Long term capital gains

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Akshat (Querist)
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01 November 2010 I sold a residential land and invested the capital gains amount of about Rs.44 lakhs to purchase an apartment.
Now this apartment was booked with a prominent builder in 2007. The builder has still not started the construction of the apartment complex and does not seem to do so. I have 2 choices.
1. He is offering another apartment in the same city but at an increased price. 2. Alternatively I can pursue the builder to refund my money that I paid + interest through a consumer court. It has been 3 yrs since I booked the flat.
Please advise what will be the Income tax implication on either of the two options? Will I be liable to pay Long term capital gains tax in either of the above scenarios?

CA Shailesh Kumar Bhagat

CA Shailesh Kumar Bhagat (Expert)
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02 November 2010 What do you mean by Rs. 44 lakhs invested for purchase an appartment, Have you given the money as advance.

Holding of legal title is not necessary, if the taxpayer pays full consideration or substantial portion of it ( in terms of purchase agreement) within the period , the exemption under sec 54 is available. this rule is applicable even if the possession is handed over after the stipulated period or sale deed is registered later on.

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Akshat

Akshat (Querist)
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02 November 2010 Dear Shaileshji Thanks for the reply.

Rs.44Lakhs was the capital gains amount and the same was invested under a down payment plan of the builder.

Now what am I supposed to do considering the 2 scenarios I have written above?

venkatraman shrinivas

venkatraman shrinivas (Expert)
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02 November 2010 The Act makes it clear hat exemption is admissible, if he transferor purchases a house one year before or constructs a house within 3 years thereafter. I.e. after the event, which is sale. In the case under consideration only advance was paid and the build has not started the construction. It is of no concern to the department whether he builder has constructed or not. the property should have been completed within the deadline, which is missing in this caee. Hence I am afraid, there is little chance of exemption under section 54.

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