Capital gain

Hi!

We bought a house in Gurgaon in 2003 from the original allottee on Power of Attorney as registration of property was not open. This purchase was done at an amount of Rs. 13.5 lacs. Power of Attorney was registered and stamp duty paid for it.

Now in 2011, society has opened registration of flats and we want to get the property registered in our name. We intend to get the property transfered in original allottee's name first and back to back same day have it transfered to our name.

Current circle rate of the said area is Rs. 3250/- per sqft and our flat is approx 1500 sqft.

Question is: will original allottee have to pay any capital gain? In reality their is no transaction that is going to take place with the allottee for the registration. If so, how much.

Manish Singhal

Let me analyse the problem this way

Assuming that registering POA was transfer (it is considered as transfer in practise also) then when you re-transfer it back to original owner then u will be liable for long term capital gain. Assume that you received Rs 10,00,000/- on this transaction. Then immediately you will purchase the property back again for the same consideration Rs 10,00,000/- So that this transaction will have not effect. The purchase from original owner will entitle you for exemption under 54.So we can conclude that this will not result in any tax liability.

So in conclusion either way i.e if original transaction was considered as transfer and inbetween transaction is also transfer then - u will be eligible for Sec.54 exemption so no tax.

and if original transaction was not transfer then - question of tax does not arise