Income tax capital gains

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CA Raj Doshi

Practising CA

8944 Points Joined December 2013

Assessee invested in underconstruction property worth Rs. 1 crore on 1/4/2007. He paid down payment of Rs.50 lacs on that date. And then paid the balance amount of Rs.50 lacs in instalments upto March 2015. The property received occupancy certificate on 1/4/15. The assessee now signs the sale deed with the builder and registers the deed in his name by paying stamp duty etc in June 2015. Now the assessee sells of the property in Aug 2015 for Rs.5 crore. 1.Compute capital gains. 2.What will be the date of Acquisition. 3.Whether answer will change if certificate of occupancy is received on 31/3/15. 4. Under which sections can assessee claim exemption if assessee is ready to invest in any eligible exemption. 5. Support your answer with relevant case laws with its decision .

Replies (4)

Karthik.V.Kulkarni

Chartered Accountant

594 Points Joined December 2012

Hi ,

The date of sale deed is the date of acquisition of property. So in this case aquisition is complete on june . On the other hand if posession is taken by the buyer and buyer has paid or willing to pay consideration and there is a contract in writing then the sale is on the date the said contract is executed as per transfer of properties act .

Considering the assumptions two options are available as under:

1) if sale deed is taken as date of transfer i.e june then the asset will be short term capital asset (even if the occupancy certificate is received on 31,3 , 2015) . Tax will be as per normal rate applicable to assessee . There is no exemption claimable in this case .

2) if assessee is deemed owner as per transfer of properties act on paying half the amount on 1/4/2007 then the asset will be long term capital asset . It is taxable at the rate of 20 % . Exemption under sec 54 can be taken if assessee doesnot own any other residential property or/and he can invest upto 5000000 in rec n nhai bonds u/s54 EC . The amount of exemption would be amount of capital gains or amount invested which ever is lower . For sec 54 the new property must be purchased within 2 years after date of transfer or constructed within 3 years , For 54EC the amount in bonds must be invested within 6 months from the date of transfer.

Regards

Karthik V Kulkarni

Arun Kumar

Auditor & Tax Practitioner

168 Points Joined July 2013

Income from Capital Gains

1. DOA will be 01-04-2007 as the date of entering into an agreement to sell. And the First Installment paid date.

2. Answer will remain same even the date of Occupany changes. Since it is a document stating when the property was meant to use.

3. U/S 54 an assess can claim exemptons. If an assess invest in Residential house Property, even on underconstructed Residential House Property, for which Service Tax is imposed.

4. Refer Case Law : Punjab and Haryana High Court Decision - Mrs. Madhu Kaul v. CIT and Another 363 ITR 54

Read more at: https://www.moneycontrol.com/news/tax/latest-judicial-decisionscapital-gains-review_1192803.H T M L?utm_source=ref_article