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Capital Gain Applicability

Jai The Professional (Articled Assisitant) (77 Points)

21 February 2011

Dear Friends,

1.Pls Suggest whether capital Gain attracts on land which was not registered.
But the issue was Power of attorney was registered &the Parties Mutually draft the agreement and signed .
Pls Note:
Full Consideration & Possession were Passed among them.

2.Also suggest If captial gains attracts, Compensation given for tenant for vacating the premises can be allowed as Deduction on Taxable Capital Gains.

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2 Replies

vishnupriya (CA Final) (1418 Points)
Replied 21 February 2011

As per 2(47) of IT Act, transfer includes any transaction involving the allowing of the possession of an immovable property to be taken or retained in part performance of a contract of the nature referred to in sec 53A of the Transfer of Property Act, 1882.

53A of TP Act says that when documents are not registered, the ownership in the property is transferred if there is

1. a contract in writing

2.transferee has paid the consideration or is willing to perform his part of the contract

3.transferee shouldd have taken possession of the property.

So in this case, even though the transfer is not registered, it attracts capital gains.

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vishnupriya (CA Final) (1418 Points)
Replied 21 February 2011

For your second question

payment made to obtain vacant possession of property as a pre condition to effect sale shall be considered to be expenses in connection with transfer & deducted from sale consideration

CIT Vs Miss Piroja C.Patel (2002) 122 Taxman 752 (Mum)