18 September 2012
A friend bought a new house - paid entire amount in July 2011, got possession in October 2011. Sold his another old house in Sep 2012. Is he chargeable for LTCG? Is the one year period calculated wrt sale deed date, final payment date or possession ready date
18 September 2012
7.4 TRANSFER: WHAT IT MEANS [SECTION 2(47)] The Act contains an inclusive definition of the term ‘transfer’. Accordingly, transfer in relation to a capital asset includes the following types of transactions :— (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or (iv) the owner of a capital asset may convert the same into the stock-in-trade of a business carried on by him. Such conversion is treated as transfer; or (v) the maturity or redemption of a Zero Coupon Bond; or
the below is most important ==>>> (vi) Part-performance of the contract : Sometimes, possession of an immovable property is given in consideration of part-performance of a contract. For example, A enters into an agreement for the sale of his house. The purchaser gives the entire sale consideration to A. A hands over complete rights of possession to the purchaser since he has realised the entire sale consideration. Under Income-tax Act, the above transaction is considered as transfer;
Year of chargeability - Capital gains are chargeable as the income of the previous year in which the sale or transfer takes place. In other words, for determining the year of chargeability, the relevant date of transfer is not the date of the agreement to sell, but the actual date of sale i.e., the date on which the effect of transfer of title to the property as contemplated by the parties has taken place [Alapati Venkatramiah v. CIT [1965] 57 ITR 185 (SC)]. Thus, in the case of any immovable property of the value exceeding Rs. 100, the title to the property cannot pass from the transferor to the transferee until and unless a deed of conveyance is executed and registered. Mere delivery of possession of the immovable property could not itself be treated as equivalent to conveyance of the immovable property. In the case of any movable property, the title to which would pass immediately on delivery of the property in accordance with the agreement to sell, the transfer will be complete on such delivery. However, as already noted, Income-tax Act has recognised certain transactions as transfer in spite of the fact that conveyance deed might not have been executed and registered. Power of Attorney sales as explained above or co-operative society transactions for acquisition of house are examples in this regard.
18 September 2012
Thanks very much for the immediate response. In this case, the asset in the Construction agreement is non existent (WIP) in it's form till the construction is over. So is it right to treat the purchase of the new flat as the date on which it was completed as per the construction agreement and not to take note when the consideration was paid or when the sale deed for the undivided share was registered.
CAclubindia
