Capital Gain on house property
Querist :
Anonymous
(Querist) 03 June 2010
This query is : Resolved
Gd mrg to all..My client purchase land in 1975.He was constructed approx.1100 Sq feet in 1988 and 1100 sq feet in 1995 but their is no documentary evidence of construction.sale out of house in March 2010.
Q.what is solution for capital gain calculation purpose.
Vineet
(Expert) 03 June 2010
What is the evidence that the residence was constructed in 1988 and 1995?
For construction cost, you can obtain certficate from a registered valuer, however you have to prove that the construction indeed took place in the respective year as there is onus to prove the same is on assessee.
soumitra basu
(Expert) 03 June 2010
If there is no proof then the AO may treat this as unexplained investment during the current financial year. Be aware of that.
M.V.GIRI
(Expert) 03 June 2010
As the assets are old and constructed for morethan 10 years usually AO cannot ask for the construction cost. The assessee has to take the value as on 2001 year and calculate by applying cost of indexation. then the capital gain tax is to be paid.
Vineet
(Expert) 04 June 2010
Mr Giri, as per Income Tax Act, 1961 the cut off date is 1-4-1981 and not 2001. AO has all rights to examine the cost of construction and year in which such construction took place. Even for valuation on 1-4-1981, the assessee should have some evidence with him to prove that the asset existed as on that date.
I am in total agreement with Mr BAsu that in absense of any proof the AO may consider the same as unexplained investment in current year i.e. the year of sale. That is why I had asked whther the assessee has some proof regarding construction and existance of house in earlier years.
However, if the assessee can prove that the house existed in any earlier year by way of evidence in form of property tax bill, electricity bill (more older the evidence the better) and if it is prior to 31-3-2003, no action whatsoever can be taken by AO with regards to investment as assessments upto AY 2003-04 cannot be reopened now.
I suggest whatever oldest evidence to prove existance of house is available, treat the same as year in which house was constructed, get a valuation report (sans cost of land which can be valued as on 1-4-1981) for that particular year and treat the same as construction cost for Capital Gains purposes.
