SALE OT NOT

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TRILOCHAN

SENIOR ACCOUNTANT

698 Points Joined May 2008

Dear all,

One thing i want to confirm from you that, I am working in a proprietor ship concern. During the financial year 09- 10 the proprietor start constrution business,( Make one residential appartment at Khanpur, New Delhi). Due to negetive area no banker ready to provide housing loan to the purchaser of the flats.

Now the proprietor is agree to salf finance agst. the property to the purchaser.

eg. Sale Price 20 lakh, Down Payment Recd. Rs.5lakh and Balance Rs.15Lakh Financeed by the proprietor to the purchaser with a rate of Interest 10% PA for 10 years and the monthly instalment comes to Rs.19823 .

The paper made between the Proprietor and buyer that " AGREEMENT TO SALE" (without any possession Letter) and the paper clearly state that the owner ship is always with the proprietor and the buyer never claimed the ownership until full & Final Settelment.

My question is that, Whether we can book SALE in our books of account during F.Y. 2009-10 on the basis of above papers. IF sale is booked on the above paper basis , Whether it is a sufficient document to prove the Assessing Officer that actual sale is made during F.Y.2009-10 for calculation of CAPITAL GAIN

Waiting ur reply

Regards

TRILOCHAN

Replies (4)

CA.G.Muguntha Narayanan

Internal Auditor at TVS Motors

2195 Points Joined January 2010

Dear Trilochan,

CG Tax wil be attracted only in the year in whcih ownership of title has passed on to the buyer. hence, until such time, CG Tax cannot be attracted. Transfer of possession is irrelevant for CG Chargeability

TRILOCHAN

SENIOR ACCOUNTANT

698 Points Joined May 2008

Mukund Sir,

What is the accounting entries in ourbooks of account, Flat Value Rs.20Lakh, D/P Rs.5Lakh and Balance Rs.10 Lakh allowed to pay in 10 years by EMI Rs.19823/-

(i) Down Payment Recd Rs.500000/- from Mr.X

Bank A/c Dr. Rs.500000/-

To, X Rs.500000/-

(ii)Allow to Mr. X to stay in the residential property until ownership of the property Transfered by paying Rs.19823/- as monthly instalment

Bank A/c Dr.19823

To Mr.X 19823

BUT my question is, whether we will debit to Mr.X Rs.20lakh and credit to Sale of Flat Rs.20 Lakh as per the above documents or any other way to show the above transaction in Books of Account

Thanks

TRILOCHAN

CA.G.Muguntha Narayanan

Internal Auditor at TVS Motors

2195 Points Joined January 2010

Dear trilochan,

If ur revenue is certain, then u can credit the whole amount to sale. But if it is not cerain you cannot take it to ur sales(As per AS-9). Even though if u cerdit the whole amount to sales, CG liability wont arise, coz entries in books are not relevant for CG tax liability. (Alapathi Venkataramiah vs. CIT (1965)). CG liability arises only in the year in which ownership is transferred.

TRILOCHAN

SENIOR ACCOUNTANT

698 Points Joined May 2008

Mukund Sir,

One thing i want toconfirm you that, on the above transaction , Whether we will issue a TDS certificate to the borrower for claim interest on Housing loan for Income Tax Purposes, Even through he is not yet the owner of the house property.

sir waiting for ur reply

Trilochan