QUESTIONS & ANSWERS
Re-investment in joint or other names
I have sold a residential house property, the proceeds of which I propose to invest in the extension of the property owned by my wife. The extension will be by way of an additional floor which will be an independent unit, which I propose to let out, so as to supplement our income. Will I get the benefit of relief under Sec. 54? I have been advised that I have to acquire proportionate interest in the plot, so as to qualify for deduction. Is it necessary?
If the additional floor is an
independent unit with its
own kitchen, (preferably
with a separate municipal
number), benefit of Sec. 54
or 54F should be available.
It is ordinarily expected
that the owner of the superstructure
would have proportionate
interest in land.
In fact, it is so stipulated
by some State legislations in
respect of high-rise building
put up by the developers.
But then, Indian laws recognise
different ownership for
land and superstructure.
It, therefore, does not appear
to be necessary for purposes
of deduction under
Sec. 54 or 54F, which requires
that re-investment
should be in a residential
house property, which will
include a flat. If additional
floor would constitute an independent
unit, merely because
it is constructed in
another's (wife's) property,
it should not lose the benefit
as was conceded by the Tribunal
in ITO v Savitha Rani
(1983) 5 ITD 621 (Del).
But it will be advisable, if
there is some documentation
either by way of grant of
licence or lease or what is
described in commercial usage
as terrace rights by the
wife in favour of the husband.
The proportionate interest
in land could also be given
by the reader's wife by
way of settlement for which
stamp duty implications are
not expensive. But a settlement
without consideration
may involve a proportionate
income of the new construction
to be clubbed in the
hands of the wife as transfer
to spouse.
S. RAJARATNAM
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