Category Archives: House Property

Exemption u/s 54/54F- New House Purchase

The Delhi High Court in Commissioner of Income-tax v. Kamal Wahal (2013) 351ITR4 held that for the purpose of availing section 54F exemption, the new residential house need not be purchased by the assessee in his own name nor is it necessary that it should be purchased exclusively in his name. In this case the assessee purchased the new house in the name of his wife.

In the previous instance the Madras High Court in Commissioner of Income-tax v. V. Natarajan (2006) 287ITR271 held the assessee entitled to exemption under section 54 of the Act for having made new investment in the name of his wife. This decision is taken into account by the Delhi High Court.

All that is important to see is that the moneys invested in the new house must come from sale proceeds of property and not from any independent sources of the wife.

Save Water
2.7bn the no of people who will face severe water shortages by 2025 if consumption continues at current rates. An estimated 1.8 bn people will live in areas plagued by water scarcity and 36 countries with 1.4 bn people are projected to be either freshwater scarce or cropland scarce.

Source: UN

Post No. - 20

Mesne Profits Are Taxable

Mesne profits are recompensed by the Court to the landlord for wrongful possession of his property by the tenant even after the termination of the lease. Often a dispute is waged on the taxability of such sum. Section 2(12) of the Code of Civil Procedure defines mesne profits as follows :

"(12) 'mesne profits' of property means those profits which the person in wrongful possession of such property actually received or might with ordinary diligence have received therefrom, together with interest on such profits, but shall not include profits due to improvements made by the person in wrongful possession."

The Madras High Court in Commissioner of Income-tax Vs. Mariappa Gounder (P.)(147ITR676) held that they are Liable to be assessed as income. In explaining the true meaning of the terms " mesne profits" the Court observed that the award of mesne profits is an award of compensation for the true owner's deprivation of the yearly income from the property. The true principle to be applied is that where compensation is paid for deprivation of a capital asset or for a restraint on trading or the conduct of a business undertaking as such, it would be a capital receipt in the hands of the recipient of the compensation. A similar consideration will prevail in cases where compensation is received for immobilization, sterilization, destruction or loss of an assessee's capital asset even without affecting his business as such. In such cases it can truly be said that the compensation is in substitution, not of income, but of the very source of income (Under the present legislation even such receipts would be chargeable to capital gains tax). The High Court held that mesne profits are not of that kind. Even the measure of mesne profits, as the definition in the Code of Civil Procedure makes clear, is the income which the person in wrongful possession derives from the property or might with due diligence have obtained from the property. Mesne profits are, therefore, a substitute for actual returns from investment. In this category therefore must be included any sum awarded by a court in restitution of interest, dividends or any other yield out of property, in contrast to awarding compensation, recompense or damages for any loss, sterilization or damage to capital assets as such.

The Calcutta High Court in Commissioner of Income-tax v. Lila Ghosh (Smt.) (205ITR9) held that mesne profits are in the nature of damages and