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Taxation from house property income,

ajeet singh (Business) (25 Points)

14 December 2015

Hello All,

I booked a flat in Gurgaon on 15 February, 2011 for Rs. 1.70 Crore for which I have already paid an amount of Rs. 1.63 Crore. I have not yet taken the possession of the said flat, now I am finalizing the sale proceed of this flat for Rs. 1.81. I just want to know that since I hav'nt take the possession of the said flat can I treat the profit as a business income & adjust it with my regular business income / loss ( I owned a proprietorship firm & in leather garment business) or it will be treated as a long term capital gain. Pls advice.

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2 Replies

Ramanathan (Article) (40 Points)
Replied 18 December 2015

Dear Ajeet,

Yes you can treat it as your business income but you will not get the indexation benefit if you do so.
it would be treated better if you show it as your capital gain because the house property was held for a period of more than 3 years(Assuming that the registeration was done on feb 2011)
The best part is the business loss can be set off against capital gain also.

You can show it as your business income and admit a profit of 18Lakhs (1.81 - 1.63) and claim set it off under loss from your leather business but both the business must be a sole proprietor only then you can set it.

Option 1 would be the best way to treat it.

If you have any other questions pls let me know.

Thanks & regards

Ruchi (CA) (1410 Points)
Replied 19 December 2015

I dont think that this sale can be treated as business income. Non possession is not a condition to meet 'business' recoition criteria. It is a single transaction not arising from buying and selling activities taken in the course of business.

It should be treated as capital gains only. And any loss from sale would not be available for set-off against your business income.