Capital gain on house property under collaboration agreement

This query is : Resolved

mohan sharma (Querist)
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14 May 2014 facts of case

one of my client held a house property of 150 sq yards in delhi from 1967.

in july 2012 she entered with a collaboration agreement with a builder for complete construction of house 150 sq yards

builder agree to pay Rs. 20 lac and 2 floor (out of four) 150 yards each

in feb 2013 construction complete and sale deed registered in favour of builder of 150 sq yards one floor sale consideration showing Rs. 21,40,000

and again 2nd deed executed in october 2013 in favour of builder and sale consideration showing in deed Rs. 21,40,000

again feb 2013 floor of 150 sq yards out of his own share sale by owner to a private person and deed showing consideration Rs. 28 Lakh

my query when txability attract on both cases when at the time of sale to builder and again sale at the time of own share

please guide

Nikhil Kaushik

Nikhil Kaushik (Expert)
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15 May 2014 yes..capital gains shall be attracted in both instances.

the sale of flat shall attract short term capital gains.

the cost of construction shall be equivalent to the cost incurred by the builder. With respect to the flats given to builder, though the transaction is chargeable to short term capital gains, there should not be any actual tax liability if the flat is transferred to the builder at price equivalent to cost of construction.

One more thing you need to look at is whether the rights on the land are also transferred or not. If rights in land are also being transferred, then to that extent long term capital gains shall also come into picture.

mohan sharma

mohan sharma (Querist)
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21 May 2014 sir agrree with your reply but why short term capital gain attract we transferred a proportionate portion of land also which is a long term capital assets. so in second case when we tfd own share then 2 situation arise in case of cost of acquisition first land will be indexed and cost of construction will not be indexed and LTCG compute accordingly please ........reply if agree

Nikhil Kaushik

Nikhil Kaushik (Expert)
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21 May 2014 because the house came into existence just now and was held for less than a year.

whatever consideration is to be attributed to land shall be taxed as long term capital gains. cost shall be indexed.

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