LTCG ON SALE OF PROPERTY
Querist :
Anonymous
(Querist) 16 March 2010
This query is : Resolved
I HAD PURCHASED A PLOT IN FY 2004-05 AND SOLD IT IN FY 2009-2010.WITH THE FULL CAPITAL GAIN ACCRUED, I HAVE PURCHASED A RESIDENTIAL FLAT WITHIN FY 2009-2010 ITSELF.THE QUERY IS THAT WHEN THIS CAPITAL GAIN (THOUGH EFFECTIVE CAPITAL GAIN IS ZERO AS FLAT HAS BEEN PURCHASED FOR THE FULL CAPITAL GAIN AMOUNT)IS REFLECTED IN THE ITR OF AY 2010-2011, WHAT IS THE POSSIBILITY OF A QUERY BEING RAISED BY THE AO WHILE SCRUTINIZING THE ITR ON THIS TRANSACTION(PURCHASE OF FLAT) AS WELL AS THE TRANSACTION OF 2004-2005(PURCHASE OF THE PLOT).
Kumar Thadhani
(Expert) 16 March 2010
Is the amount mentioned in the SALE AGREEMENT differs from the amount of valuation of property made by the The registrar of Stamp-Duty. IF it is Yes. Why?
Querist :
Anonymous
(Querist) 16 March 2010
I AM AFRAID YOU HAVE NOT UNDERSTOOD MY QUERY. THERE IS NO DISPARITY BETWEEN THE VALUE INDICATED IN THE SALE AGREEMENT AND THE VALUATION OF PROPERTY AS PER CIRCLE RATE. HOWEVER, MY QUERY IS THAT WHEN THE AO CHECKS THE ITR OF AN ASSEESSEE WHO HAS RECEIVED CAPITAL GAINS, WHAT IS THE PROCEDURE FOLLOWED BY THEM(AO), IS IT THAT AS A NORM ALL SUCH ASSEESSEE ARE ASKED TO FURNISH FINANCIAL DETAILS OF THE TRANSACTION OR IT IS RARELY ASKED, SECONDLY, ARE THE TRANSACTION DETAILS PERTAINING TO THE EARLIER PURCHASED PLOT ALSO ASKED OR IT IS RESTRICTED TO THE PRESENT TRANSACTION ONLY.
Kumar Thadhani
(Expert) 16 March 2010
Rarely AO ask transactions deails of the earlier purchased plot.The procedure follows are norm in respective in all type of all assesses.
A V Vishal
(Expert) 17 March 2010
Scrutiny of cases are selected through CASS (Computer Aided Scrutiny Selection) Process. The computer is set with pre-determined parameters through which cases are selected randomly for scrutiny, please note there is no manual intervention in the selection process, so the chances are 50:50.
Vineet
(Expert) 17 March 2010
First thing first, you will be eligible for full exemption of LTCG only if the entire sale consideration of plot has been invested in new flat (not the LTCG amount only as the exemption available is u/s 54F and not section 54)
Vishal has rightly pointed out that scrutiny selection is through CASS and hence if your purchase of new flat is disproportionate to your declared income vis a vis set parameters by CBDT the case is likely to be picked up for scrutiny.
Now as the case involves LTCG the purchase consideration of plot is also likely to be examined. However if the entire sale consideration has been invetsted in new flat the purchase price of old plot becomes immaterial. Nothing much remains in old plot purchase until AO gets hold of any information regarding underhand dealing in old trnsaction which is quite rare in normal scrutiny.
Querist :
Anonymous
(Querist) 17 March 2010
Mr Vineet,
Your reply that I will be eligible for full exemption of LTCG ONLY IF the entire sale consideration of plot has been reinvested in the new flat (not the LTCG amount only as the exemption available is u/s 54F and not section 54)is NOT UNDERSTOOD.Because all taxation experts indicate that the taxable amount is the LTCG and NOT the FULL sale consideration,so the reinvestment is of the gain, that is LTGC, and NOT full sale consideration.Kindly clarify this aspect.
A V Vishal
(Expert) 17 March 2010
Mr Vineet is right since the capital asset in your case is an open plot. As replied by Vineet, only in case of sale of a residential house the deduction under s.54 is available for re-investment of LTCG which is exempt but in case of sale of an asset other than a residential house, the amount of deduction that which may be claimed as exemption is net consideration received u/s.54F
Querist :
Anonymous
(Querist) 18 March 2010
COULD YOU PLEASE EXPLAIN THE WORD 'NET CONSIDERATION' IN THE CASE OF SECTION 54F. IS IT THE FULL AMOUNT OF THE SALE PROCEEDS OR THE FULL AMOUNT MINUS THE PURCHASE PRICE OF THE PLOT.
A V Vishal
(Expert) 18 March 2010
net consideration = full value of consideration - cost of transfer.
Vineet
(Expert) 19 March 2010
Hope you got your answer.
soumitra basu
(Expert) 20 March 2010
If you purchase property worth of less than the net consideration, you need to pay proportionate capital gain tax.
