Exemption under Section 54GB [Inserted w.e.f. 1st April, 2013]- Capital gain on transfer of residential property not to be charged in certain cases

–         Relief from long-term capital gains tax on transfer of residential property

–         If sale consideration invested in a manufacturing small or medium enterprise.

Exemption of Long term Capital Gain Tax to an Individual or HUF on transfer of residential property (a house or a plot of land) on or before 31st March, 2017 upon reinvestment of sale consideration before the due date of furnishing the return of income as specified section 139 (1) in the Equity of ELIGIBLE BUSINESS (a new start up SME company in the manufacturing sector which is utilized by the company for the purchase of new plant & machinery as specified in the section in which it holds more than 50% share capital or voting rights) and The share cannot be transferred within a period of 5 years . The relief is available for any transfer of property made on or before 31.03.2017.

Some Practical Issues ISSUE on Section 54B

Q. Whether the assessee would be entitled to get exemption under section 54B for purchase of land in name of his son and daughter-in-law?

The word “assessee” used in the Income Tax Act needs to be given a ‘legal interpretation’ and not a ‘liberal interpretation’, if the word ‘assessee’ is given a liberal interpretation, it would tantamount to give a free hand to the assessee and his legal heirs and it shall curtail the revenue of the Government, which the law does not permit. Consequently, an assessee would not be entitled to get exemption under section 54B for land purchased by him in name of his son and daughter-in-law. [Kalyavs CIT [2012] 22 taxmann.com 67 (Raj.)]

Q. Whether the assessee would be entitled to get exemption under section 54B for purchase of land in his name and in name of his only son?

When the purchased land was being used by assessee only for agricultural purpose, merely because in sale deed his only son was also shown as co-owner, assessee could not be denied deduction under section 54B. [CIT vs Gurnam Singh [2008] 170 Taxman 160 (Punj. & Har.)]

Q. If no agricultural activities are performed on land in past two years preceeding date of sale of land, the claim for exemption under section 54B allowable?

When as per revenue records no agricultural activity was undertaken on land owned by assessee in past two years preceding date of sale and the assessee failed to prove that land in question was agricultural land, assessee’s claim for exemption under section 54B cannot be accepted.[G. Ramkumar vs DCIT [2012] 20 taxmann.com 522 (Chennai-ITAT)]

Q Is the assessee eligible for exemption under section 54B, where capital gains from sale of agricultural land was invested in purchasing non ­agricultural land?

The land revenue authorities had categorically stated that as per revenue records no crop was cultivated/agricultural activity was undertaken on the land owned by the assessee. No concrete evidence has been brought on record by the assessee to controvert the findings of fact recorded by the lower authorities, except production of statements of neighbours of the assessee. Since the assessee has miserably failed to prove that the land in question was agricultural land and he had cultivated crops in the land, assessee is not eligible for exemption under section 54B.[G.Babuvs ITO [2012] 24 taxmann.com 36 (Chennai-ITAT)]

Q. Whether word ‘parent’ as appearing in section 54B includes an ‘uncle’ within its ambit?

The word ‘parent’ does not stand defined in the Act. Once this is so, the general definition of the word ‘parent’ is to be taken into consideration and even the general definition does not include an ‘uncle’. Thus, the land having not been exploited for agricultural purposes by a parent of the assessee, the exemption under section 54B would not accrue to him. [Jarnail Singh vs ITO [2009] 31 SOT 8 (Asr.-ITAT)(URO)]

OTHER EXEMPTIONS AVAILABLE FROM CAPITAL GAIN U/S 54B, 54D, 54G, 54GA & SECTION 54GB

 

SECTION

54B 54D 54G 54GA
 Which Capital asset is eligible for exemption -LT/ST ST/LT ST/LT ST/LT ST/LT
 

When available

Transfer of Land used for Agricultural purposes by assessee/his parents for atleast 2 years On compulsory acquisition of land and building forming part of an industrial undertaking On shifting of industrial undertaking from urban area to rural area On shifting of industrial undertaking from urban area to SEZ
Asset Any Agriculture Land Land/building

 

Land/building/ P&M Land/building/ P&M
Person IND/HUF* Any person Any person Any person
Period within which to purchase 2 years after 3years after the date of transfer 1year before or 3years after the date of transfer 1year before or 3years after the date of transfer
Deposit money before due date of return is compulsory Yes Yes Yes Yes

(Source – Book on Practical Aspects of Tax Audit, TDS, HUF & Capital Gains  written by CA Agarwal Sanjay ‘Voice of CA’ & Team)

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