Opinion Of Eminent Legal Luminaries On Controversial Issues

QUERY: Gift to HUF by members:
a) What will be the tax implications of a gift by cheque (sum of money), given by a member to the HUF?
b) Whether the member will be considered as a relative as defined in explanation to clause (vii) of section 56(2) and consequently the gift not considered as income from other sources for the HUF as per section 56(2)(x)(a)?
ANSWER: Click here to read the full answer of the expert
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A gift by a member to HUF is not taxable as per section 56(2)(vii) read with Explanation to section 56(2)(x).

QUERY: An old lady was residing at Malad in tenanted chawl having about 1000 sq. ft. area. After her death her daughter-in-law became successor and continued to live there.
Subsequently the building was re-developed and she was allotted two flats of 650 sq. ft. each in her name in exchange of surrender of tenancy right. Out of which one was sold by her at an handsome price.
Now the ITO wants to tax the whole sum as long term capital gain without allowing any deduction as purchase value or cost price plus index cost.
Kindly advice whether the AO is correct?
ANSWER: Click here to read the full answer of the expert
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The Finance Act, 1994 has amended the provisions relating to capital gains for the purpose of taxing the capital gains arising from transfer of tenancy right.

QUERY: I had sold 4 of vacant sites during the financial year and earned capital gains on each of them. Thereafter, I purchased a residential property for Rs. 1,50,00,000/- in the same financial year. My total long term capital gains was Rs. 36,72,000/-, on the sale of said sites. How to reflect in I. T. Return.
ANSWER: Click here to read the full answer of the expert
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In the return of income, you have to disclose under the head “capital gains”. You have to give working under “schedule CG” in schedules to the Return Form.

QUERY: A property owned by the HUF was sold for ` 80,00,000/-. The new house property was purchased in the name of co-parcener (daughter). Whether HUF is entitled to get benefit under section 54F of the Income-tax Act, 1961 as co-parcener is a part of the HUF?
ANSWER: Click here to read the full answer of the expert
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In Vipin Malik (HUF) v. CIT [330 ITR 309] the Delhi High Court held that the agricultural land which was sold of by the assessee – HUF and the flat purchased in the co-operative society was not in the name of the HUF. The flat was in the individual name of V along with his mother. To claim the benefit of section 54F, the residential house which was purchased or constructed had to be of the same assessee whose agricultural land was sold. Therefore, there was no question of section 54F of the Act.

QUERY: ‘A’ has two residential house (let out) in Mumbai and one residential house (self occupation) in Chennai. Now ‘A’ wants to purchase one residential house in Chennai, out of sale proceeds of one houses in Mumbai out of two residential houses. Whether ‘A’ will get section 54 exemption or not?
ANSWER: Click here to read the full answer of the expert
EXPERT:
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It is not clear from the fact, whether the ‘A’ wants to dispose of the Chennai’s residential house and one house of Bombay and then buy one house in Chennai? If yes, ‘A’ is entitled to get the benefit of section 54.

QUERY: In case of redevelopment of property the consideration takes in the form of corpus, which is a real cash inflow and fair market value of the property to be developed, which is a deemed consideration for the purpose of exchange. Thus, there is exchange of property. Now, the question is in which year capital gain arises and when can exemption be claimed either under Section 54 or under section 54F?
ANSWER: Click here to read the full answer of the expert
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In case of development of property the capital gain arises as per terms of the agreement. Generally, the agreement provides that the developer has right to enter and construct on the land of owner and owner parts with land only on receipt of certain portion of building to be constructed. Till then possession of land is not parted with. In such case, the amount received is to be treated as advance.

QUERY: An agriculturist sold his agriculture land to an infrastructure company for the commercial project after obtaining permission from the Collector under section 63 of the Bombay Agriculture & Tenancy Act. The sale deed was executed for agriculture land as per jantri value mentioning order number of Collector. One of the conditions of the order was that the stamp duty would be payable as per N.A land. Now the assessee has executed sale deed for agriculture land as per jantri value. The Assessing Officer has passed the order making addition of difference value of Rs. 90/- lakh as per non agriculture under section 50(C); though the assessee has executed sale deed for agriculture land. Whether action of Assessing Officer is right?
ANSWER: Click here to read the full answer of the expert
EXPERT:
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S. 50C is clear that this section is applicable to all kinds of land, whether agricultural [other than land situated in area stated in clause (iii) of section 2(14)] or non- agricultural. Therefore, action of the Assessing Officer is right in making addition of difference in value of land as per stamp duty value over Jantri value.

QUERY: The vacant plot was purchased five years back, which is sold at Rs. 60,00,000/-, but Stamp Duty value is Rs. 1,30,00,000/- what assessee should do?
ANSWER: Click here to read the full answer of the expert
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Section 50C provides that where consideration received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and the capital gains shall be computed accordingly under section 48 of the Act.

QUERY: Purchase of flat under self finance scheme: An assessee booked a flat with RHB under self financing scheme & paid regular instalments. The flat was booked in 2006 and the amount was paid till 2011. The flat was allotted in 2010 & possession was given in 2011. What will be the date of acquisition & position of indexation of instalment.
ANSWER: Click here to read the full answer of the expert
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Explanation to section 48 of the Act, defines “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, 1981 whichever is later.

QUERY: A person acquired inherited property before Independence. Thereafter, he had obtained, the court order for legal heirship in the Financial Year 1991/92, At that time stamp duty was paid amounting to Rs. 1,98,840/-. Can it be considered as cost for indexation?
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Credit: Several of the queries and answers are reproduced with permission from the AIFTP Journal. We thank AIFTP for generously allowing us to host their research material.
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