gaurabp (engineer) 25 March 2013

Period of holding.

Respected Sir/Madam,

i need a clarification on the following.

1. i bought a flat i.e. did an REGISTERED AGGREEMENT TO SALE in June 2006 in PUNE for around 42 lakhs. It was on AXIS BANK LOAN mostly : 38 lakhs loan and 4 lakhs from my pocket. I stared paying my EMI from July 2006 onwards.

2. I got a TEMPORARY LICENSE to OCCUPY the PUNE FLAT form the builder on Jan 2007. The builder did NOT GET COMPLETION CERTIFICATE and so he gave a TEMPORARY LICENSE to occupy in Jan 2007.

3. I bought another flat on loan in BANGALORE in June 2009. This was registered on June 2009. This was again on home loan mostly 52 lakhs and 5 lakhs from pocket. The total amount was aorund 57 lakhs.

4. I sold the PUNE flat in August 2009 for around 52 lakhs and closed the bank loan. This was a DEED OF ASSIGNMENT made on August 2009 between myself, builder and new buyer. And whatever amount i made i put into the loan for the BANGALORE FLAT and my father's treatment.

So, my question is:

1. is the income i made from selling the PUNE flat LTCG ? And what is the period of holding calculation for the flat ?

2. Is it from the date of REGISTERED AGGREMENT to SALE ie. June 2006 or from Date of Temporary license being granted to myself ie. Jan 2007 ?

3. what is the indexation factor and how much taxes would i need to roughly based on above figures.

Any help is highly appreciated.

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3 Replies

NAVEESH DHAR (TAX PRACTICIONER) 27 March 2013

1. The holding period of the Pune flat is less than than 3 years i.e from Jan 2007 to August 2009 so it will be the Short term Capital Gain.

2. The calculation of holding period is to be from Date of Posession or Date of Temporary Licence to occupy the flat.

3. Indexation cost is not applicable in the case of Short Term Capital Gain. The Capital Gain of Rs. 10 lakhs (52-42) will be added to your other income ( i.e. salary or business Income) and tax will be calculated accordingly.

gaurabp (engineer) 28 March 2013

On another thread this was put:

I think , we should not strict to the point that the Capital gains is related to the 'flat' only. Actually it relates to any ' as defined in S.2(4). as "Capital Asset" means any property of any kind...".. In my view any valuable right e.g. goodwill, preemted right of existing shareholders, to purchase the shares of any company at concessional rates. Even the explanation to the said section clarifies that even "...a right in a co. in relation to any company.." is 'property'. The Asset/right should be of value to be fatched in monetary terms or otherwise, may it has any cost of acquisition or not.or may the full payment was made at the time of acquisition. In this case the agreement was for 42 lakhs i.e. CII pad or payable in installment.

The agreement to sell is also a right/property under the definition of "capital asset" in section 2(4). The sae consideration may not be for the transfer of 'flat', because what you do not own you can not transfer it (flat). But certainly you had a valuable right/property to transfer for consideration and you did it for the consideratin more than or less than the Cost of acquisition; that is immaterial brcause you will have gain or loss on transfer.

Ome more thing is that the agreement to sell is done in case of Hire Purchase also.technically, yhe hirer is not vthe owner but still the asset under hire purchase agreement is sold not as transfer of ownership bu transfer of some right/property/capital asset. such transfer is also subject.

So as the right/property is a capital asset and the date of acquiring such right is the date 20th June, 2006 w,e,f, which the period of holding must be counted.