Taxation on sale of flat not in possession
surajp21
(Querist) 24 August 2013
This query is : Resolved
Dear Sir
My query is as follows:
Suppose Mr. A has entered into purchase agreement of Flat with the builder on 10/05/2010. He has made full payment. However as on date he has not received the possession of flat.
He has now sold the flat on 20/08/2013 to Mr. B. Kindly guide me on following points:
1) Whether will Mr. A be considered as rightful owner of the flat though he has not got possession?
2) Whether can Mr. A sell such flat before the possession? legally vaild?
3) If Yes, he can sell, then what will be the treatment of Capital gain?
Whether its Long term since the date of purchase agreement or
it will be treated as Short term adn added to his other income.
Kindly revert.
Thanks
Suraj
ajay sethi
(Expert) 24 August 2013
raise query in CA club india .com
Anirudh
(Expert) 24 August 2013
Capital asset has been defined in the Income Tax Act as property of 'any kind' held by an assessee.
Once you have booked the flat and made the payment, you have acquired a right to receive possession of the flat. That right to receive possession itself is an Asset. Courts have held so.
Therefore, even without receiving the possession, if you have sold the same to somebody else, the same will attract capital gains tax.
Rajendra K Goyal
(Expert) 24 August 2013
1. Yes.
2. Yes.
3. It will attract capital gain tax.
Capital assets are classified as Long Term or Short Term with reference to the period of holding of the assets till it is transferred.
Any Assets other than Shares in a company or any other security listed in a recognised stock exchange in India or a unit of a Unit Trust of India or a unit of a mutual fund specified under section 10(23D).
a) Held for not more than 36 months.--- Short Term Capital Asset
b) Held for more than 36 months. --- Long Term Capital Asset
