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Flat buyers won't lose I-T sop by adding kin name - The Economic Times https://economictimes.indiatimes.com/wealth/real-estate/flat-buyers-w...

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BY LUBNA KABLY, TNN | UPDATED: MAY 01, 2017, 07.31 AM IST Post a Comment

MUMBAI: The Income Tax Appellate Tribunal (Mumbai bench) has, in a recent order, held
that if the entire investment for purchase of a new residential house, along with stamp duty
and registration charges, has been made by an individual, he should get the full benefit of
the relevant income tax (I-T) exemptions.

Merely because the name of a close relative has been added to the newly purchased
property (or in other words the new property is jointly held), it should not result in dilution
of the I-T exemption in the hands of the individual who has paid for it.

The I-T Act, under various sections, offers tax benefits where sale proceeds (such as sale
of residential house) are reinvested in certain assets (such as another residential house or Name plates in housing society may find several flats
eligible investments). are jointly held.

For instance, under section 54, if on sale of a residential house, the sale proceeds are Big Change:
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reinvested in another house in India, within the stipulated period of time, to the extent of
such reinvestment an exemption is available in computing capital gains. The taxable component of capital gains is reduced to the extent
of the reinvestment, which results in a lower capital gains tax outgo.

If you look up the name plates in your housing society, you may find that several flats are jointly held.

The flat may be in the joint name of a couple, or owned with a parent or a sibling. The co-owner may or may not have contributed
towards this purchase and the name of such a relative may have been added for the sake of convenience, such as to prevent family
disputes arising in the future.

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“The ITAT has upheld the well-established criteria that ownership for I-T purposes is determinant upon who has made the payment and
to what extent. Very often, the name of a non-earning spouse, or parent or even sibling is added when a new property is purchased to
offer a security net to them.

In those cases, where they have not contributed towards the purchase, the I-T benefit, such as on re-investment should flow entirely to
the buyer who had made the purchase. This aspect has been reiterated by the ITAT,“ explains Gautam Nayak, tax partner, CNK &

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Flat buyers won't lose I-T sop by adding kin name - The Economic Times https://economictimes.indiatimes.com/wealth/real-estate/flat-buyers-w...


In this case, decided by the ITAT on April 27, the taxpayer, Jitendra V Faria, had on sale of a residential house incurred capital gains of
Rs.43.01 lakh. He reinvested Rs 42.66 lakh in a new residential house and claimed this amount as exempt under section 54 of the I-T
Act. On the deficit balance, of Rs 35,000 odd, he paid capital gains tax amounting to Rs 7,376.

However, in the course of assessment, the I-T official noted that the new house that had been purchased was held in the name of two
persons -Jitendra Faria with his brother Kunal Faria.Thus, the I-T official held that the exemption claimed by Jitendra Faria should be
restricted to Rs 21.33 lakh (which is 50% of the amount claimed as exempt by him under section 54).

When the matter reached the ITAT, the tribunal noted that the name of brother was included only for the sake of convenience. It
observed that even the I-T official had confirmed that the entire cost of the new house was borne only by Jitendra Faria. Thus, the ITAT
set aside the decision of the I-T authorities and decided in favour of the taxpayer.

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