Capital gains on sale of house property

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tarun Hassija (Querist)
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25 June 2014 my dad and uncle purchased a flat (house property) 3 years ago for 48 lakhs. However the the flat was registered in the joint name of my uncle, my uncles HUF and my uncles daughter in law. my dad just transferred money from his account to uncles account and my uncle was the one to pay for the house. so although the flat is registered in another person's name, in reality my dad and my uncle are the real part owners. This year they sold the flat for 66 lakhs i.e at a profit for 18 lakhs. my dad now wants that the 9 lakhs profit is actually his income. but since the flat was registered in another person's name, it cannot be counted as my dad's income. One of the way that my dad suggested is that we can show the 23 lakhs contributed for the flat as the loan given to my uncle. so 9 lakhs is the interest received by my dad which comes to approximately 13 % p.a. However that possibility is ruled out since it wasn't shown as the income in the 1 St year. Can anyone suggest a way out?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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25 June 2014 Dear Tarun,

the legal ownership is irrelevant...you father the beneficial owner of the property and this income shall be counted as his income...please refer section 64...

Samarth Garg

Samarth Garg (Expert)
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26 June 2014 According to me the amount of capital gain shall be taxable in the hands of your uncle only. Since sec 64 do not deals with such case. Further, 56(2) (vii) can be applied.It is recommended to take the amount net of taxes.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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26 June 2014 Samarth are you sure it doesnt? please refer again. the person has contributed the money for purchase of the asset. that makes him beneficial owner and any capital gains have to apportioned to him. you cannot retrospectively change the nature of money given to loan. That would be dubious and an attempt to evade taxation plus misrepresentation of facts in earlier years.

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