Having paid the Capital Gains Tax, whether a case exists in the case below to claim a pro-rata refund of the tax paid amount subsequently used for the construction of a house: [1] Capital Gain Tax for Rs. 21 lakhs on sale of property during FY 2021-22 already paid and showed in the ITR for AY 22-23, My returns has been assessed and I have received the refund for some excess tax paid. [2] I had plans to invest the capital gain amount before the last date of filing of returns for AY 22-23, i.e [deleted] but could not implement the plan before the filing of ITR. [3] I was aware that my wife was going to receive a site as gift from her mother as she had a made a will on plain paper (not registered) to that effect. Accordingly I invested Rs. 72 L in the following manner for the construction of a house on this site, by issuing cheques favoring her mother which were debited from my bank account before [deleted]. A family MOU on plain paper (not registered) was also signed between me and my wife’s mother detailing my investment of Rs. 72 lakhs for her construction work and confirming that the house on completion would be gifted to her to assure me safety of my funds. [4] The site on which construction of house started in FY 22-23, was gifted by her mother to my wife on Oct.2022 as per MOU & Will. [5] Now, I am seeking pro-rata refund of the Capital Gain Tax paid on Rs. 72 L, which is the amount invested before [deleted] in the construction of a house on a site belonging to my wife. Questions before me: [1] Is a ground exists, based on precedents, to claim refund of Capital Gain Tax, already paid, on Rs. 72 lakhs spent for the construction of a house which now stands in the name of my wife in FY 2022-23. [2] Is it possible to convince, if required, that my wife was the defacto owner of the site based on the MOU and the Will, on account of which I invested the funds. [3] The odds for me are that I have not made disclosure nor aware how to do it in my ITR for AY 22-23 to the effect of my investment in a house that was under construction and would belong to my wife when completed. Any risks if I make a claim of pro rata refund? Please advise with pros and cons and time limits.
There are 2 issues:
1. The house is not in your name but in your wife's name and this is also a controversial question.
2. Updated return can only be filed if you wish to pay tax but not for getting refund.
Hence, I don't see any way to claim such investment and get a refund.
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- If the amount of LTCG has not been utilised for purchase/construction of new residential house property before the due date of filing of ITR, opening of capital gain account is mandatory to avail the exemption u/s 54
- Also you have paid the construction cost to the wife mother instead to the developer
- Conveyance deed should also contain your name as co-owner
- You may file an application but it may be subject to the litigation
For detailed discussion you may opt for phone consultation
In order to claim exemption under Section 54 of the Income Tax Act for long-term capital gains (LTCG), it is mandatory to utilize the proceeds for the purchase or construction of a new residential property within the due date of filing of ITR. and also fact that the house is not in the your name but in the name of your spouse can add another layer of complexity to the situation.
It seems difficult to claim a refund of the capital gains tax paid on the Rs. 72 lakhs invested in the construction of the house, which is now in your wife's name. As per the Income Tax Act, in order to claim exemption u/s 54, the capital gains amount needs to be utilized for the purchase or construction of a new residential house property in the taxpayer's name.
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