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Welcome To New Seminar


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Title: Welcome To New Seminar

Welcome To New Seminar
  • Tax Planning of Real Estate
  • AND
  • Money Making Ideas in Real Estate
  • For the first time in India a real power
    packed seminar on Tax planning of Real Estate as
    also unique innovative ideas in Real Estate for
    making your money grow. Strongly recommended for
    all those who are in the real estate sector as
    also for all those who would like to join real
    estate sector as a business or as investment.

  • By
  • Tax Guru CNBC Awaaz
  • Director Lakhotia College of
    Taxation Management
  • Director R.N. Lakhotia Associates LLP

Seminar onTax Planning of Real Estate Money
Making Ideas in Real Estate by Subhash Lakhotia
  • Important topics to be covered in the Seminar
  • 1. Real practical objectives of Tax Planning of
    Real Estate.
  • 2. Real Life tax planning ideas and practical
    tax saving examples for Investment in Real
  • 3. Important pointers in Buying, Selling
    Renting Properties including Capital Gains tax
    saving vistas.
  • 4. Important Judicial decisions which help the
    process of Tax Planning in the wonderland f Real
  • 5. Money Making Ideas in Real Estate.
  • 6. Utilising Limited Liability Partnership
    Firms for your Real Estate Investments.
  • 7. The new concept of Real Estate Business
    Oxygen Company for making money in Real Estate.
  • 8. Investment in India by Non Resident Indians.
  • 9. Miscellaneous aspects of Tax Planning of
    Real Estate Unlimited Questions Answers.

  • Lakhotia College of Taxation Management
  • S-228, Greater Kailash Part-2, New Delhi-110 048
  • Phone 011-29215434, 29215420, 29217768,
  • E-mail slakhotia_at_satyam.net.in
  • lakhotia49_at_gmail.com

1. Real Practical Objectives of Tax Planning of
Real Estate
  • 1. To achieve best results in Property Buying ,
    Selling Renting.
  • 2.To achieve Optimum tax advantages of Tax
    benefits and gains by making Investment in Real
  • 3.To encourage cash rich people to be a part of
    Real Estate sector.
  • 4. To debate and analyse Judicial thinking for
  • tax benefit and relief.
  • 5. To think and meditate on Money Making Ideas in
    Real Estate.

2(1) Real Life Tax Planning Ideas and practical
tax saving examples for Investment
in Real Estate
  • Have faith in the dictum of Walt Disney
  • If you can
  • Dream it
  • You can,
  • Do it

2(2) Real Estate Planning Ideas and practical
saving examples for Investment in Real
  • Think Boldly
  • Yes, I Can
  • Yes, I Will

2(3) Expand the horizons of Tax Entities in your
family for Tax Planning of Real Estate.
  1. Jot down on a piece of paper the various tax
    entities that are available under the Income-tax
  2. Compare with Tax entities existing in your group
    right now.
  3. Now proceed to think of New Tax Entities which
    can be a part of your growth story.

2(4) Expanding horizons of new Tax Entities in
your family.
  • Find out whether all family members are having a
    separate Income-tax File.
  • Does your spouse have a separate tax entity.
  • If not what care to take.
  • The importantce of Technical Professional
    Qualification of your spouse.
  • Building brick by brick, the tax entity of spouse
  • Tax advice to young couples to be before
    marriage, at marriage and after marriage.
  • The Cross Transfers and impact of Real Estate

2(5) Expanding horizons of new Tax Entities in
your family contd.
  • It is time to take care of your major children
    for your Tax Planning.
  • The sons and daughters in the family who are 18
  • Transfer of liquid money to major children.
  • Aspects connected with Real Estate transfer
    through gift to major children.

2(6) Expanding horizons of new Tax Entities in
your family contd.
  • It is time not to ignore your Parents and
    your-in-laws to reach out for best fruits of
    your Real Estate Investment.
  • If not done till now, just start promptly a
    separate tax entity in their names.
  • Think of investing in Real Estate in their names.
  • Plan their Real Estate succession through Will

2(7) Expanding horizons of new Tax Entities in
your family contd.
  • 5. Think of Real Estate Investments in your minor
    children and grand childrens name.
  • Plan tax entities of Minors with no Clubbing of
    Income if out of their earned income.
  • Plan through 100 specific beneficiary trust for
  • Plan to have fixed Rental Income for minor
  • Specific Beneficiary Trust for safety and
    security of your dear daughter.

2(8) Expanding horizons of new Tax Entities in
your family contd.
  • 6. Have you planned a tax entity in the name of
    your Hindu Undivided Family (HUF)
  • HUF is a separate tax entity with basic Income
    tax exemption of Rs.1,80,000.
  • HUF enjoys separate tax deduction for Interest on
    Residential house property and Repayment of
    Housing Loans.
  • HUF possible even today.
  • HUF even without children.
  • HUF full Partition Tax benefits in Real Estate.

2(9) Expanding horizons of new Tax Entities in
your family contd.
  • 7. Other Tax Entities for your Real Estate
  • A Tax entity in the form of AJP Artificial
    Juridical Person.
  • A Tax entity in the form of Partnership Firm,
    Limited Liability Partnership, Private Limited
    Company or Public Limited listed company.
  • A Tax entity in the form of an AOP.
  • A Tax entity as a Discretionary Trust with or
    without will for investment in Real Estate.

3(1) Important points in Buying, Selling
Renting properties including
Capital Gains Tax saving vistas.
  • Important Points in Buying Real Estate
  • Think of the name in which to buy Property.
  • Property can be purchased in single or joint
  • Meditate first on the objectives of buying new
    property and then buy out.
  • Always lay special emphasis on Location only.
  • It makes a sense to pay little more for
    Preferred Location Charges (PLC) in long run.
  • Consider loan as preferred theme of making
    investments in Real Estate specially residential
    property for self use.

3(2) Important points in Buying,Selling Renting
properties including Capital Gains Tax
saving vistas.
  • ( Important Points in Selling Real
  • From tax angle always sell Real Estate after
    holding it for a period of 36 months so that the
    gain becomes Long Term Capital Gain with tax
  • As certain the fair market price before selling.
  • Meet brokers in the vicinity and advertise in
  • Peep into tax aspects before taking a management
    decision to sell a property.
  • Understand the impact of section 50C of the
    Income-tax Act on your property sale registration.

3(3) Important points in Buying, Selling
Renting properties
including Capital Gains Tax saving vistas.
  • Important Points in Renting Real Estate.
  • Ascertain the fair value of your property before
    actually renting out your property.
  • Execute a Lease Deed which in particular must
    contain details of Rent increase in the terms
    of Lease, the penal action for default in payment
    of Rent.
  • Keep in mind the impact of Service Tax and who
    would bear it, let there be specific mention in
    the Lease deed or Rent agreement.
  • Let property use be specified in your Rental

3(4) Important points in Buying, Selling
Renting properties including
Capital Gains Tax saving vistas.
  • General principles of Investment in Real Estate
  • For optimum INVESTMENT PLANNING of your REAL
    ESTATE please stop pause for a moment and always
  • The size of the family.
  • The age of different family members.
  • The incomes of different family members
  • To-days Income-tax Wealth-tax position.
  • New investment impact on Income-tax Wealth-tax
  • Time available at your disposal

3(5) Important points in Buying, Selling
Renting properties including
Capital Gains Tax saving vistas.
  • Tips for Investment Planning of Immovable
  • To purchase property jointly even between husband
    wife major minor children one property
    for W.T. exemption.
  • Wife children can take loan from you.
  • Taking loans is good.
  • Watch Impact on Self-occupied property viz-a-viz
    let-out property.
  • Clear cut demarcation of joint property.
  • Dont invest in the name of person owing one
  • Investment in the name of persons whose income
    and wealth is less.
  • The concept of Sale of Roof Rights.
  • For daughter 100 Trust.
  • Agricultural land and Farm house (Buy cheap
  • Adopt concept of Unite to Invest.
  • Take care of s.50C.
  • Buy a Plot of Land for every minor child.
  • Invest in Agricultural Land.
  • Multiply Money in Agricultural Land.

3(6) Important points in Buying, Selling
Renting properties including
Capital Gains Tax saving vistas.
  • Tax Saving on Self-Occupied House property
  • Property
  • Guaranteed Tax Saving
  • You can save as much as Rs.45,000 by way of
  • For Self-occupied house property for the A.Y.
    2011-2012 interest on loan deductible upto
  • Provided
  • - Loan after 1.4.1999
  • - Completion of House within three years from
  • the end of the financial year in
    which loan taken.
  • - Employee can get benefit on submission of
  • details of interest
  • - Interest loss adjusted against any
    Income of the
  • year.

3(7) Important points in Buying, Selling
Renting properties including
Capital Gains Tax saving vistas.
  • Tax Saving on Let -out House property - - Know
    the new formula for computation of House Property
  • Income from House Property (Let Out)
  • Rent received Actual Rent received only to be
  • Less Vacancy Unrealized rent.
  • Less Corporation Tax.
  • Annual Value
  • Less (i) Standard Deduction 30 of Annual
    Value u/s 24
  • Less (ii) Interest on Loan
  • Net Taxable Income.
  • - Just remember House tax/Corporation tax will
    be allowed only if actually paid.
  • - No upper limit on deduction of interest on
  • - Loan can be from any one at any rate of
  • Set off and Save Tax Loss from House property
    allowed against any other head of income.
  • Less (ii) Interest on Loan
  • Net Taxable Income.
  • - Just remember House tax/Corporation tax will
    be allowed only if actually paid.
  • - No upper limit on deduction of interest on
  • - Loan can be from any one at any rate of
  • Set off and Save Tax Loss from House property
    allowed against any other head of income.

3(8) Important points in Buying, Selling
Renting properties including
Capital Gains Tax saving vistas.
  • Let Real Estate be a part of your Financial
  • It is time to prepare a Financial Planner for
    every investor by dividing your Investments
    broadly under following groups and deciding the
    percentage of investment as per your family
    situation -
  • Zero risk investment
  • Investment in Mutual Funds
  • Investment in Real Estate
  • Investments in Insurance Policy
  • Risky Investment options
  • Jewellery other Investments
  • ??? Let Real Estate be a part of your financial

3(9) Important points in Buying, Selling
Renting properties including Capital
Gains Tax saving vistas.
  • Real Estate can be your Tax Saver for section 80C
  • Claim deduction upto Rs.1,00,000 on Repayment of
    Residential Housing Loan.
  • Payments for Stamp Duty, Registration Fee also
    eligible for deduction.
  • Payment eligible for installments paid under
    self financing or other scheme of any Development
    Authority, Housing Board, Co-operative Society,
  • Payment of Amount borrowed from Central or State
    Government, Bank, Life Insurance Corporation of
    India or assessees employer (Corporate entity).

3(10) Residential Property with Loan
- tax gain.
  • 1. Always buy a residential
  • property with a Loan enjoy
  • Tax benefit.
  • Demarcate Loan and its
  • payments for tax advantage.

3(11) Property in Joint Names.
  • 1. Take Property in Joint names of
  • different family members and save
  • Income-tax.
  • 2. All co-owners enjoy separate tax
  • deduction even if it is one Property.
  • 3. The Rental Income of Joint Property
  • is taxed separate as per s.26.

3(12) Rented out Property purchase with Loan
- A tax gain
  • Entire amount of Interest on
  • Loan amount is allowed as
  • a deduction. Even if the net
  • figure is loss, it is allowed
  • adjustment during the year.

3(13)Purchase of Business/Industry
Property with Loan
  • 1. Entire Interest on Loan taken for
  • Business/Industry property allowed as a
  • deduction from Business Income.
  • 2. Claim Depreciation also enjoy deduction
  • on Interest on Loan.
  • 3. Best buy Loan and Building and Not Land
  • alone so as to get full Depreciation on full
  • value.

3(14) Housing Loan - Interest
  • Interest can be claimed
  • deduction U/S 24 even if
  • not paid.
  • Circular of CBDT - No.363
  • Dated 24-6-1983.

3(15) Interest on second
Housing Loan
  • 1. Second Loan if borrowed and used
  • merely To repay the original loan
  • and this fact is proved to the
  • satisfaction of the Income-tax
  • Officer, then the interest on the
  • second loan would also be allowed
  • as a Deduction.
  • - CBDT Circular No.28 Dated 20-8-1969

3(16) Tax benefit on Interest on Loan
by Employer.
  • In the case of Salaried Employees, the benefit
    of Interest on Loan as per section 24 would be
    granted by employer only if the employee
    furnishes a Certificate, from the person to whom
    any interest is payable on the Capital borrowed,
    specifying the interest payable by the assessee
    for the purpose of acquisition or construction of

3(17) HRA Rent Payment
  • 1. You can make Rent payment for a residential
    house property to your spouse, father, mother,
    any relative or any person and enjoy tax benefit.
  • 2. You can enjoy HRA benefit by making rent
    payment and you may also enjoy the benefit of
    interest on loan for residential house property

3(18) TDS on Rental Income
  • TDS only if yearly Rent exceeds Rs.1,80,000
  • 2. In the case of co-owners, this limit to be
    applied separately for each co- owner.

3(19) Your second Residential
  • 1. Never buy a second Residential House in
    your name.
  • You may venture second residential house in
    your name but with a Loan, a big tax

3(20) Wealth-tax on Your
  • One Property/500 yd. Plot is exempt from
  • Wealth-tax without any limit. Aim at this
    benefit for all family members.
  • 2. All commercial properties are Wealth tax
  • 3. All residential property let out for more
    than 300 days in a year are Wealth-tax free.

3(21) Gift tax on Properties.
  • 1. No Gift-tax either on donor or donee on Gift
    of Properties
  • 2. Now applicability of section 56 of the
    Income-tax Act, 1961 w.e.f. 1-10-2009
  • 3. Gift of Properties to Relatives -no

3(22) Property in the name of your
  • Adopt planning and give Property to the
  • daughter preferably through a 100 specific
    beneficiary Trust.
  • 2. Separate tax Return and separate exemption
    even for Minor Trust receiving property in a
    Trust as per Supreme Courts decision in M.R.

3(23) Special Provision for Properties
received in Gift/Will.
  • In case the Property becomes Capital asset
    of the assessee under a Will or a Gift the cost
    of acquisition of the asset shall be deemed to be
    the cost for which the previous owner of the
    property acquired it, as increased by cost of
    improvement s. 49 of the I.T. Act, 1961.

3(24) Special Tax Provision for
taxing Capital Gains.
  • As per s.50C of the Income-tax Act. 1961 the
    consideration received for Capital Gains purpose
    would be the value adopted for Stamp Duty
    valuation. Also applicable for Power of Attorney
    Agreement to Sell transactions from 1-10-2009

3(25) Agricultural Properties
  • 1. Separate set of Rules for Wealth-tax.
  • 2. Separate rules for Computation of Capital
  • Gain.
  • 3. Reinvestment in Agricultural Land to save
  • Tax.
  • 4. Exemption of tax on Rent from Agricultural
  • Land.

3(26) AIR Properties
  • All property transactions
  • over Rs.30 lakhs are to
  • be informed to the tax department as per
  • Annual Information Return.

3(27) Unaccounted Money, I.T. Raid
  • 1. Never use unaccounted money for
  • Real Estate Transactions.
  • 2. Impact of Income-tax Raid
  • Survey in Property transactions.
  • 3. Penalty and Prosecution under the
  • Income-tax Law.
  • 4. Tax Scrutiny-on Real Estate
  • Transactions

3(28) Real Estate Investment
  1. Have a deep study of the provisions contained in
    FEMA law.
  2. Investment permitted for every individual upto US
    2,00,000 every year.
  3. Think of Investing in USA specially if you have a
  4. Comply with Tax regulations.
  5. Declare your income in Indian Tax Return.
  6. Very bulk cheap Agricultural Land in Africa.

3(29) Depreciation on Property
  • Registration of Property not
  • necessary to claim
  • Depreciation on Immovable
  • Property

3(30) Facing old age blues with Real
  • 1. Reverse Mortgage.
  • 2. No Income Tax on Reverse
  • Mortgage.
  • 3. No Payment of Interest etc..
  • 4. Let your inheritors take
  • care of your Real Estate.

3(31) Unique Idea to preserve your
primary Residential House.
  • 1. No Loan
  • 2. No Mortgage
  • 3. Keep Title Deed in Bank
  • Locker with Joint
  • operation only.

3(32) Tax Saving on Capital Gains from
Residential House
  • Long -term C/G for individuals and HUF is fully
    exempt u/s 54 on
  • transfer of Residential house, if -
  • A. C/G invested in purchase of a residential
    house within 1 year before or 2 years after
    transfer or C/G invested in construction of a
    residential house within 3 years of transfer AND
  • B. No sale of such house for 3 years AND
  • C. Utilization of C/G by the date for filing of
    I.T. Return u/s 139 or deposit of unutilized
    amount as per C/G A/Cs scheme by last date of
    voluntary filing of I.T. Return u/s 139 (1).

3(33) Tax Saving On Capital Gains of other
assets by investment in Residential House
  • Long -term C/G for individuals and HUF exempt u/s
    54F - if the
  • consideration of any other Asset is invested in-
  • Purchase of a residential house before one year
    or within two years
  • after transfer or construction of a
    residential housewithin three years of
    transfer AND
  • B. Then not sold for 3 years AND
  • C. Not to Purchase within one year or construct
    within three years after transfer to own not
    more than one residential house on the date of
  • Note Utilization of the net consideration by the
    date of furnishing I.T. Return u/s 139 is a must
    or unutilised amount is deposited under Capital
    Gains A/c Scheme by last date for voluntary
    filing of I.T. return u/s 139 (1). The amount is
    to be deposited with a Nationalised Bank. Two
    optional schemes are available to tax payers.
    For details, contact nearest branch of state Bank
    of India or other Nationalised Bank (other than
    Rural Branch)

3(34) Tax Saving On Capital Gains through Cost
Inflation Index Cost Inflation Index
for different years
The Formula for finding out index cost of
acquisition or the Indexed cost of any
improvement would be as under - Cost of
Acquisition X Cost Inflation Index for
F.Y. 2011-2012 ---------------------------------
---------- Cost Inflation Index for
F.Y. 1981-82 on later F.Y.
3(35) Tax Saving On Capital Gains by Investment
in Bonds
  • Exemption of long -term Capital Gains is possible
    on Investment
  • in certain Bonds - s. 54 EC
  • (i) Available to all tax payers
  • After -1-04-2006 Investment for section 54 EC
    can be made only in Bonds of NHAI REC with in 6
  • Invest in 54EC Bonds by 30th Sept. 2006, if gains
    accrue during the period 29/9/05 to 31/12/05 and
    by 31st December 2006 if accruing from 1-1-06 to

3(36) Real Estate Business with No Accounts
  • As per section 44AD if an Individual, HUF or
    Partnership Firm Carries on Real Estate Business
    with no accounts the Income on Presumptive
    Basis would be Calculated _at_ 8 of the Total
    Turnover if the Turnover does not exceed Rs.60
    lakhs. If exceeding Rs.60 lakhs then Tax Audit

3(37) Agricultural Land
  • Capital Gains exemption on selling Agricultural
    Land and buying new Agricultural Land in two
  • 2. Exemption of Capital Gains regarding
    shifting of Industrial Undertaking s.54G.

3(38) Distribution of Assets of Firm
  • Non Distribution of the Assets on change of
    Partners in the Partnership Deed or on
    Dissolution of Firms, no Capital Gains to the

3(39) Depreciation on Land
  • No Depreciation on Land for Business or
    Profession, whether Office Building or Factory
    Building hence buy land in the name of separate
    tax entity and pay Lease Rent.

3(40) Depreciation Block of Assets
  • Depreciation Block of Assets Concept A Big
    MMI in Real Estate specially for all those in
    Business or Profession

3(41) Real Estate Finance
  • Dynamism in Real Estate Finance
  • Think of FDI Funding
  • Selling 5 Stock at Cost Price OR even little
  • Selling the next 10 stock at 10 profit.
  • Developing BBG groups Bulk Buying Groups.
  • Encouraging UTI concept in Real Estate.
  • Super special Discount to NRI clients and doing
    road shows outside India.

3(42) Know more about WILLS for Real Estate
Investments succession
  • Please remember the salient features relating to
  • wills-
  • (a). Will may be Registered or Unregistered.
  • (b). Through Will distribution of Real Estate and
  • assets as you like it - to whom you
    like it-in the
  • proportion as you like
  • (c). Special Family Trust through will in the
  • can be created for tax advantage.
  • (d). New HUFs can be created through the Will.
  • (e). Change Will as often as you like.
  • (f). Continue Income-tax file of a Dead Person ?
  • Note Will Recommended to all persons after the
    age of 50 years

3(43) IT FILE of a Dead Person can be
  • 1. Section 168 Will executor of a
  • Will for the estate
  • 2. Separate assessment of executor
  • of Will apart from ones personal
  • assessment
  • 3. Rate of tax, etc. like the testator.

3(44) Special new innovative idea for your
  • ???? It is time to
  • Your Will????
  • - To avoid challenges to the
  • WILL and safeguard
  • Real Estate.

4(1) Important Judicial decisions which help
the process of Tax Planning in
the Wonderland of Real Estate.
  • If you want to adopt
  • Tax Planning
  • In Real Estate
  • Either as a
  • Developer or
  • Investor then
  • Please keep yourself
  • Updated on new and latest Judicial thinking of
    the Judges which will surely kelp you to plan

4(2) Income of a Company dealing in Property
from Letting out Building
  • The Income of Letting out of Buildings
    belonging to
  • Company
  • Income from House Property
  • Settled by Madras High Court in the case
    of CIT
  • v. Chenai Properties Investments Ltd.
  • 266 ITR 85
  • The assessee company owning two Buildings
  • Chennai and receiving Rental Income.
  • The Income from Service Charges would be
  • Business Income.

4(3) Earnest Money its Forfeiture
  • The Earnest Money and Advance Forfeited by
    Vendor is a Capital Receipt says the Supreme
    Court of India in the case of Travancore Rubber
    Tea Co Ltd. v. CIT (2000) 343 ITR 158 (SC) hence
    not liable to tax
  • - New thinking Madras High Court in the case of
    K.R. Srinath v. ACIT (2004) 268 ITR 436

4(5) Construction Amount Paid to a Builder
  • The Delhi High Court in the case of CIT v.
    Brinda Kumari (2002) 253 ITR 343 has held that
    where the amount spent for construction of new
    residential house is to be deducted from the
    amount of capital gain, the amount advanced to
    the builder for specific purpose of construction
    of flat in the new building would be treated as
    amount spent by the assessee on such construction

4(6). Expenditure Incurred for
Vacating Hutment Dwellers
  • The compensation paid by the assessee for
  • eviction of hutment dwellers from its land was
  • allowed deduction while calculating the amount
  • of capital gain. It was held that the expenditure
  • so incurred by the assessee for vacating the land
  • actually amounted to incurring of an expenditure
  • for improvement of the asset. This was the view
  • the Bombay High Court in the case of CIT v. Miss
  • Pooja C. Patel (2000) 243 ITR 582

4(7). Land Building Bifurcation
  • Where a consolidated PRICE is paid for two
  • Assets, the price can be bifurcated
  • - Rajasthan High Court in the case of CIT. v.
    Vimal Chand Golecha (1993) 201 ITR 442.
  • - Kerela High Court in the case of CIT v. Smt.
    Lakshmi B. Menon Another (2003) 264 ITR 76.
  • - Madras High Court in the case of CIT v. T.C.
    Itly Ipe (2001) 249 ITR 591.
  • - Madras High Court in the case of CIT v. Dr.
    D.L. Ramachandra Rao (1999) 236 ITR 51.

4(8). Capital Gains Taxable on the basis of
  • When a document shows a fixed price, there
    will be a
  • presumption that that is the correct price
    agreed upon by the
  • parties. It is not necessary that the price
    stated in the
  • agreement will be the price shown in the sale
  • Sometimes, it may be higher and sometimes it
    may be lower.
  • Sometimes intentionally a lesser value may be
    shown in the
  • sale deed. Even if it is assumed to be so,
    unless it is proved
  • that the agreement was acted upon and unless
    the amount
  • stated in the agreement was paid for the
    sale, the court
  • cannot come to the conclusion that the price
    mentioned in the
  • sale deed is not correct.
  • - Kerala High Court in the Case of CIT v.
    K.C. Agnes Others (2003) 262 ITR 354

4(9). Capital Gain or Profit on Adventure in
the nature of Trade on selling a
Plot of Land
  • Sale of a PLOT assessable as Capital Gain not
    Speculative Trade or Business
  • - M.P. High Court in CIT. v.
  • Smt. Saraswati Bai Jaiswal (2003)
  • 264 ITR 366

4(10). Cost of Construction accepted
- No Subsequent Reopening
  • When the cost of construction is accepted
    subsequent reopening of tax Assessment is not
  • - M.P. High Court in the case
    of CIT v. S.R. Construction (2002)
    257 ITR 502

4(11). Additions for understatement of
Sale Value of flats without evidence
  • The addition made by the Assessing Officer in
    the case of Civil construction on ground of
  • understatement of Sale Value of flats but the
  • found that the I.T. Department had not
    established its
  • case hence as there was no evidence, the
    addition was deleted.
  • - Madras High Court in the case of K. Manikam v.
    CIT (2002) 258 ITR 175

4(12). Cost of Construction as per
Registered Valuer
  • Cost of Construction as per Registered Valuer
    to be accepted and no addition can be made under
    section 69 B.
  • - Income-tax Appellate Tribunal,
    Hyderabad Bench in
    the case of
  • ACIT v. Vinod Kumar Agarwal
  • (2002) 257 ITR 65 (AT)

4(13) Cash Credits by Accounts Payee Cheque
  • Amounts received by account payee
  • cheques the initial burden of proving the
  • cash credits would be considered to be
  • discharged by the assessee
  • - Gujarat High Court in the case of
    DCIT v. Rohini Builders (2002) 256 ITR

4(14) Dissolution of Firm Non-
Distribution of Capital
  • No Capital Gains arise on Dissolution of Firm
    if no Distribution is effected of Capital Assets.
  • - Karnataka High Court in the case of CIT v.
    Mangalore Ganesh Beedi Works (2004) 265 ITR 658

4(15) Valuation of Closing Stock at just 10
of cost
  • It may be possible to value your Closing Stock
    at just 10 percent of cost and this would not
    call for any addition to the total income.
  • - Bombay High Court in the case of Alfa
    Laval India Ltd. v. DCIT (2004)266 ITR 418

4(16) Identity of Shareholders Cash
Credit Addition
  • Cash Credit addition of Share Capital not
  • justified where identity of share-
    holders is established.
  • - ITAT, Delhi in the case of Skyhigh
  • Properties Pvt. Ltd. v. ITO (2002) 258 ITR
  • 98 (AT)
  • Share capital by poor farmers is taxable-
  • Bhola Shankar Cold Storage Pvt. Ltd. v.
    ICIT (2004) 270 ITR 487 (Cal. H.C.)

4(17) Property Joint Ventures
  • 1. Business Income or Capital Gain
  • - P.M. Mohammed Meerakhan v. CIT (1969) 73 ITR
    735 (S.C)
  • 2. Understand the meaning of Venture
  • - CIT v. Smt. Minal Rameshchandra (1967)167
    ITR 507
  • - Raja J. Rameshwar Rao v. CIT (1961) 42 ITR
    179 (S.C)

4(18) Provision for Warranted Liability
  • Estimate of Accrued liability to be
    discharged at a future date
  • - Supreme Court of India in the case of
    Calcutta Co. Ltd. v. CIT (1959) 37 ITR 1
  • Provision for meeting Warranted Liability is
    tax deductible
  • - Kerala High Court in CIT v. Indian
    Transformers Ltd. 2004 270 ITR 259

4(19)Income from PlinthGodowns
  • Monthly income from Plinth Godowns
  • for storage of commodities is Business
  • Income and not income from House
  • Property
  • MP High Court in the case o
  • Babulal Agrawal v. CIT (2005) 272
  • ITR 454

4(20). Payment to Corporation for
Infringement of By-Laws.
  • Payment of Rs 4 Lakhs paid to Corporation for
    infringement of Bye Laws allowed
  • -consideration for getting the Revised Plan
  • - Delhi High Court in the case of CIT v. Loke
    Nath Co. (Construction) 147 ITR 624

4(21) Purchase / Construction of New
Residential House to Save Capital Gains
  • Under a Joint Development Agreement, the
    assessee gave property to a Builder for putting
    up flats. Under the agreements eight flats were
    to be put up on the property and four flats were
    the share of the assessee. Held, that these four
    flats constituted a Residential House as per
    Karnataka High Court in the case of CIT v. Smt.
    K.G. Rukminiamma 331 ITR 211.

4(22) Firms Immovable Property and
  • The whole concept of Partnership is to embark
    upon a joint venture and, for that purpose to
    bring in as Capital, money or even property
    including immovable property. Once that is done,
    whatever is brought in would cease to be the
    exclusive property of the person who brought it
    in - it would be the trading asset of the
    partnership in which all the partners would have
    interest proportion to their share in the
    business of Partnership CIT v. Kedarnath Poddar
    Co. 201 ITR 639

4(23) Interest on amount Borrowed
for Purchase of Property
  • Interest on Loan paid for
  • purchasing property will
  • have to be included while
  • calculating the cost of
  • acquisition of the asset CIT
  • v. Sri Hariram Hotels Pvt. Ltd.,
  • 325 ITR 136

4(24) No Penalty for furnishing inaccurate
Valuation on the basis
of Valuation Officers Report.
  • Where the assessee enclosed Registered
    Valuation Report in support of Capital gain, it
    was not accepted by the Assessing Officer who
    made the Assessment of Capital Gains on the basis
    of District Valuation Officers Report, it was
    held that it did not amount to furnishing of
    inaccurate particulars and penalty under section
    271(1)(c) not leviable Dilip N. Shroff v. CIT
    291 ITR 519 (sc).

4(25) Purchase of Flats which were combined to
make one Residential Unit valid
for claiming tax exemption under
section 54
  • Karnataka High Court in the case of CIT V.D.
    Ananda Basappa 309 ITR 329 held that purchase of
    two flats which were combined to make one
    Residential unit would be eligible for granting
    exemption under section 54 of the Income-tax Act,
  • Transfer of Residential house purchase of
    four flats in the same Residential Building
    -Assessee entitled to exemption u/s 54.
  • - CIT v. K.G. Rukminiamma 331 ITR 211.

4(26) Reinvestment of Capital Gains in
New Floor of the same Building.
  • The benefit of tax exemption for investment in
    Residential House would be available in case the
    investment is made in new floor in the existing
    building owned by the assessee. Addl. CIT v.
    Vidya Prakash Talwar 132 ITR 661. It was held
    that two units of the assessee comprising the
    house in South Extension, New Delhi could be
    occupied independently, hence these two
    residential units of the property should be
    considered separate.

4(27) Repurchase of House Sold
and Availability of Exemption.
  • The seller of the House Property would be
    eligible to exemption if he decides to repurchase
    a part of the property which he had earlier sold.
    CIT v. Phiroze H. Patel 112 CTR 254 exemption
    would still be available in such cases as per
    section 54.
  • Good Judgment for Property Collaborations.

4(28) Sale Proceeds Invested in a Flat under
Construction amounts to Construction
  • As per the decision of CIT v. Bharti C.
    Kothari 244 ITR 352 the entire purchase price
    paid by assessee within three years from the
    date of the sale of the flat would be treated as
    as amount invested in a flat which was under
    construction and tax benefit can be availed under
    section 54

4(29) Sale of Land Building -
Demolition of Building
  • Assessee sold property with land and building.
    Purchaser sought permission to demolish the super
    structure and therefore there was no value for
    the building and what remained was only land
    which was not depreciable asset, hence gain
    treated as Long-term Capital Gain and provision
    of s.50 not applicable CIT v. Union Co (Motors
    Ltd. 283 ITR 445.

4(30) Purchase of four portions of property
by four sale deeds and tax exemption.
  • Purchase of four portions of property by four
    sale deeds would be valid to save Capital Gains
    because properties constituted one single unit.
    Held, that execution of four different sale deeds
    in respect of four different portions of the
    property did not materially affect the nature of
    the transactions or the nature of the property
    acquired CIT v. Sunita Aggarwal 284 ITR 20

4(31) Sale of Residential House and
investment in new House, Possession received but
Registration not completed.
  • In order to attract the application of section
    54F, it is not necessary that the new house
    should be Registered in the name of the assessee.
    Section 54F speaks of purchase and Registration
    is not imperative CIT v. Ajitsingh Khajanchi.
    297 ITR 95.

4(32) Deduction of Expenses incurred in
connection with transfer
  • Expenditure incurred on obtaining Probate,
    Travel expenses of Executors and expenditure
    incurred on evicting illegal tenants held to be
    expenditure incurred wholly and exclusively in
    connection with Transfer and hence deductible
    June Perrett v. ITO 298 ITR 268

4(33) Short-term or Long-term
Capital Gain.
  • Where the assessee was in possession of
    Property under Agreement of sale entered in 1976,
    sale deed executed in July, 1986 and Registered
    on 26-9-1986, Property sold on 30-9-1986, the
    Capital Gain would be long-term Capital gain as
    the assessee held the property from 1976 -
    Madathil Brothers v. DCIT 301 ITR 345.

4(34) Income tax Exemption under
section 54F.
  • Where the assessee established investment of
    entire Capital gain in purchase of Land within
    the stipulated period but construction of the
    house was not completed, the assessee was
    entitled to exemption. Held, that in order to
    get the benefit under section 54F of the Act, the
    assessee need not complete the construction of
    the house and occupy it, it was enough if the
    assessee established the investment of the entire
    net consideration within the stipulated period
    CIT v. Sardarmal Kothari Others 302 ITR 286.

4(35) Agricultural Land Tax Exemption
  • 1. Agricultural Land sale No Capital Gains
    even if Agricultral Income not shown in
    Income-tax Return CIT v. Debbie Allmao 331ITR
  • 2. Agricultural Land sold and new land
    purchased in sons name still benefit of deduction
    u/s 54B granted CIT v. Gurnam Singh 327 ITR
  • 3. Report of Tehsildar that land was beyond
    eight Kilometres from Municipal limits, hence
    gains arising from such transfer not taxable
    CIT v. Lal Singh 325ITR 588.
  • 4. Sale of Agricultural Land Investment in
    purchase of New Land in assessees sons name
    as co-owner, entitled to tax deduction u/s 54B
    CIT v. Gurnam Singh 327 ITR 278

4(36) Family Arrangement
  • When parties enter into a family arrangement
    for rearranging shareholding of the members to
    avoid possible litigation among themselves, this
    does not amount to transfer and is not eligible
    to Capital Gains Tax CIT v. Kay Arr Enterprises
    Others 299 ITR 348.

4(37) Adventure in the Nature of Trade
  • Delhi High Court decision in the case of CIT
    v. B.K. Bhaumik 245 ITR 614 The expression
    Adventure in the Nature of Trade relates to the
    existence of certain elements in the adventure
    which in law would invest it with the character
    of trade or business.

4(38) No payment of Stamp Duty for
transfer, hence s.50C not applicable.
  • The guideline value is not conclusive proof.
    Section 50C is applicable in cases of payment of
    Stamp Duty for Transfer Asst. CIT v. V.N.
    Meenakshi 319 ITR 262 (AT).
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