Capital gain.

Dinesh Kandpal (Querist) 30 July 2022 This query is : Resolved
Hello sir,
Income tax department has raised queries on capital gains so need your suggestion.

1) They say allotment letter issued by the builder on their letter head doesn't have a seal so it cannot be recognised as valid allotment. The allotment was from April 2015 and property registered in May 2016 so they claim 2016-2017 ready reckoner as market rate for capital gain.

2) Source of Payment - As the funds are directly paid from Mothers account, so can we show the bank statement of the mother as payment proof? They don't consider receipt issued by the builder as evidence. Please guide.

Regards
Dinesh

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Quick Summary

This discussion addresses queries from the Income Tax Department regarding capital gains tax. The department questions the validity of an allotment letter without a seal and suggests using the 2016-2017 ready reckoner rate for capital gains, as the property was registered in 2016. It also discusses using a mother's bank statement as proof of payment when funds were directly transferred to the builder. Expert advice suggests obtaining a sealed certificate from the builder and consulting a local CA, while also clarifying that the cost of acquisition is generally the purchase price, not market rates, unless specific tax provisions apply.

kavksatyanarayana (Expert) 30 July 2022
It is not a legal query. 1. They will take the value for the year 2016-17 as your document was registered in the year 2016-2017. 2. You can show your mother's bank statement. Ask the builder to issue another certificate with a seal. Consult local CA.

Dinesh Kandpal (Querist) 31 July 2022
Thanks for the guidance sir.

Adv. Ravish Bhatt, ADIT, CIOT (Expert) 03 August 2022
Information is insufficient as such. Generally, Cost of acquisition will be required to be looked at for determination of amount chargeable to capital gain tax which will be full value of consideration less cost of acquisition. Cost of acquisition generally and in a situation not falling within ambit of s.49 or s.55 will be purchase price plus any other amounts directly connected with the purchase of a property.

It is your cost of acquisition i.e. cost at which you acquired the asset and has nothing to do with market rate or other factors unless the value of asset had been subject to income tax earlier under clause (vii) or clause (viiia) or clause (x) of s.56(2). I do not fathom relevance of allotment letter either for determination of cost of acquisition therefore.

As regards source of payment is concerned, it is the payment you made in 2015 or 2016. You can produce your mother’s bank statement for that purpose. There may be however further queries in property is registered in your name and if mother directly paid to builder.

Author: Advocate Ravish Bhatt
Gmail: ravishdbhatt@gmail.com
Link to Linkedln Profile: https://bit.ly/3IDGfsU

Dinesh Kandpal (Querist) 08 August 2022
Thank you sir for the kind advice.

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