Ad free CAclubindia and daily updates on your mobile. Subscribe Now!

CAPITAL GAIN

17 May 2018

I made an agreement with Mr. A to sell a property and received full amount of Rs. 40 lakhs but registration was not done, Stamp Duty Value at agreement date was 45 lakhs. Now, Mr.A sold the unregistered property further to Mr. B for 50 Lakhs and asked me to get the registration done in Name of Mr. B., SDV at the time agreement between Mr. A and Mr. B increased to 54 lakhs. In this case what will be my liability for capital gain taxation. ??

Reply
Follow
Share

1 Replies

Jeeva Thangavelu (Student CA Final ) (609 Points)
Replied 17 May 2018

Since title was not transfered to Mr.A he will not be included in this picture at all. So it will be treated as direct sale by you to Mr.B.

Now the consequences of this:

1. Consideration and Stamp Duty:

You have received only 40 lakhs from Mr.A whereas now the sale value to Mr.B is 50 lakhs. You can treat the early receip from Mr.A as Loan, So if you make agreement for 50 lakhs you can return the 40 lakhs as loan repayment, and the other 10 lakhs to Mr.A(Mr.A has to offer it as income, probably as commission). In this case you have to pay additional stamp duty for short registration of 4 lakhs (54-50)

(or)

You can make the agreement for 40 lakhs and receive & settle to Mr.A and ask Mr.B to directly give the balance Rs.10 lakhs to Mr.A (Mr.A has to offer it as income, probably as commission). But the major issue here is you have to pay additional stamp duty for short registration of 14 lakhs (54-40).

2. Capital Gain:

Since the SDV of the property is 54 lakhs you have to consider the amount to be 54 lakhs even if you make agreement for 40/50 lakhs and pay capital gain tax on it after deducting the purchase and other costs if any (indexed cost in case of LTCG).

And Mr.B has to offer the short amount paid than the SDV under income from other source i.e., 14 lakhs (54-40) if agreement is made for 40 lakhs (or) 4 lakhs if agreement is made for 50 lakhs.

1 Like