Capital Gains on Sale of Immovable Property

This query is : Resolved

ASGAR MEHDI SAIYED (Querist)
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25 May 2011 Dear Experts,

I have a query which i am presenting in the form of an Example as below:

Mr. A purchased a property from Mr. B in the year April 1999 for Rs. 450000.

For this property Mr. A entered into a normal agreement of sale with Mr. B but Mr. A did not registered the property in his name.

In the year March 2011, Mr. A now sold the same property to Mr. B for Rs. 2500000/-.

My query is as follows:

1. Since Mr. A has not registered the property in his name, therefore whether he will be liable to pay Capital Gains Tax on sale of Such property.

2. If not chargeable to Capital Gains, then what will be the tax treatment of Rs. 2500000/- received on sale of such property.

Thanks & Regards

Amol Gopal Kabra (CA,CS,DISA)

Amol Gopal Kabra (CA,CS,DISA) (Expert)
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25 May 2011 Even if it is not registered in the name of Mr. A, the fact of the case is that he has purchased the property. Even if he was not the registered owner of the property, he was the beneficial owner for the time. So, he shall be liable to pay tax on long term capital gain on this transaction.

Akhil Agrawal

Akhil Agrawal (Expert)
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25 May 2011 The Transaction will still be taxable in the hands of Mr.A. It does not matter whether he got the sale deed registered in his name or not.

ASGAR MEHDI SAIYED

ASGAR MEHDI SAIYED (Querist)
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25 May 2011 Thanks for the same.

I want to know one thing more that, whether he will be liable to any penal consequences for not registering the Agreement under the Income Tax Act or Bombay Stamp Act

Regards

Amol Gopal Kabra (CA,CS,DISA)

Amol Gopal Kabra (CA,CS,DISA) (Expert)
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25 May 2011 There are no penal consequences under any of these Act. The only problem is that if there is any dispute between the parties, there wont be any legal solution as the title is not clear from th transaction.

ASGAR MEHDI SAIYED

ASGAR MEHDI SAIYED (Querist)
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25 May 2011 Thanks for your kind reply.....