Is CA's interpretation correct?

Querist : Anonymous (Querist) 10 March 2011 This query is : Resolved
Kindly help us urgently by suggesting. The problem is given below.

- Apartment purchased in Gurgaon 2005 (from person who made original
booking in 'pre-launch')
- Apartment allotted to us in November 2006
- Construction linked payment made over 5 years
- Offer for possession received in Sep 2010
- Physical possession not taken and apartment being sold in March 2011
- Sale proceeds expected appx Rs 1.35 Cr
- Indexed cost of acquisition appx Rs 95 lakhs
- Cap gains appx Rs 40 lakhs

It is a full cheque transaction.
We have been informed by our CA that we
have held a 'right to property' for more than 3 years which is a capital
asset. Hence profit on sale of this 'right to property' is in the nature of
capital gains. As the property itself was not registered in our name, the
section where capital gains can be deployed in purchasing another property
within 1 year before sale or 2 years after sale in order to avoid cap gains
tax, is not applicable. The only way to avoid cap gains tax is to invest in
Cap Gains bonds with a 3 year lock in which is what we propose.

1) Kindly confirm if the above interpretation is correct &
2) Which bond we should purchase now &
3) Any other Tax Saving investment suggeated?

Immediate reply is requested as we shall have to invest immediately.

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INDER JAIN (Expert) 10 March 2011
The purchase from original booking holder is of no consequence. It is not a case of Works contract. You will become the owner when a sale deed is executed in your favour by the builder. Indexing not possible/permissible. It will be short term capital gains or income from business liable to full taxation. You have right in in property only after execution of saledeed or by virtue of possession. I do not agree with your CA.
INDER JAIN

soumitra basu (Expert) 14 March 2011
In my view. You became the deemed owner in 2006 and as such the property is a long term capital assets. It may be possible that you were not the registered owner.
You can save the capital gain tax in the following ways:
1. Investing the entire or proportionate sales proceeds in new residential property.
2. Investing the capital gain in specified bond within six month from the date of sale.

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