Short term capital gains -point of taxation
A P Singh
(Querist) 14 December 2013
This query is : Resolved
Respected Sirs,
Assessee's husband purchased 17.21 kathas agricultural land in Rs 825000/- in fy2011-12 (sale deed registered in April,2011)in her name . Assessee entered into agreement to sell 6 kathas of the same land in Rs 12 lac in Sep,2011 and received Rs 8 lac in cash by Feb,2012.
Thereafter ,the vendee paid Rs 250000 in cash in FY 2012-13 to the assesse. Because of very high stamp duty coupled with cash crunch the vendee got registered sale deed for only one katha land and that too in FY2013-14 April.
My question is the vendee has effectively paid consideration for 4 kathas land in FY 2011-12 itself and for 1 katha more in FY2012-13 itelf yet only 1.1 katha land has been transferred till date. A total of Ts 1.5 lacs remains unpaid. Assesse has to file belated returns for FY2011-12.SHOULD HE OR SHOULD HE NOT PAY SHORT TERM CAPITAL GAINS TAX FOR 5.25 KATHAS AGR. LAND SOLD, AGREEMNT FOR SALE FOR WHICH WAS EXECUTED IN SEP,2011 AND SALE CONSIDERATION RECEIVED FOR 5.25 KATHAS LAND YET ONLY 1.1 KATHA LAND REGISTERED/TRANSFERRED TILL DATE??? OR
PLEEASE REPLY SOON.SHALL BE OBLIGED
THANKS IN ADVANCE.
ajay sethi
(Expert) 14 December 2013
consult your tax consultant . or raise query in CA club india .com .
Vineet
(Expert) 16 December 2013
It is understood that agreement to sale is not registered.
Whether the vendee has been put into posession post the agreement to sale. If yes, Section 53A of transfer of property comes in picture (doctorine of part performance) and capital gains for entire 6 Kathas becomes taxable in FY 2011-12 as almost 66% of consideration has been received.
However, there is twist to the tale. As the payments are made in cash and agreement to sale is unregistered, there is nothing to suggest that transfer actually happened in FY 2011-12. If the registered sale deed does not refer to agreement to sale, officially capital gains in respect of 1.1 katha land has arisen only in April 2013. The remaining sum is only advance and offer capital gains as and when sale deeds are registered.
A P Singh
(Querist) 16 December 2013
Dear Sir,
Yes the Agreement to sell is unregistered .As of now possession is only on 1.1 katha transferred/registered land .The terms of agreement also mention that if the total consideration is not paid in FULL within 6 months the vendor has the right to renegotiate at higher price or forfeit the advance money. The price of land has in the meantime risen sharply and the 1.1 katha land was transferred @ Rs 3 lakh/per katha as compared to Rs 2 lac/katha as per agreement. Now the vendor is demanding Rs 4 lakh/katha which the vendee is not wiiling to pay as he doesn't have funds. So it is now very likely that vendor will forfeit the advance money in FY 2013-14 itself. If the vendor forfeits the advance money how will the 5 LAKHS(8-3) received in FY2011-12 and 2.5 lakh received in Fy2012-13 be taxed in the assessee's/vendors hands.
Please reply soon
Thanks
Vineet
(Expert) 17 December 2013
the forefeited money shall be treated as advance and reduced from cost of acquisition for the purposes of capital gains in subsequent sale.
C. P. CHUGH
(Expert) 17 December 2013
well advised by xperts. nothing more to add.
