My client has sold a plot of land on April 10, 2009 (net sale consideration: Rs. 40 lakh, long-term capital gain: Rs. 33.7 lakh). The net sale consideration of Rs. 40 lakh is deposited by him in capital gain deposit account scheme on June 1, 2010 for availing exemption under section 54F. He is going to sell another piece of land during June 2010 (net sale consideration Rs. 70 lakh, long-term capital gain: Rs. 65 lakh). He wants to purchase a residential house in December 2010. Amount of investment will be Rs. 1.5 crore. Is it possible to claim exemption under section 54F by purchasing only one house property in view of the fact that Rs. 40 lakh and Rs. 70 lakh relate to financial years 2009-10 and 2010-11 respectively?
Under section 54F, exemption is available if a few conditions are satisfied.
- The taxpayer should be individual/HUF.
- He should not own more than one residential house property on the date of transfer.
- Capital gain exemption is available on the transfer of any long-term capital asset (other than a residential house property)
- if the net sale consideration is utilized in purchasing or constructing a residential house property.
- If he purchases more than one residential house property, he cannot claim exemption under section 54F.
Nowhere section 54F requires that net sale consideration of two different transactions pertaining to two different years cannot be utilized for purchasing one residential house property. In the given case, exemption under section 54F cannot be denied. However, the following points should be noted –
- He should not purchase another residential house property up to June 2012. Moreover, he should not complete construction of any other residential house up to June 2013.
- The new residential house should not be transferred up to December 2013.