Does the spouse’s reinvestment of LTCG qualify for the capital gains exemption?
The Income Tax Appellate Tribunal (ITAT) ruled in January 2020 that reinvesting the entirety of long-term capital gains (LTCG) inside a partner’s call qualifies for exemption under the capital profits exemption rules. The decision was reached after an applicant’s claim was turned down by the evaluating officer. The sale earnings of an asset held for more than years must be invested in residential property per the regulations about exemptions below the reinvestment of LTCG.
The purchase must be made within years after the sale of the original assets, and to claim the tax benefits, the owner of the purchased assets must be the legal owner of or have access to the new assets. However, in this instance, the owner sold a partner’s call asset, leading to the lawsuit.
In this instance, the applicant informed the authorities up front that he had purchased one asset with the whole sum generated by the sale of his other properties. But in response to his spouse’s call, the claimant liquidated the brand-new assets. Following Section 54F of the Income Tax Act of 1961, he claimed exemption from long-term capital gains. The applicant allegedly made the case that he satisfied all requirements for exemption under Section fifty-four/54F of the Income Tax Act. The declarant was rejected by the evaluating officer, nevertheless.
An analogous situation occurred at the Chennai branch of the ITAT, where a woman had purchased a small plot of property in Trichy and invested the money earned in any other assets she could find at her husband’s beck and call. The government rejected her claim when she applied for the capital gains deduction under Section 54F of the Income Tax Act. The reinvestment was made at the partner’s request rather than on her own, and that was the only factor recognized.
The Delhi High Court has previously ruled that because it is a beneficial provision, the petitioner should be given the advantage even though the reinvestment was made at the partner’s request. The Delhi ITAT also agreed with the High Court’s decision and rendered a decision along the same lines. According to the document, the applicant is entitled to the exemption due to long-term capital gains because the whole sum realized after the sale of the principal assets was spent on buying any other assets within the reach of the applicant’s spouse.
Giving a similar ruling, the Chennai ITAT also decided that it was no longer problematic to grant the female the benefit of exemption even though the money acquired from the sale of the major assets was invested at the husband’s request. She must accept the exemption provided by Section 54F of the Income Tax Act.
The exemptions from capital gains that keep taxes for the assessee are related to Sections 54 and 54F of the Income Tax Act. But there are significant differences between each of the portions. The Income Tax Act’s Section 54F is related to the exclusion from long-term capital gains tax that results from the sale of non-residential assets, whereas Section 54 is related to the exclusion from long-term capital gains tax that results from the sale of residential assets. To claim a complete exemption under Section 179, the whole selling proceeds from the first sale must be reinvested within two years after the sale of the assets.
The blessings are distributed proportionately if the entire selling profits are not invested. Following Section 54F, it is prohibited to own more than one residential property at the time a vintage non-residential asset is sold.
“The current judgment of the Income Tax Appellate Tribunal is a positive decision,” Som Mandal, managing partner of Fox Mandal, a regulatory firm from Noida, said in response to the ruling. It will help people reinvest their LTCG revenues under the direction of their spouses or husbands and claim an exemption under Section 54/54F of the Income Tax Act.
Finally, the judgment has put the LTCG reinvestment in the partner’s call in the clear. It will help homebuyers have more financial control and possibly improve financing effectiveness.
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