Distress sale of immovable property

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Suresh Roy (Querist)

26 July 2012 I made a distress sale.

I entered into an Agreement Of Sale (Sathekhat) for selling a plot of land for Rs.10,00,000. The Agreement Of Sale has not been registered. The person with whom the agreement was signed also took a Power of Attorney from me since he will be selling the plot at a later date. The Agreement Of Sale was signed so that he could pay me the agreement amount of Rs.10,00,000 through a cheque.

Now, how do I pay income tax on the sale. There wont be a sale deed until the person actually sells the land to someone else. However, I have received the agreement value in full and deposited it in my bank account. Can the capital gains tax be calculated on the amount in the Agreement To Sale since that is the amount that I have actually received or do I have to wait until the plot is sold via a proper sale deed.

In case there is a query from the income tax dept. will the Agreement Of Sale be enough proof to show the source of income. If not, what do I do? Will registering the Agreement Of Sale help.

Amol S Joglekar

Amol S Joglekar (Expert)

26 July 2012 01) Agreement to sale of immovable property needs to be registered within 4 months of its execution. 2)53A of the transfer of property act comes into play and the gain becomes taxable in the year of agreement to sale.

Suresh Roy

Suresh Roy (Querist)

26 July 2012 Agreed. But from the income tax point of view, does the Agreement Of Sale need to be followed by a Sale Deed. In my case, I have received the entire consideration on the date of Agreement Of Sale. However, I cannot force the person to register a Sale Deed since the Agreement To Sale is a temporary document that was signed just to facilitate the transfer of the consideration amount. The actual Sale Deed will be executed through the Power Of Attorney, which may happen even after 2-3 years.

As you have said, the gain becomes taxable in the year of Agreement Of Sale. So, I will pay appropriate tax. However, if there is a query from the income tax dept. how do I prove the source of income. The only document I have is an unregistered Agreement Of Sale. Would that be enough.

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