Dear Vishal,
The allotment you received from your builder constitutes the right in the property and not the property itself and as per definition of transfer u/s 2(47) and capital asset u/s 2(14) the right in any kind of property is also a capital asset and its sale is a transfer. Hence you are liable to pay LTCG on your sale.
I would also like to draw your attention to the newly introduced section 194IA under chapter XVII-B of the IT Act, 1961 in which TDS is liable to be deducted by the payer on sale of immovable property. Hence the sale in your case is not that of an immovable property, the said section does not apply on you.
So you can simply pay your tax liability as an advance tax by 15.03.2014 if the tax is above Rs.10000.
For your refence i am hereby giving you the important judgements which i've used in reaching to the conclusions.
Hope the same would be helpful to you.
In case the intended buyer transfer his rights in the property during the period when construction is in progress and he has not obtained possession of the property, the right of the buyer would be in the nature of capital assets and accordingly, gain arising on such transfer would be in the nature of long term or short terms gain depending upon the period of holding.
- Bombay High Court has explained definition of capital asset as defined u/s 2(14) of the I T Act in the case of CIT vs Tata Teleservice Ltd 122 ITR 594 and has held as follows :-
What is a capital asset is defined in section 2(14) of the I.T. Act, 1961. Under that provision, a capital asset means property of any kind held by an assessee, whether or not connected with his business or profession. The other sub-clauses which deal with what property is not included in the definition of capital asset are not relevant. Under section 2(47), a transfer in relation to a capital asset is defined as including the sale, exchange or relinquishment of the asset or the astonishment of any right therein or the compulsory acquisition thereof under any law. The word “property”, used in section 2(14) of the I.T. Act, is a word of the widest amplitude and the definition has re-emphasised this by use of the words “of any kind” Thus, any right which can be called property will be included in the definition of “capital asset”.
Therefore, in our view, a right to obtain conveyance of immovable property, was clearly “property” as contemplated by section 2(14) of the I.T. Act, 1961.
- Date of allotment is the date when the right of conveyance get vested. So, if there is difference of 36 months in this date and date of sale , then it can be considered that the said asset was a long term asset and gain on sale of such asset was “Long Term Capital Gains “. (As per Hon’ble Andhra Pradesh High Court in the case of M. Syamala Rao v. CIT [1998] 234 ITR 140).
- Index of the year in which Assessee receives allotment letter of the flat should be taken (As per Smt. Lata G. Rohra v. Deputy Commissioner of Income-tax, C.C. 39, Mumbai [2008] 21 SOT 541 (Mum.)).
Here we would also like to refer Judgment of Delhi ITAT in the case of Praveen Gupta vs ACIT -ITA No. 2558/Del/2010; Asst. Year 2007-08 in which Honourable ITAT has taken indexation on the basis of Payment made by the Assessee.
- In respect of Stamp Duty, Registration Charges, Society Deposits take index of the year of payment. If Assessee has incurred any other expenses in respect of Purchase of property in addition to these in respect of those expense also take index of the year of expense for calculation of Long Term Capital Gain as what tribunal has stated above is cost of acquisition.
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