Taxability of Capital gain - cancellation of agreement

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This discussion addresses a taxpayer's eligibility for capital gains tax exemption after their initial property purchase agreement was cancelled. The taxpayer sold a flat, reinvested the capital gain in a new property, but the agreement was later cancelled, and the money returned. They then purchased another flat. The query seeks clarification on whether the cancellation impacts the capital gains tax exemption and if there are other factors to consider, particularly regarding the developer's bank account registration.

Suraj

Suraj (Querist)

08 January 2025 Dear Sir / Madam,

My query is as follows:

Mr A sold his flat on 10-03-2023 and invested the capital gain of Rs. 47 lakhs in new flat with MNP developers before the due date of filing the return for FY 2022-23. Mr A deducted TDS of Rs. 47000/- on Rs. 47 lakhs paid to MNP developers.
However after six months, on the dispute with MNP developers on the allotment of an identified flat, MNP developers cancelled the agreement and returned the money to Mr. A.
After that Mr A booked a new flat with XYZ developers and paid Rs. 1.30 crores to XYZ developers. XYZ developers issued the receipts with an identified flat number. However, TDS was not deducted at that time.

Q1: Is Mr A still eligible for investment of capital gain on sale of earlier flat as his agreement got cancelled but then he booked with new developer?

Further XYZ developers deposited Rs. 1.30 crores in their bank account NOT registered under MAHARERA. Now in August 2024, XYZ developers returned Rs. 1.30 crores in his bank account and asked Mr A to pay them afresh. Then XYZ developers deposited this Rs. 1.30 crore in the Bank account registered under MAHARERA. Now TDS of Rs. 130,000/- is paid and deposited.

Q2: Will this affect Mr A's position of claiming the exemption of LTCG ?

Q3: Also tell me any other aspect to be looked into.

Please guide.

Thanks & Regards,
Suraj

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

08 January 2025 1. Yes, eligible, as the time period of 2/3 years has not been lapsed.
2. Though disputable, but assessee can claim the exemption.
3. TDS has been deducted, keep all the records of bookings, correspondence & payments.

Message likes : 1 times

Suraj

Suraj (Querist)

08 January 2025 Thank You Rambhia Sir !!

Message likes : 1 times

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

08 January 2025 You are welcome.

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