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2018 (2) TMI 869

ual co-parcener acquires the property the same cannot be treated as HUF property - Held that:- HUF has sold the property and received 1/6th share of consideration amounting to ₹ 20,00,000/- out of which contributed ₹ 15 lakhs towards purchase of new property and the remaining amount of ₹ 25 lakhs was contributed by the co-parcener for acquiring the new property. - Both the HUF and co-parcener of the property have entered into a memorandum of understanding to transfer the property in the name of HUF after complete repayment of the loan, which was granted to the individual co-parcener Mr. G. Rama Murthy Setty, S/o Nageswara Rao. The assessee also declared the rental income in its hands and the loan is being repaid by th .....

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inst the market value adopted by the SRO at ₹ 2.10 crores for stamp duty purpose. However, the assessee did not disclose the sale consideration as capital gains. Hence, the assessing officer reopened the assessment by issue of notice u/s 148 of the Act and brought to tax the assessee s share of capital gains. The assessee is 1/6th share holder of 6 acres of land sold to Mr. A Jagadish and others of M/s. A.S. Steel Traders and received a sum of ₹ 20,00,000/- as sale consideration and claimed deduction u/s 54F of the Act. The A.O. rejected the deduction claimed by the assessee u/s 54F of the Act, since the impugned property was purchased in the name of Sri Ramana Murthy Setty, co-parcener of the HUF. The assessee contended that Sr .....

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e loan, Mr. Rama Murthy Setty who is having salary income has taken loan from LIC of India and accordingly the asset was purchased in the name of Mr. R. Murthy Setty, one of the coparcener and the MOU has been reached on 11.3.2014 and the property is treated as HUF property as per the MOU. The rent received was also offerred in the hands of HUF and the loan installments were repaid by the HUF and on complete repayment of the loan, the property would be transferred by registered sale deed to the hotchpotch of HUF. Since the funds were invested from HUF and the co-parceners are having equal share in the HUF property, the Ld. A.R. argued that HUF is entitled for deduction u/s 54F of the Act even though the property was purchased in the name of .....

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.6 to 10 of the order cited (supra). 6. We have considered the rival submissions on either side and perused the material available on record. The assessee sold a capital asset namely diamond and claims exemption on the capital gain under section 54F of the Act. The assessing officer rejected the claim of the assessee on three grounds :- (1) First, the capital asset was purchased in the individual name of coparcener of HUF. (2) Borrowed funds were used for purchase of the new asset and not the sale proceeds of the diamond. (3) There was no construction on the new asset. 7. As regards the investment made in the individual capacity, even though HUF is an independent assessable unit under Income Tax Act, under the common law, HUF cannot be cons .....

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e before the date of the sale of the capital asset. The assessee cannot have any sale proceeds before the date of the sale. Therefore, this Tribunal is of the considered opinion, when the assessee borrowed the funds and utilized in purchasing the capital asset and thereafter uses the sale proceeds or capital gain for repaying the loan borrowed, that would amount to sufficient compliance of the requirement of section 54F of the Act. Therefore, merely because the borrowed funds were used when the property was purchased before the date of the sale of asset, this Tribunal is of the considered opinion, this cannot be a reason for disallowing the claim of the assessee. 10. In view of the above, we are unable to uphold the orders of both the lower .....

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