable premises
The investment in residential house would not only include the cost of purchase of
the house but also the cost incurred in making the house habitable.

An inhabitable premises cannot be equated with a residential house.

In the modern age, the builder may provide semi-finished house or complete house,
depending upon the price agreed to between the parties. In case of semi-finished
house, the purchaser will have to invest on flooring, wooden work, sanitary work,
etc., to make it habitable. Therefore, the investment in house would be complete
only when such house becomes habitable.

Accordingly, the expenditure incurred on making the house habitable should be

considered as investment in purchase of the house, subject to the condition that
payment was made during the period specified.

~Saleem Fazelbhoy vs. DCIT [2007] 106 ITD 167 (MUM.)

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 Habitable vs. Comfortable

There is distinction between expenditure incurred on making the house habitable

and the expenditure on renovation.

A situation where assessee may buy a habitable house but the assessee may like to
incur expenditure by way of renovation to make it more comfortable.

He may not be happy with the quality of material used by the builder and,
therefore, he may incur the expenditure on improvement of the house.
Such expenditure cannot be equated with the expenditure on making the house
habitable.

Whether the house purchased by the assessee was in a habitable condition or not
would depend on the state of condition of the house at the time of purchase. Hence,
this aspect would have to be kept in mind while adjudicating such issue.

~Saleem Fazelbhoy vs. DCIT [2007] 106 ITD 167 (MUM.)

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Case 5

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Residential House acquired on lease – qualifies for deduction u/s. 54/54F?
whether the assessee has to purchase the property absolutely for claiming exemption
under Section 54/54F or perpetual lease for unlimited period (or considerable long
period) would amount to purchase of the property for claiming exemption?
“…the assessee has within a period of one year before or two years after the date on which the
transfer took place purchased, or has within a period of three years after that date constructed,
one residential house in India…”

A bare reading of Section 2(47)(vi) shows that the agreement or arrangement which has
the effect of transferring or enabling the enjoyment of immovable property, has to be
considered as transfer in relation to capital asset.

Section 269UA(f) the term "transfer" - in relation to immovable property includes by

way of sale or exchange or lease for a term of not less than 12 years and includes
allowing possession of such property by way of lease if the aggregate term of lease by
way of extensions etc in aggregate is not less than 12 years.

Section 27(iiib)  when a person acquires any right (excluding any right by way of a
lease from month to month or for a period not exceeding one year), in or with respect to
immovable property referred to in section 269UA(f), he shall be deemed to be the owner
of that building or part thereof.

“Hence, for all practical purposes, the acquisition of property by perpetual lease exceeding the
period of twelve years, has to be construed as purchase within the meaning of Section 54F of the
Act.” ~ N.Ramaswamy v. ITO [2020] 113 taxmann.com 289(Chennai Trib.)
Mrs. Prema P. Shah v. ITO [2006] 100 ITD 60 (Mum.)
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Case 6

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 Section 54EC – Rights in immovable property ?

“54EC: (1) Where the capital gain arises from the transfer of a long-term capital asset , being land
or building or both, (the capital asset so transferred being hereafter in this section referred to as
the original asset) and the assessee has, at any time within a period of six months after the date of
such transfer, invested the whole or any part of capital gains in the long-term specified asset, the
capital gain shall be dealt with…”

Upto AY 2018-19  ‘long-term capital asset’

From AY 2019-20  ‘long-term capital asset , being land or building or both’

“19.3 In order to rationalise the provisions of section 54EC of the Income-tax Act and to restrict
the scope of the section to only capital gains arising from long-term capital assets, being land or
building or both, section 54EC has been amended…”
Finance Act, 2018 - Circular No. 8, Dated 26-12-2018

Capital gains on transfer of tenancy rights, leasehold rights, or like; covered?

Section 54G: ”(1) Subject to the provisions of sub-section (2), where the capital gain arises from
the transfer of a capital asset, being machinery or plant or building or land or any rights in
building or land used for the purposes of the business…”

In the context of section 50C – literal interpretation to ‘land or building’

CIT v. Greenfield Hotels & Estates (P.) Ltd. [(2017) 77 taxmann.com 308 (Bom.)] -
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Case 7

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 Conditions under section 54F
Proviso to section 54F(1):
“Provided that nothing contained in this sub-section shall apply where—
(a) the assessee,—
(i) owns more than one residential house, other than the new asset, on the date of
transfer of the original asset; or
…”

30
 Joint Ownership vs. Absolute Ownership
• The word 'own' appearing in section 54F must mean a complete residential
house and would not include shared interest in a residential house.

• Where the property is owned by more than one person, it cannot be said that
any one of them is the owner of the property.

• Joint ownership is different from absolute ownership. In the case of joint

ownership, none of the co-owners can claim that he is the absolute owner of
residential house. Ownership of a residential house means ownership to the
exclusion of all others. Therefore, where a house is jointly owned by two or
more persons, none of them can be said to be the owner of that house.

• Where ownership of assessee over property is subject to life interest retained by

co-owner in said property, it could not be said that assessee owned said
property fully and it cannot be a reason to deny exemption under section 54F

~ Ashok G. Chauhan vs. ACIT [ITA 1309/Mum/2016](12.4.2019)

~ ITO v. Rasiklal N. Satra [2006] 98 ITD 335 (Mum-Trib.)
~ Mrs. V. R. Usha v. ITO [2016] 159 ITD 402 (Chennai-Trib.)
31
 Ownership held outside India
• On the date of transfer of Capital Asset; the Assessee owns the following:
 1 Residential House property in India
2 Residential House property in USA

Main provision: (primary condition for claiming exemption u/s. 54F)

"constructed, a residential house"  "constructed, one residential house in India"

Proviso: (non-applicability of section 54F)

Where the assessee, owns more than one residential house, other than the new asset, on the
date of transfer of the original asset.

32
 Ownership held outside India
Object/Purpose test:
The proviso is not to be taken absolutely in its strict literal sense but is of necessity limited
to the ambition of the section which it qualifies and cannot be permitted by construction to
defeat the basic intent expressed in the substantive provision.

A proviso must be construed harmoniously with the main statute so as to give effect to the
legislative objective and the section should be read as a whole inclusive of the proviso in
such manner that they mutually throw light on each other and result in a harmonious
construction.

The legislative intent behind granting relief to the assessee through section 54F is
investments in residential house in India and therefore the proviso imposing the conditions
cannot be read in isolation and should construed harmoniously with the main section.

Accordingly the proviso to section 54F which contains the condition that the deduction is
not available if the assessee owns more than one residential house, other than the new asset,
should be interpreted to mean ownership of residential houses in India.

~ Smt. Maries Joseph vs. DCIT [2023] 148 taxmann.com 97 (Cochin - Trib.)
33
Case 8

34
 Benefit of exemption provision to Trust
Where a trust having sole beneficiary invests a long term capital gain in a residential
house. Can deduction under section 54/54F be denied on the ground that trust is not
an individual or HUF?

Section 161, makes a representative assessee subject to the same duties, responsibilities
and liabilities as if the income was received by him beneficially.

The fiction is created as it was never the object or intention of the Act to charge tax upon
persons other than the beneficial owner of the income. Whatever benefits the beneficiary
will get in the said assessment must be made available to the trustee while assessing him
under section 161.

Whatever benefits the beneficiary will get in a particular assessment must be made
available to the trustee while assessing him under section 161.

Accordingly, the assessee is principally entitled to deduction u/s. 54F and it cannot be
said that since it is a AOP and not a individual or HUF the said exemption/ deduction
should be denied.

Mrs. Amy F. Cama v. CIT [1999] 237 ITR 82 (Bom.)

Balgopal Trust v. Asstt. CIT [2017] 81 taxmann.com 367/164 ITD 584 (Mum. - Trib.)

35
Case 9

36
 Investment in the name of other person
Assessee sells a residential house and purchases another residential house in the
name of his wife; is deduction allowable?

The word 'purchase' is not defined under the Act and, therefore, resort to the
ordinary meaning, as understood by a layman, has to be made. In many
dictionaries, the word 'purchase‘ means the acquisition of property by party's own
act, as distinguished from acquisition by act of law. The context demands not the
literal interpretation but liberal and wider interpretation.

Further, taking into consideration the letter as well as the spirit of section 54 and the
word 'towards' used before the word 'purchase' in section 54(2), it seems that the
said word is not used in the sense of legal transfer, and, therefore, holding of a legal
title within a period of one year is not a condition precedent for attracting section
54.

~ CIT vs. Dr. Laxmichand Narpal Nagda [1995] 78 TAXMAN 219 (BOM.)

37
 Investment in the name of other person
In the entire section 54, it is not expressly stated that the purchase to be made or the
construction to be put up by the assessee should be there in the name of the
assessee.

Favour:
CIT v. Gurnam Singh [2010] 327 ITR 278/[2008] 170 Taxman 160 (Punj. & Har.)
Late Mir Gulam Ali Khan v. CIT [1987] 165 ITR 228 [1986] 28 Taxman 572 (AP)
CIT v. Kamal Wahal [2013] 351 ITR 4/214 Taxman 287/30 taxmann.com 34 (Delhi)
N. Ram Kumar v. Asstt. CIT [2012] 138 ITD 317/25 taxmann.com 337 (Hyd.)
CIT v. Ravinder Kumar Arora [2012] 342 ITR 38/[2011] 203 Taxman 289/15
taxmann.com 307 (Delhi)

Against:
Jai Narayan v. ITO [2008] 306 ITR 335 (P&H)
ITO v. Prakash Timaji Dhanjode [2002] 258 ITR (AT) 114 [ITAT, Nagpur]

~CIT vs. Vegetable Products Ltd. [1973] 88 ITR 192

38
 Investment in the name of other person
Investment in Section 54EC eligible Bonds in the name of other person:
~DIT v. Mrs. Jennifer Bhide [2011] 203 Taxman 208/15 taxmann.com 82 (Kar.)

Implication under the Prohibition of Benami Property Transactions Act, 1988:

New property is purchased only in the name of :

a) Spouse/Children
b) Mother/Father/Brother/Sister/Lineal Ascendant/Lineal Descendent

39
 Investment in the name of other person
"benami transaction" means,—
(A) a transaction or an arrangement—
(a) where a property is transferred to, or is held by, a person, and the
consideration for such property has been provided, or paid by, another person;
and
(b) the property is held for the immediate or future benefit, direct or indirect, of
the person who has provided the consideration,
except when the property is held by—
(i) …;
(ii) …;
(iii) any person being an individual in the name of his spouse or in the name of any
child of such individual and the consideration for such property has been
provided or paid out of the known sources of the individual;
(iv) any person in the name of his brother or sister or lineal ascendant or
descendant, where the names of brother or sister or lineal ascendant or
descendent and the individual appear as joint-owners in any document, and
the consideration for such property has been provided or paid out of the
known sources of the individual; or

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Case 10

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 Taxability of unutilized amount in CGAS – upon death of Assessee

Circular No. 743 dated 6.5.1996, 219 ITR (St.) 50

“The matter has been considered by the Board and it is clarified that
in such cases the said amount cannot be taxed in the hands of
the deceased. This amount is not taxable in the hands of legal
heir also as the unutilised portion of the deposit does not
partake of the character of income in their hands but is only a
part of the estate devolving upon them.”

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Case 11

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 Overriding effect - 45(1) vs. 45(5A)
“45. (1) Any profits or gains arising from the transfer of a capital asset effected in the
previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB,
54F, 54G and 54H, be chargeable to income-tax under the head "Capital gains", and shall be
deemed to be the income of the previous year in which the transfer took place.”

“(5A) Notwithstanding anything contained in sub-section (1), where the capital gain arises
to an assessee, being an individual or a Hindu undivided family, from the transfer of a
capital asset, being land or building or both, under a specified agreement, the capital gains
shall be chargeable to income-tax as income of the previous year in which the certificate of
completion for the whole or part of the project is issued by the competent authority; and for
the purposes of section 48, the stamp duty value, on the date of issue of the said certificate, of
his share, being land or building or both in the project, as increased by the consideration
received in cash, if any,] shall be deemed to be the full value of the consideration received or
accruing as a result of the transfer of the capital asset :…”

Overriding effect only for the point of chargeability of tax and determination of the
FVOC; or even for the saving clause provided under section 45(1)?

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Thank You
Audience
BCAS

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‘It’s not the Profession that Glorifies You,
You Glorify the Profession.’
(281 and Beyond – VVS Laxman)
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CA. Shashank A. Mehta
SHASHANK MEHTA & ASSOCIATES

Cont.: 7208046221
Email: shashankmehta1695@gmail.com
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